Taxation of international executives
Tax returns and compliance
When are tax returns due? That is, what is the tax return due date?
30 September.
What is the tax year-end?
The tax year-end for individuals is 30 June of each year.
What are the compliance requirements for tax returns in Botswana?
Income tax payable by the individual employee on their annual gross income is generally recovered at the source under the PAYE salary deduction system and withholding taxes payable on certain categories of income. All individuals whose annual gross income exceeds BWP36,000 are required to register as taxpayers and submit annual tax returns no later than 30 September following the end of the tax year. Upon request, an extension is possible.
Progressive tax rates (5 percent to 25 percent) apply. The first BWP36,000 is tax free. The highest marginal tax rate of 25 percent is applied to taxable income in excess of BWP144,000.
Non-resident individuals are required to register as taxpayers and to comply with all tax return and compliance obligations in the same way as residents, in relation to income from a Botswana source. Non-residents are, however, taxed slightly differently from residents in that there is no exemption from tax on the first BWP36,000 per year which is taxed at the rate of 5 percent.
What are the current income tax rates for residents and non-residents in Botswana?
Income tax table for 2020
Taxable income bracket |
Total tax on income below bracket |
Tax rate on income in bracket |
|
From BWP |
To BWP |
BWP |
Percent |
0 |
72,000 |
0 |
5.00% over BWP36,000 |
72,001 |
108,000 |
1,800 |
12.50% over BWP72,000 |
108,001 |
144,000 |
6,300 |
18.75% over BWP108,000 |
144,001 |
Over |
13,050 |
25.00% over BWP144,000 |
Income tax table for 2020
Taxable income bracket |
Total tax on income below bracket |
Tax rate on income in bracket |
|
From BWP |
To BWP |
BWP |
Percent |
0 |
72,000 |
0 |
5.00% over BWP0 |
72,001 |
108,000 |
3,600 |
12.50% over BWP72,000 |
108,001 |
144,000 |
8,100 |
18.75% over BWP108,000 |
144,001 |
Over |
14,850 |
25.00% over BWP144,000 |
Exemption from tax is restricted to gains on disposal of specified assets/property including shares traded on the Botswana Stock Exchange, shares in a Botswana registered public company as defined in the Income Tax Act, bonds, and debentures issued by the government, Bank of Botswana or statutory bodies, shares in an International Financial Services Company, principal private residence.
When are estimates/prepayments/withholding of tax due in Botswana? For example: monthly, annually, both, and so on.
Withholding tax is due within 15 days of the end of the month of deduction.
Currently individuals are not required to make estimates or prepayments of tax. Assessed tax is due 30 days from issue of assessment.
For the purposes of taxation, how is an individual defined as a resident of Botswana?
An individual is regarded as a resident of Botswana, if:
Is there, a de minimus number of days rule when it comes to residency start and end date?
For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.
There is no such requirement. The test is based on the criteria stated above.
What if the assignee enters the country/jurisdiction before their assignment begins?
This counts towards the period of physical presence in Botswana in determining the residency status.
Are there any tax compliance requirements when leaving Botswana?
If the individual was registered as a taxpayer they will be required to file the final tax return, settle any outstanding taxes, and apply for tax de-registration. There are no requirements where the individual is not registered for tax. However, where the Commissioner General deems it necessary, they may at any time require an individual to submit a tax return for a tax year specified if they feel that the individual may leave Botswana permanently.
What if the assignee comes back for a trip after residency has terminated?
There are no implications on residency should an assignee come back to Botswana for a trip after termination of tax residency.
Currently, KPMG in Botswana is not aware of such communication. However, the Commissioner General is free to obtain such information from any source they consider appropriate.
An assignee will have filing requirements only if Botswana-source income, which is not subject to final withholding tax, accrues to them.
No. There is no indication that this approach will be adopted in Botswana in the near future.
Are there a de minimus number of days before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?
No – Not applicable.
As a rule, all types of compensation and remuneration received by an employee for services rendered in Botswana or deemed to have been rendered in Botswana constitute taxable income. These include, but are not limited to, the following:
Will a non-resident of Botswana who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Botswana trigger a personal tax liability in Botswana, even though no separate director's fee/remuneration is paid for their duties as a board member?
Yes, however a personal tax liability will be triggered by the rendering of services, including attending board meetings, in Botswana.
a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Botswana?
No, the taxation will be triggered by physical presence in Botswana.
b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Botswana (i.e. as a general management fee where the duties rendered as a board member is included)?
No, the answer remains the same.
c) In the case that a tax liability is triggered, how will the taxable income be determined?
The tax table under Tax rates section is applicable.
