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Botswana - Indirect Tax Guide

Botswana - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Botswana.

Explore the requirements and rules that apply to indirect taxes in Botswana.

Flowers on the water

General

Types of indirect taxes (VAT/GST)

VAT.

What is standard VAT/GST rate?

12 percent.

Are there any reduced rates, zero rates or exemptions?

Zero-rated supplies include:

  • export of goods
  • services physically rendered outside Botswana
  • supplies to a branch or main business outside Botswana
  • services supplied directly in connection with land or movable property outside Botswana or relating to intellectual rights for use outside Botswana
  • services supplied to non-residents
  • repair of railway train operated by non-resident, non-registered person
  • international transport services
  • supply of a going concern
  • goods or services to the president or dependent member of his family
  • certain foodstuff:
    • sorghum or maize meal for human consumption, but not in a meal or as cooked or prepared food
    • millet grain, millet meal, wheat grain, maize cobs, flour, sugar and beans in their natural state
  • pesticides and fertilizers
  • tractors acquired for farming
  • first 5,000 liters of water supplied per month to a dwelling by Water Utilities Corporation.

Exempt supplies include:

  • financial services, excluding transactions rendered for a fee or for commission
  • education
  • medical services by a government or aided facility
  • residential letting and hostel accommodation on a non-profit basis
  • leasing or renting of land for erecting a dwelling
  • certain prescription drugs
  • sectional title management levies
  • domestic passenger transportation by road or rail, not including transportation of tourists
  • grants from the government
  • condoms
  • donations
  • various agricultural farming implements.

What are the general and specific place of supply rules, if applicable?

No specific place of supply rules.

VAT/GST registration

Who is required to register for VAT/GST?

An enterprise (including a sole proprietorship, partnership or joint venture) carrying on continuous or regular activities in or partly in Botswana, whereby goods or services are supplied to another person for consideration and whose taxable supplies exceed or are expected to exceed 1 million Pula (BWP) or more per annum.

Is voluntary VAT/GST registration possible for an overseas company?

Voluntary registration for an overseas company is possible where the taxable supplies turnover is over BWP500,000. Voluntary registrants may not deregister until 2 years after the date of registration.

Does an overseas company need to appoint a fiscal representative?

No, but an overseas company carrying on business in Botswana must appoint a representative. The representative must be a person controlling the overseas company’s taxable activities in Botswana.

Is VAT/GST grouping* possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly, if the value of taxable supplies is BWP12 million or more in a 12-month period.

Bi-monthly, if the value of taxable supplies is less than BWP12 million in a 12-month period.

The VAT return must be filed within 25 days after the end of the relevant tax period.

Can returns be filed and payments be made electronically?

Yes.

What are the exchange rate rules?

Invoices in foreign currency are converted to BWP at the exchange rate applicable on the date of the invoice.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No. Refunds are only granted to non-resident individuals, diplomats, diplomatic missions and persons under certain international laws and conventions.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Input VAT cannot be deducted on:

  • passenger vehicles (including double-cab vehicles but excluding safari vehicles) purchased or hired except if by a vehicle letting business
  • certain entertainment
  • membership fees for sports, social or recreational organizations
  • VAT on expenditure applied in the making of exempt supplies.

Where VAT incurred relates to the making of both exempt and taxable supplies, input tax claims should be apportioned.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

4 months.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

The refund is paid to the taxpayer.

Invoices

Is a business required to issue tax invoices?

Yes, if supplies are made for more than BWP20. Tax invoices may be in either English or Setswana.

Is it possible/mandatory to issue invoices electronically?

It is possible but not mandatory. The invoicing system should be dependable and reliable to avoid duplicate invoices.

Is it possible to issue recipient-created tax invoices?

Yes (self-invoicing).

Audits

Do tax audits take place on a regular basis?

Yes.

  • Large refunds are subject to audits.
  • Some audits are targeted.
  • Invoices are verified to support input tax claims (including verifying if the supplier accounted for the output tax), whether claims are within the prescribed period, existence of VAT registration numbers of the supplier and the claimant on tax invoices, methods of apportionment of input tax where applicable, etc.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

Late submission penalty equivalent to the greater of BWP50 per day or 10 percent per month or part thereof, capped at the amount of tax payable for the return or import declaration, may be imposed.

Penalties for late NIL or refund returns are capped at BWP5,000.

Compound interest at the rate of 1.5 percent per month or part of a month, is levied for late payment of tax.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

No.

Does a reverse charge mechanism apply?

Yes – on expenses that are not utilized in the making of taxable supplies.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

No. Reverse VAT is only payable if the service is acquired for a purpose other than for the making of taxable supplies. Effectively, this will have the same result.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

No.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

No.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes. However, rulings issued by the tax authority are not binding.

Are rulings and decisions issued by the tax authorities publically available?

No.

Other indirect taxes

Are there other indirect taxes not commented on above?

Yes, other indirect taxes include:

  • customs duty
  • excise duty.

For further information please contact

Olivia Muzvidziwa
Associate Director
KPMG in Botswana
T: +267 391 2400
E: olivia.muzvidziwa@kpmg.bw

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Botswana, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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