Corporate - Income determination

Last reviewed - 14 July 2022

Inventory valuation

Inventories are valued at cost less such amounts, if any, that the Commissioner General 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, last in first out (LIFO) has not been accepted in practice by the tax authorities.

Capital gains

Gains from disposal of 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 30 June 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 75% of the total gain.

Currently, the sale of any shares, units, or debentures of a resident company is exempt from tax under any of the following circumstances:

  • The resident company whose shares are being sold is a public company.
  • The shares, units, or debentures are traded on the Botswana Stock Exchange.
  • The company has released for trading 49% or more of its equity on the Botswana Stock Exchange.

This exemption only applies if the shares, units, or debentures were held by the taxpayer for a period of at least one year prior to the date of disposal.

The aggregate amount of capital losses is offset against the aggregate amount 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.

Dividend income

Net dividend income from local sources is not subject to tax.

Interest income

In the case of a resident company, interest income is included in gross income and taxed at the CIT rate. In the case of a non-resident company, interest income is subject to withholding tax (WHT), which constitutes a final tax.

Royalty income

Royalty income is included in gross income and taxed at the CIT rate. In the case of a non-resident company, royalty income is subject to WHT, which constitutes a final tax.

Partnership income

Partnership income is taxed in the hands of the partners, in proportion to their share in the partnership.

Foreign income

Resident corporations are not generally taxed on a worldwide income basis. However, interest and dividend income from a foreign source is taxed in the hands of the resident company on an accrual basis. Relief is given for any WHT imposed on such income.