The budget does not propose any changes to the tax rates. However, there are provisions to offer tax incentives to attract foreign direct investment. The tax incentives include a 5% rate of corporate income tax for a 10-year period, and a 10% rate of corporate income tax thereafter.
Other income tax measures proposed in the budget include the following:
- Income from, or deemed to be from a source within Botswana would be taxable in Botswana.
- Income accruing from different businesses would be deemed to accrue from one business (except capital gains and income from farming and mining).
- Farming, mining and prospecting income/losses and capital gains/losses would be determined separately.
- Normal business expenses wholly, exclusively and necessarily incurred in the production of assessable income would be allowed as deductions.
- Transactions with connected parties would be consistent with the arm’s length principle and contemporaneous transfer pricing documentation would need to be filed with the tax return.
- Deduction of interest expenditures incurred by companies (other than banking and insurance companies) would restricted to 30% of tax EBIDTA. Any excess interest disallowed would be carried forward for 10 years in the case of a mining company or three years in all other cases.
- Deductions of expenditure relating to interest, royalties management or consultancy fees paid or payable to non-residents would be allowed in the year in which the related withholding tax is paid over to the tax authority.
- Specific deductions would be provided regarding capital allowances, expenditure on lease improvements, bad debt provisions, and contributions to an approved mine rehabilitation fund. Capital allowance claims for assets procured from third parties through a non-resident related party would need to be supported by the third-party invoice.
- Assessed losses from business could be carried forward for no more than five years, except for mining and prospecting losses that could be carried forward indefinitely.
- Capital losses could be carried forward for one year only.
Read a February 2020 report [PDF 882 KB] prepared by the KPMG member firm in Botswana