SIGNIFICANT DEVELOPMENTS
New legislation has been introduced for taxation of International Financial Services Centre (IFSC) companies. See “Taxes on corporate income” below.
TAXES ON CORPORATE INCOME
Company tax is imposed at a rate of 15% for nonmanufacturing companies and 5% for manufacturing companies. Additional company tax is imposed at a rate of 10%. IFSC companies are taxed at a flat rate of 15% with no additional company tax component. Companies must apply for a certificate in order to
be classified as IFSC companies, which deal only in specified services and only with nonresidents.
CORPORATE RESIDENCE
Corporate residence is determined on the basis that a company’s registered office or place of incorporation is in Botswana or it is managed and controlled in Botswana.
OTHER TAXES
There are no other taxes on income.
BRANCH INCOME
Company tax at the rate of 25% is payable on branch profits.
INCOME DETERMINATION
Inventory valuation/Inventories are valued at cost less such amounts, if any, that the Commissioner of Taxes believes are reasonable as representing the amount by which the value of such stock has been diminished because of damage, deterioration, obsolescence, or other cause. Although not expressly excluded by legislation, LIFO has not been accepted in practice by the tax authorities.Capital gains/Gains on specified capital assets (immovable property and marketable securities, including shares in private companies) are included
in taxable income in the hands of the corporate taxpayer. Acquisition costs of immovable property are subject to a 10% compound annual addition for inflation for the period from acquisition to June 30, 1982, and thereafter to an inflation addition based on the increase in the consumer price index
to the date of sale. For other gains, no inflation allowances are granted, but the taxable gain is set at one-half of the total gain.The aggregate amount of capital losses is set off against the aggregate of capital gains in the same tax year. Any excess of loss is deducted from aggregate gains over losses accruing in the succeeding tax year only. Capital losses cannot, in any circumstances, be deducted against other income.
Intercompany dividends/Dividend income is not subject to tax. A withholding tax of 15% is deducted from dividend payments.
Foreign income/Resident corporations are not generally taxed on a worldwide income basis. However, interest arising from the South African rand monetary area is taxable in Botswana; relief is given for any withholding tax imposed on such income.
DEDUCTIONS
Depreciation and depletion/Annual and capital allowances available are as follows.
1. Companies other than mining companies:
Annual taxation allowances for expenditure incurred on machinery and equipment before June 30, 1982, can be claimed up to 100%. This allowance may be for any proportion of previously unclaimed expenditure. For expenditure incurred on machinery and equipment after June 30, 1982, annual allowances are granted, calculated on cost by the straight-line method on
the basis of the expected useful lives of the individual assets. Guidelines are provided for expected useful lives of different categories of assets, which vary from four to ten years. Book depreciation is not required to conform to tax depreciation. The capital allowance claimable on a company
motorcar is restricted to a maximum of P100,000.
An initial allowance of 25% of cost is granted on certain industrial buildings. All industrial and commercial buildings (excluding residential properties) are granted a 2.5% annual allowance based on cost or, in the case of an industrial building on which an initial allowance has been claimed, the original cost less the initial allowance.Balancing allowances and charges are brought to account on the disposal of
assets on which allowances have been claimed. Where disposal value of an item of machinery or equipment exceeds the difference between expenditure incurred on the asset and allowances granted, the whole amount is taxable as corporate income, or the balancing charge can be offset against further
additions of new equipment, thus providing rollover relief.
However, there is no rollover relief on motorcars except where the cars are used in a car rental or taxi service business.
2. Mining companies:
Mining capital allowances are ascertained by dividing the residual capital expenditure by a number equal to the estimated number of whole years during which mining operations may be expected to continue. This number of years is not to exceed 10.
Net operation losses/Losses may be carried forward for five years, with the exception of farming, mining, and prospecting operations, for which these is no time limit. There is no allowance for carrybacks.Payments to foreign affiliates/Royalties, interest, and service fees paid
to foreign a
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