Botswana: Transition rules for temporary reduction in VAT rates

The tax authority issued transition rules with regard to the reduced VAT rates

The tax authority issued transition rules with regard to the reduced VAT rates

The Minister of Finance in early August 2022 announced the following temporary reduction in the rates of value added tax (VAT)—for the period 1 August 2022 through 31 January 2023:

  • Reduction in the standard VAT rate to 12% (from 14%)
  • Reduction in the VAT rate for cooking oil and liquid petroleum gas to 0% (from 14%)

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The tax authority on 10 August 2022 issued transition rules with regard to the reduced VAT rates, and specifically regarding the effects of the rate reduction on existing agreements that, when entered into, the VAT rate was 14%. The transition rules also provide guidance with regard to different categories of VAT-registered persons and how they will be affected by the change in the VAT rates. 

KPMG observation

The transition rules are silent as to how to resolve the two-day discrepancy between the date when the reduced rates were announced (1 August 2022) and the date stipulated in the statutory instrument (3 August 2022). It has been observed that some traders (especially retailers) implemented the reduced VAT rates as of 1 August 2022.

Tax professionals believe that the date when the rate reduction was implemented will be the effective date. However, traders need to pay attention to the provisions relating to the “time of supply” rules when deciding whether the reduced rate of 12% is applicable for supplies made before 3 August 2022. For example, it appears that the rate of VAT applicable on goods delivered after 3 August 2022, for which part payment was made in July 2022, will remain 14% even though the applicable tax invoice was issued on 15 August 2022.


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

Leonard Muza | leonard.muza@kpmg.bw

Kenneth Sakonda | kenneth.sakonda@kpmg.bw

 

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