Amendments to the Income Tax Act 2018 and 2019
Salient features of amendments to the Income Tax Act are as follows:
Direct/indirect transactions with a connected person to be at arm's length
All the transactions between related parties are to be recorded at arm's length. The Minister is to prescribe whether the conditions of a transaction are consistent with the arm's-length principle, and required documentation is to be kept by the parties in respect of such transaction.
Non-compliance shall have severe penalties. The penalties will be the greater of 200% of the amount of tax that would have been avoided/payable or a fine of 10,000 Botswana pula (BWP).
Further, a penalty not exceeding BWP 500,000 will be imposed on failure to furnish the Commissioner with the transfer pricing documentation.
Restriction of claiming interest expenses in arriving at taxable income
The maximum net interest expense claimable by a company (except for a variable rate loan stock company, a micro, small, or medium enterprise, or a bank and an insurance company) is 30% of the taxable income or earnings before interest, tax, depreciation, and amortisation (EBITDA).
Disallowed interest, if any, is to be carried forward and claimed in three years. In respect of mining companies, such denied interest is to be carried forward and claimed in ten years.
Amendments to Transfer Duty 2018
The Transfer Duty Act is amended by inserting the following:
- Increase of the duty for non-residents from 5% to 30%.
- The imposition of a duty on the transfer of shares in a company owning immovable property.
- The introduction of mandatory valuation certificate duly executed by a registered property valuer for all transfers.
- The imposition of a duty on the transfer of tribal land.
- Increase in the exemption applicable to citizens from BWP 200,000 to BWP 1,000,000.
- Introduction of a minimum penalty of BWP 20,000 plus 1.5% compound interest per month or part of a month for false declarations or fraudulent act by the person liable to pay the duty.
Selibe Phikwe Economic Development Unit (SPEDU) region incentive
The Income Tax Act was amended through the SPEDU Region Development Approval Order, 2018 to introduce concessionary corporate income tax (CIT) rates for approved business operating in the SPEDU region. Below are the key points of the Order:
Concessionary CIT rates
The following concessionary CIT rates are applicable for approved business operations in the SPEDU region:
|Period of operation||CIT rate (%)|
|For a new business:|
|First five years of operations||5|
|For an existing business:|
|First five years of operations as per Tax Relief Certificate||5|
Areas covered under the SPEDU region
- Mmadinare - Sefhophe.
- Lerala - Maunatlala.
- Neighbouring villages, farms, and cattle posts.
A new business or an existing business under the following sectors in the SPEDU region is eligible to apply for concessionary CIT rates:
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.