An amendment to Botswana’s income tax law was promulgated on 29 December 2018.
The new law—The Income Tax (Amendment) Act, 2018—includes measures that:
Under Section 36A, the legal framework is effective to allow for transfer pricing regulations in Botswana. The transfer pricing legislation is premised on the arm’s length principle, and the major features of the transfer pricing regulations include the following.
Tax professionals in Botswana understand that the transfer pricing legislation will apply to all related-party transactions including transactions between resident connected persons. There is a certain amount of ambiguity in the application of the legislation because the following key terms are not defined:
Taxpayers are advised to review their transactions with related parties to determine that these transactions are consistent with the arm’s length principle.
The general anti-avoidance provisions of Section 36 have been amended to exclude related-party transactions because these are covered by the transfer pricing legislation. Under amended Section 36, the Commissioner General is authorized to:
The tax law has been amended as follows:
These provisions will apply to entities included in the definition of “company” in Section 2, and as such apply with respect to:
Companies will want to review their debt-expenditure-to-tax-EBITDA ratios in the light of the potential tax exposures under the anti-earnings stripping rules.
The provisions of the tax law governing the taxation of international financial services company (IFSC) companies have been amended as follows:
While IFSC companies are now allowed to do business with both residents and non-residents—provided that the activities are restricted to “approved financial operations”—it appears that only income arising from approved operations with non-residents will be subject to tax at 15%.
The provisions in paragraph 6 of the Twelfth Schedule—relating to interest payable by a foreign-controlled resident mining company—were repealed.
The deduction of such interest is now subject to the 30% of EBITDA restrictions under Section 41A and the 10-year carryforward period of disallowed interest under Section 43A (2).
This change may have a significant affect on the short-term cash flows projections of mining projects that are calculated on the basis of the former and now repealed provisions.
The tax law was amended to increase the following fines or penalties:
Prison sentences would be imposed upon conviction by a competent court of law.
For more information, contact a KPMG tax professional in Botswana:
Silvia Camara-Roos | +267 71628684 | email@example.com
Leonard Muza | +267 3912400 | firstname.lastname@example.org
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.