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Botswana: Overview of transfer pricing rules

Botswana: Overview of transfer pricing rules

Transfer pricing legislation and regulations in Botswana were effective 1 July 2019. The regulations are based on the OECD Transfer Pricing Guidelines (that are cited in the legislation as a relevant source of interpretation).

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The transfer pricing rules require transactions between directly or indirectly connected persons to be consistent with the arm’s length principle. Transfer pricing applies to transactions with non-residents and transactions with Botswana resident IFSC accredited related companies. The terms “connected person” and “control” are defined in the income tax law.

A transaction with a connected party is considered to be consistent with the arm’s length principle if the conditions of the transaction do not differ from the conditions that would have applied between independent persons in a comparable transaction conducted in comparable circumstances.

Some of the transfer pricing documentation and information that taxpayers are required to submit within four months of the end of the financial year are:

  • An overview of the taxpayer’s business operations which includes the history, recent evolution, general overview of the relevant markets of reference and an organizational chart
  • A description of the group’s operational structure including general description of the role that each of the group members carries out with respect to the group’s activities, which are relevant to the controlled transaction
  • A general business strategy that includes business restructuring or intangible transfer in the present or immediate past year and an explanation of the effects of such transaction
  • Details of the taxpayer’s key competitors
  • Description of controlled transactions, including analysis of the comparability factors and such
  • The amount of intra-group payments and receipts for each category of controlled transactions broken down by the tax jurisdiction of the foreign payer or recipient
  • Copies of all material inter-company agreements
  • A detailed comparability and functional analysis and the relevant connected persons with respect to each documented category of controlled transactions
  • A summary of the important assumptions made in applying the transfer pricing methodology
  • Comparability analysis that includes details of industry and economic analysis, budgets or projections relied on
  • Any other information that may have material impact on the determination of the taxpayer’s compliance with the arm’s length principle

The head of the tax agency is authorized to:

  • Request the taxpayer to submit the equivalent of an OECD Master file within seven days from the date of the request in cases when transactions with a connected person exceed BWP5 million
  • Restate taxable income in line with the arm’s length principle

Failure to comply with transfer pricing legislation can give rise to penalties, as follows:

  • The greater of BWP10,000 or 200% of the additional tax arising from a transfer pricing adjustment, or
  • An amount not exceeding BWP500,000 for failure to comply with transfer pricing documentation-filing obligations which may be reduced to below BWP250,000 upon mitigation
  • Certain criminal penalties

Note that a restatement of related-party transactions by the tax agency may give rise to additional value added tax (VAT), withholding tax, and other tax liabilities plus penalties and interest charges.


For more information, contact a KPMG tax professional in Botswana:

Leonard Muza | +26 777 19 9067 | leonard.muza@kpmg.bw

Olivia Muzvidziwa | +26 777 19 9022 | olivia.muzvidziwa@kpmg.bw

Kenneth Sakonda | +26 777 19 9079 | kenneth.sakonda@kpmg.bw

Masa Selerio | +26 777 19 9069 | masa.selerio@kpmg.bw

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