Within employment contracts, the following items are not taxed in the hands of the employee:
As a general rule, there are limited instances where individuals are exempt from taxation in Botswana. Such instances would include employees of diplomatic missions and employees of companies providing technical assistance to the government of Botswana where the agreement provides for exemption.
Are there any concessions made for expatriates in Botswana?
One third of contractual terminal gratuity is tax free.
Is salary earned from working abroad taxed in Botswana? If so, how?
Foreign employment income is normally not taxable in Botswana. However if the work is performed abroad during temporary absence from Botswana by a resident and for the employer in Botswana, the income is taxable in Botswana.
Botswana bank and building society interest accruing to a resident individual in excess of BWP7,800 (exempt portion) is subject to 10 percent withholding tax which is a final tax. All other interest income of resident taxpayers is taxed at the normal resident individual tax rates.
Interest received by an individual from the following sources is, however, exempt from tax:
Foreign dividends are subject to income tax at a rate of 15 percent with relief for foreign tax paid. However foreign investment income (interest and capital gains) accruing to a non-citizen resident in Botswana is not subject to tax. Botswana dividends are subject to withholding tax at the rate of 7.5 percent. The rate may be varied by an applicable double taxation agreement. This is a final tax.
Commercial royalties, entertainment fees, and management or consultancy fees accruing to a resident from a source within Botswana are taxed as business income on assessment.
Interest commercial royalties, and management or consultancy fees paid by a resident to a non-resident are subject to withholding tax of 15 percent on the gross amount paid.
Withholding tax rates may be varied by an applicable double taxation agreement. The tax so withheld is final.
Capital gains are taxed as per the rates shown in the following table.
Taxable income |
Cumulative |
Percent |
Tax payable |
|
0 |
18,000 |
0 |
|
|
18,001 |
72,000 |
0 |
+ 5.00% |
Over 18,000 |
72,001 |
108,000 |
2,700 |
+ 12.50% |
Over 72,000 |
108,001 |
144,000 |
7,200 |
+ 18.75% |
Over 108,000 |
144,001 |
and over |
13,950 |
+ 25.00% |
Over 144,000 |
Any capital gain realized by an individual with respect to the disposal of the following assets will be included in the calculation of the taxable income of the individual:
The capital gains realized by an individual on the following assets are not subject to tax and therefore will not be included in the calculation of taxable income of an individual.
See above regarding dividends and interest income.
Rental income is classified as business income. Any rental income, less expenses necessarily incurred wholly and exclusively in the production of such rental income, is taxed at the individual tax rates. Chargeable business income is aggregated together with employment and investment income for purposes of determining the marginal tax rates applicable. However, business/investment losses cannot be off-set against employment income. Rental income from properties used for business will be subject to 10 percent withholding tax. This is a provisional tax credited on assessment.
Residency status |
Taxable at: |
||
|
Grant |
Vest |
Exercise |
Resident |
N |
N |
Y |
Non-resident |
N |
N |
Y |
Other (if applicable) |
N/A |
N/A |
N/A |
Any foreign exchange gains or losses are taxable or deductible when realized.
Gains on the disposal of a principal private residence will be subject to income tax.
However such gains are exempt from tax if the property so disposed was owned for at least 5 years and no similar exemption was granted in the immediately preceding 5 years.
Assessed capital losses fall away unless utilized in the following tax year.
See fringe benefits.
Gifts received in relation to services rendered constitute remuneration subject to income tax.
Are there additional capital gains tax (CGT) issues in Botswana? If so, please discuss?
A disposal of shares in a company whose principal assets consist of immovable property is deemed to be a disposal of the underlying property.
Are there capital gains tax exceptions in Botswana? If so, please discuss?
Exemption from tax is restricted to gains on disposal of specified assets/property including shares traded on the Botswana Stock Exchange, shares in a Botswana registered public company as defined in the Income Tax Act, bonds, and debentures issued by the government, Bank of Botswana or statutory bodies, shares in an International Financial Services Company, principal private residence.
Generally Botswana tax treaties exempt capital gains accruing to a non-resident on the disposal of shares held in a company that is not property rich.
Proceeds from the disposal of shares in a company holding Botswana mineral rights or an interest in Botswana mineral rights, mining or prospecting information or any Botswana mining or prospecting rights is taxed as business profits and not capital gains.
Gains on disposal of any property are taxable as stated above.
The items, which are allowable as a deduction in the calculation of income tax payable by an individual, depend on the nature of the income and the trade.
Expenses of a revenue nature which are wholly, exclusively, and necessarily incurred in the production of assessable income, and which are not specifically prohibited, are to be deducted in the computation of taxable income.
