Botswana

Special Economic Zones (SEZs) Development Approval Order incentive

The Income Tax Act was amended through the SEZs Development Approval Order, 2021 to introduce concessionary corporate income tax (CIT) rates for approved business operating in the SEZ regions. Below are the key points of the Order:

Concessionary CIT rates

The following concessionary CIT rates are applicable for approved business operations in the SEZs:

SEZs in Botswana 

• Sir Seretse Khama International Airport (SSKIA) - Mixed Use
• Tuli Block - Agropolis
• Lobatse - Meat and Leather
• Fairgrounds - International Finance & Technology
• Pandamatenga - Agropolis
• Greater Palapye - Energy
• Francistown - Mixed Use
• Selebi Phikwe - Mixed Use

Eligibility criteria

A new business or an existing business engaged in the following activities in the SEZs is eligible to apply for concessionary CIT rates:

• agrobusiness activity
• a manufacturing activity
• a warehousing, distribution, or logistics service, or
• an internationally traded service, and
• a business that intends to export 100% of its annual production or sales unless an exemption is granted by the Minister of Trade and Industry in respect of the 100% exemption, and
• the business is either a new business within an SEZ, expands/relocates an existing business from a customs territory to an SEZ, or expands/relocates an existing business from one SEZ to another.

Application for tax relief

It is required to submit an application in the prescribed form to the Ministry of Finance and Economic Development in order to obtain approval under this Order.

Withholding tax (WHT) on director's fees

The Income Tax Act is amended by inserting the following:

Every person who, being a resident company, makes any payment of director’s fees or similar fees to any person in the person’s capacity as a member of the board of directors of the company shall deduct WHT at following rates:

• Resident director: 10%.
• Non-resident director: 15%.

Tax amnesty

Tax Amnesty, covering CIT and value-added tax (VAT), was granted to all taxpayers covering the tax periods prior to 1 July 2021. The period to apply for amnesty was from 1 July 2021 to 30 June 2022. This tax amnesty provided taxpayers an opportunity to settle outstanding principal tax debt under CIT and VAT assessments due for periods prior to 1 July 2021, with a reciprocal remission of outstanding penalties and interest relating to such amounts. This provided taxpayers a once-off opportunity to regularise CIT and VAT affairs for such historical periods.

Taxes covered under the tax amnesty

• VAT.
• CIT.
• Personal income tax (PIT).
• Taxes collected under pay-as-you-earn (PAYE) and other withholding tax (OWHT).

Tax periods covered

In respect of CIT, all tax periods prior to and including the 2020/2021 tax year (i.e. to 30 June 2021) are covered. In respect of VAT, tax liabilities for all tax periods prior to 1 July 2021 are covered.

The tax amnesty period

The tax amnesty is available from 1 July 2021 to 30 June 2022.

Penalties and interest eligible for remission

All interest and penalties charged under the VAT Act are eligible for remission.

All interest and penalties charged under the Income Tax Act are eligible for remission, with the exception of: 

• penalties charged on non-submission of transfer pricing documentation (Sec.118A), and 
• penalties on non-submission of additional information (Sec.119B).

No fines (charged under Part XIV of the Income Tax Act) will be waived.

Persons eligible for the tax amnesty

A person shall be eligible for the tax amnesty where such person:

• has an outstanding principal tax debt that has a relevant penalty and/or interest liability
• has filed a tax return but has not paid the whole or part of the tax due under that return
• has paid the principal tax under any of the relevant revenue laws but has outstanding interest and/or penalties
• has outstanding interest and/or penalties only
• has not filed a tax return for a period covered by the amnesty
• is not registered for VAT or PIT
• has lodged an objection against any assessment with the Commissioner General, or
• has lodged an appeal to the Board of Adjudicators, the High Court, or the Court of Appeal.

Persons not eligible for the tax amnesty

A person shall not be eligible for the tax amnesty where such person:

• has previously been convicted of a criminal offence under any of the relevant revenue laws, or
• has been convicted of organised crime, including money laundering, human trafficking, poaching, economic sabotage, corruption, drug trafficking, or involvement in terrorism or any transnational crime.

Amounts not eligible for remission

No interest or penalties paid prior to 30 June 2021 will be remitted.

VAT

The VAT rate was initially changed from 12% to 14% on 1 April 2021; however, in an effort to reduce the impact of increasing inflation on the Botswana economy, the Botswana government introduced a temporary measure to alleviate the pressure by reducing the rate from 14% to 12% from 3 August 2022 up to 31 March 2023. The VAT rate reverted to 14% from 1 April 2023.