Botswana’s income tax rates are progressive, up to 25%. Botswana’s tax regime is based on a scale of taxable income. Botswana’s tax rates for individuals have been changed so that the tax-free threshold for resident individuals is increased from 25,000 BWP to 30,000 BWP per year, and the maximum marginal tax rate of 25% will now apply to income more than 120,000 BWP per year. The tax rates for individuals for non-residents and the rates for the net total income of individuals were also changed.

Corporate tax rates in Botswana

Botswana’s corporate tax rate is 15% or 25%. The corporate income tax rate in Botswana is divided into 2 levels:

• Base company tax of 15%, or a Special tax rate of 5% for manufacturing and companies at Botswana’s International Financial Services Center (IFSC);
• Additional Company Tax (ACT) of 10% applies to both tax rates above.

So, the Botswana corporate income tax rate for major companies is:

Base company tax: 15%

Additional company tax (ACT): 10%

TOTAL TAX RATE: 25%

The Botswana corporate income tax rate for manufacturing companies and IFSC companies are:

Tax for manufacturing companies and IFSC companies: 5%

Additional company tax (ACT): 10%

TOTAL TAX RATE: 15%

A two-tier tax system becomes relevant when a company pays dividends. The resident company paying the dividend must withhold tax at a rate of 15%. This withholding tax can be credited against the 10% Supplemental Company Tax (ACT) for the tax year and any unused Supplemental Company Tax (ACT) is accumulated and can be carried forward for 5 years. Income tax of 15%, which is considered part of the corporate tax structure and not a tax on dividends, can be reduced by an additional company tax (ACT) that has not previously been used. The two-tier tax system means that a Botswana resident company does not incur additional tax costs in distributing profits, provided that the withholding tax payable does not exceed the current year’s Additional Company Tax (ACT) liability.

Low tax regime

A low tax environment has existed in Botswana for several years to stimulate domestic investment and local business expansion and will continue for the foreseeable future. Corporate income tax is capped at 25% while a special rate of 15% is available for specific categories of industries and all companies operating under the control of the International Financial Services Center (IFSC).

The 15% tax for industries and companies operating in the jurisdiction of the International Financial Services Center (IFSC) includes 10% additional company tax (ACT) and 5% main company tax.

Botswana has one of the most easygoing and comprehensive tax regimes in the world. Corporate tax rates in Botswana are the lowest in the SADC region and are 15% for all manufacturing enterprises and all companies operating within the jurisdiction if it is BIFSC, and 25% for other non-manufacturing enterprises. VAT is charged in full for end-users and is 10% for standard materials and 0% for zero rate shipments.

Corporate Tax Credits – Special Tax Credits Applicable to Botswana International Financial Services Center (IFSC) companies

– Special corporate tax rate of 15% (including 10% additional company tax – ACT) guaranteed until June 2020;

– Withholding tax exemption on interest, dividends, commercial royalties, the management or consulting services in Botswana;

– One-way loans for withholding taxes levied in other jurisdictions (up to 15%);

– Access to Botswana’s Double Tax Treaties Network;

– Exemption from Capital Gains Tax (CGT);

– Collective investment enterprises (CIUs) are tax exempt. It applies to mutual funds and other collective investment structures;

– IFSC companies are exempt from Botswana Value Added Tax (VAT).

Botswana Income Tax (WHT) – Dividends

An income tax of 15% is levied on all dividends paid by a resident company to a resident or non-resident. Withholding tax is the final tax and can be credited against the 10% Additional Company Tax (ACT) of the paying company for the tax year.

Botswana Income Tax (WHT) – Royalty

Botswana’s withholding tax on royalty payments to non-residents is 15%. Withholding tax on royalty payments cannot be offset against corporate liabilities.

• Branch Transfer Tax: There is no branch transfer tax in Botswana.
• Property tax. Local authorities in Botswana levy a property tax known as “rates” on property owners. Property sales in Botswana are subject to a 5% property transfer tax.
• Transfer Tax: Property transfer tax in Botswana is 5%.
• Capital transfer tax: Capital transfer tax at the rate of 12.5% ​​is levied on the transfer of assets. Company registration fees are charged at different rates.
• Taxation of dividends: Dividends received are specially excluded from the definition of gross income and therefore represent tax-exempt income. Dividends received from sources outside of Botswana are subject to a flat tax of 15%.