No deduction from taxable income is allowed for the following expenditure items:
The Income Tax Act of Botswana does not make provision for any personal allowances. However, individuals are entitled to the following deductions.
What are the tax reimbursement methods generally used by employers in Botswana?
An employer is required to reconcile individual employees PAYE calculations and effect refunds/additional deductions through the payroll, as long as such reconciliations do not result in a refund due from the tax authorities. In such cases, reimbursements are processed through assessment of the employee tax return by the tax authority.
How are estimates/prepayments/withholding of tax handled in Botswana? For example, Pay- As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
PAYE is withheld by the employer and must be remitted no later than 15 days after the end of the month in which the deduction took place.
Currently, there is no PAYG in Botswana.
See PAYG Withholding.
When are estimates/prepayments/withholding of tax due in Botswana? For example: monthly, annually, both, and so on.
Withholding tax is due within 15 days of the end of the month of deduction.
Is there any Relief for Foreign Taxes in Botswana? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
Relief is provided both in the domestic law and in the double taxation agreements. Such relief is equal to the foreign tax paid subject to a maximum of Botswana tax on the relevant income.
What are the general tax credits that may be claimed in Botswana? Please list below.
There are no general tax credits.
This calculation assumes a married taxpayer resident in Botswana with two children whose 3- year assignment begins 1 January 2017 and ends 31 December 2019. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 3 years.
|
2017 USD |
2018 USD |
2019 USD |
Salary |
100,000 |
100,000 |
100,000 |
Bonus |
20,000 |
20,000 |
20,000 |
Cost-of-living allowance |
10,000 |
10,000 |
10,000 |
Housing allowance |
12,000 |
12,000 |
12,000 |
Company car |
6,000 |
6,000 |
6,000 |
Moving expense reimbursement |
20,000 |
0 |
20,000 |
Home leave |
0 |
5,000 |
0 |
Education allowance |
3,000 |
3,000 |
3,000 |
Interest income from non-local sources |
6,000 |
6,000 |
6,000 |
Calculation of taxable income
Tax year ended 30 June |
2017 BWP |
2018 BWP |
2019 BWP |
2020 BWP |
Days in Botswana during the year |
183 |
365 |
365 |
183 |
Earned income subject to income tax |
|
|
|
|
Salary |
521069 |
1042139 |
1042139 |
521069 |
Bonus |
104214 |
208428 |
208428 |
104214 |
Cost of living allowance |
52107 |
104214 |
104214 |
52107 |
Net housing allowance |
62528 |
125057 |
125057 |
62528 |
Company car |
31350 |
62528 |
62528 |
31350 |
Moving expenses reimbursement |
0 |
0 |
0 |
0 |
Home leave |
0 |
0 |
0 |
0 |
Education allowance |
15675 |
31264 |
31264 |
15675 |
Other income |
0 |
0 |
0 |
0 |
Total taxable income |
786943 |
1573630 |
1573630 |
786943 |
Tax year ended 30 June |
2017 BWP |
2018 BWP |
2019 BWP |
2020 BWP |
Taxable income as above |
786,943 |
1,573,630 |
1,573,630 |
786,943 |
Botswana tax thereon |
173,786 |
370,457 |
370,457 |
173,786 |
Less |
|
|
|
|
Domestic tax rebates |
0 |
0 |
0 |
0 |
Foreign tax credits |
0 |
0 |
0 |
0 |
Total Botswana tax |
173,786 |
370,457 |
370,457 |
173,786 |
1. Certain tax authorities adopt an ‘economic employer’ approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/jurisdiction for a period of less than 183 days in the fiscal year (or a calendar year of a 12-month period), the employee remains employed by the home country/jurisdiction employer but the employee’s salary and costs are recharged to the host entity, then the host country/jurisdiction tax authority will treat the host entity as being the ‘economic employer’ and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied and the employee would be subject to tax in the host country/jurisdiction.
2. For example, an employee can be physically present in the country/jurisdiction for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.
3. All tax information is summarized by KPMG in Botswana, the Botswana partnership and member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Income Tax Act (Chapter 52:01) of Botswana as amended together with the Departmental Guidance Notes issued by the Botswana Unified Revenue Service.
All information contained in this publication is summarized by KPMG in Botswana, the Botswana partnership and member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Income Tax Act (Chapter 52:01) of Botswana as amended together with the Departmental Guidance Notes issued by the Botswana Unified Revenue Service, Ministry of Employment, Labour Productivity and Skills Development (permit applications), Ministry of Nationality, Immigration and Gender Affairs (visa applications), and the Botswana Immigration Act.
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