Botswana operates a territorial system of taxation where an individual liable to income tax on accrued income and gains from a source within or deemed to be within Botswana irrespective of where the employer is resident or where the payment is made.. Income tax is levied at progressive rates on an individual’s taxable income for the year.
Short-term and extended business travelers are liable to tax on employment income relating to services rendered in Botswana (Botswana workdays).
The Botswana tax year runs from 1 July to 30 June of the following year.
An individual is treated as resident in Botswana if any of the following statutory criteria is met:
A non-Botswana resident is taxable on Botswana-sourced income only.
A Botswana resident is taxable on Botswana source and deemed-source income including income earned during temporary absence from Botswana. Where deemed-source income is taxed in Botswana credit for foreign tax paid is granted up to a maximum of Botswana tax payable.
Different tax rates apply to residents and non-residents. Non-residents are subject to tax on each Pula earned from a Botswana source whilst residents are taxable on income exceeding a statutory threshold (currently BWP 36,000) in any tax year.
A resident is taxed at progressive tax rates ranging from 0% to 25% (5% to 25% for non-residents).
The Botswana Income Tax Act does not define the term ‘source’. However, it has been established by precedent case law that the source of income from the rendering of services is the place where there services are rendered. Therefore where the employee performs services in Botswana the source of income relating to such services is Botswana. An apportionment of remuneration based on work days may be necessary in some cases where the employee is a non-resident and the services were rendered partly in Botswana.
To the extent that the individual qualifies for relief in terms of the employment income article of an applicable double tax treaty, there should be no Botswana tax liability.
Employees are required to register for tax and file tax returns except where the annual remuneration is less than P 36,000.
All earnings including allowances and the value of non-cash benefits provided by an employer to an employee are taxable unless specifically exempted.
There is no social security in Botswana.
Tax returns are due for filing on or before 30 September following the end of the tax year.
Employment income is subject to tax withholding under the Pay as You Earn (PAYE) system. Employers are required to register and tax from employment income and pay such tax over to the tax authority on or before the 15th of month following that of the payroll.
There is the risk that the presence of employees in Botswana may create a permanent establishment for the employer, but this would be dependent on the type of services performed and the level of authority the employee has.
Botswana imposes value-added tax (VAT), which is borne by the end-user. VAT registered businesses making taxable supplies do not bear the final cost of VAT. Such businesses charge VAT on the supplies that they make (output VAT) and recover VAT on purchases made and utilised in making taxable supplied (input VAT). VAT is levied at the rate of 12% on most goods and services and zero percent on certain specified goods and services e.g. exports. Certain specified goods and services are exempt from VAT. These include financial services healthcare and education in public facilities.
Non-Botswana nationals require work and residence permits to work in Botswana regardless of the duration of presence in Botswana. Certain nationalities require entry clearance (visa) prior to travel. An employee requires sponsorship from the employer in order to obtain a work permit.
Botswana has a number of statutory obligations placed on Botswana-based employers of non-Botswana nationals which include the following:
In addition to the Botswana’s domestic legislation that provides relief from international double taxation, Botswana has entered into double taxation treaties with more than 12 countries to prevent double taxation, and allow co-operation between Botswana and other tax authorities in enforcing their respective tax laws.
Whilst Botswana currently has no transfer pricing legislation transactions between related parties including the provision of services through personnel are required, under domestic law, to be at arm’s length prices.
Botswana does not have exchange controls. Certain reporting obligations, however, are imposed to control tax evasion and money laundering. Organizations, such as banks, have a number of obligations, including the requirement to establish the identity of individuals. An individual cannot open a bank account in Botswana without proof of identity.
As businesses become increasingly global, we have witnessed a dramatic rise in the number of business travelers now working in foreign jurisdictions.
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