- Low general tax rate: resident companies pay company tax at 22% of the taxable income and the general rate of withholding tax is 7.5% on all dividends distributed.
- Manufacturing companies pay tax at 15% of taxable income – subject to approval.
- Development Approval Order – tax holiday (zero corporate tax) can be made available to investors for a period of 5 to 10 years.
- There are no foreign exchange controls in Botswana – hence free repatriation of profits, dividends and capital.
- Operational double taxation avoidance agreements with South Africa, United Kingdom, Sweden, France, Mauritius, Namibia, Zimbabwe and Russia.
- International Financial Services Centre (IFSC) accredited companies pay tax at 15% on profits from approved operations.
- Companies accredited by the Innovation Hub pay tax at 15% of profit.
IFSC Company Certification
The Botswana IFSC offers a range of tax incentives to approved companies. These include, but are not limited to:
- Flat Corporate Tax rate at 15%
- No withholding tax on dividends, interest, royalties, management fees
- Unilateral credit for withholding tax suffered in other jurisdictions whether or not a Double Tax Avoidance Agreement exists
- Specified Collective Investment Undertakings (CIUs) managed by IFSC companies are tax exempt
Requirements to Become an IFSC Company
To register as an IFSC company, the company must be registered in Botswana must make a formal application to the International Financial Services Centre Certification Committee through BITC. If the company meets criteria for IFSC certification, BITC will forward a recommendation to the Minister of Finance and Development Planning who will issue a certificate stipulating approved activities
Activities Eligible for IFSC Certification
The following activities are approved financial operations, broadly defined in the Income Tax Act, provided they are carried out by non-residents or IFSC companies:
- Banking and finance operations transacted in foreign currency
- Broking and trading of securities denominated in foreign currency
- Investment advice
- Management and custodial functions related to CIUs
- Insurance and related activities
- Registrars and transfer agency services
- Exploitation of intellectual property
- Development and supply of computer software for use in provision of the aforementioned services
- Accounting and financial administration
- Holding and administration of group companies
- Business process outsourcing and call centres
- Shared financial services
- Mutual funds
- Other operations that the Minister may declare by order to be approved financial operations on a case by case basis.
Development Approval Order (DAO)
The DAO provides special tax relief and/or education and training grants and is subject to the authority of the Minister of Finance and Development Planning. Zero-rate tax holidays for between 5 and 10 years can be obtained through the DAO.
Requirements for Development Approval Order
The Minister must be satisfied that the proposed project will be beneficial to Botswana’s economy. Any firm, local or foreign, may apply to the Permanent Secretary for Finance and Development Planning for a DAO.
Applications are evaluated against the following criteria:
- Job creation for Botswana citizens
- The company’s training plans for Botswana citizens
- The company’s plans to localise non-citizen positions
- Botswana citizen participation in company management
- Amount of equity held by Botswana citizens in the company
- The location of the proposed investment
- The project’s effect on stimulation of other economic activities
- The project’s effect on reducing local consumer prices