Authored by Armstrongs, Lex Africa Law Firm in Botswana
- Type of Government
- Forms of Business Organisation
- Formation of a Business
- Foreign Investments
- Exchange Control
- Regulatory Environment
- Intellectual Property
- Membership of International & Regional Organisations
Type of Government
Multi party democracy.
Forms of Business Organisation
- Private or Public limited liability company
- External company (branch of foreign company)
- Company limited by guarantee
- Common law trust
- Sole proprietorship
- Societies being associations of persons
Formation of a Business
Societies and companies must be registered with the appropriate authorities in Gaborone. There is no requirement for registration of a trust, although the practice is to register a trust with the Registrar of Deeds. Companies, societies, trusts, partnerships and proprietorships generating income, are to register with the Commissioner of Income Tax. Trading licences are required for wholesale, retail, and agency activities.
Tax is levied on income which is actually derived or deemed to be derived from Botswana sources.
- the Corporate tax rate is 25% which comprises 15% company tax and an additional tax of 10%
- the top marginal rate of individual tax is 30%
- the effective tax rate of manufacturing companies approved by the Minister of Finance and Development Planing as manufacturing companies is 15% which comprises 5% company tax and 10% additional tax.
There is a 15% withholding tax on all dividends. The aggregate of the tax so withheld is available for and capable of set off/credit against the 10% additional company tax.
Companies listed on the Botswana Stock Exchange prior to 1 July 1995 are entitled, for 5 years from date of listing, to a deduction from chargeable income of 12,5% thereof, provided that 25% of the paid up capital was held by the general public in a tax year. As of July 1995 companies being listed are no longer entitled to this deduction.
There is capital gains tax at the income tax rate of the particular tax payer in respect of -
- immovable property as to 100% of the gain which is calculated by deducting from the sale price the cost of acquisition and the cost of any improvements and a prescribed escalator factor applied to such costs
- shares in a company as to 50% of the gain which is calculated by deducting from the sale price the cost of acquisition of the shares sold.
Capital gains tax is not payable on the sale of shares of a company listed on the Botswana Stock Exchange.
Botswana has double taxation agreements with South Africa, United Kingdom and Sweden.
Botswana welcomes foreign investment. A direct investor (an investor which invests in more than 10% of the issued share capital in a company and has a right to appoint directors and control management) may invest with Bank of Botswana ("BOB") approval. That approval is readily given where the investment is in -
- a new company upon proof that the funds are received from foreign sources
- an existing company upon satisfaction that fair value is being paid for the shares.
A portfolio investor (an investor which invests in less than 10% of the entire issued share capital of a company and has no right to appoint a director to and has no say in management) may invest in up to 5% of the entire issued share capital of a company without BOB approval, and up to 10% with BOB approval.
The aggregate of foreign portfolio investment in a company may not exceed 49% of the free shares of a company.
Once the investment has been approved by BOB -
- dividends are freely remittable out of Botswana, subject to audited financial statements being lodged with an
- authorised dealer (ie the commercial bank concerned) and payment of withholding tax;
- capital gains on a subsequent sale are freely remittable out of Botswana, subject in the case of an unlisted
- company, to payment of capital gains tax.
Non residents may make loans to Botswana entities. The loan and the terms thereof require BOB approval and interest payable on the loan may then be remitted, subject to payment of 15% withholding tax, and the capital may be repaid and remitted after two years.
The purchase price of goods imported in Botswana is readily remitted out of Botswana.
Companies and individuals are allowed unlimited current account foreign exchange for payments for travel, royalties, licence, franchise and management fees. Companies may remit up to the equivalent of P1 million for investment for the acquisition of income generating assets outside of Botswana. Citizens may remit up to the equivalent of P100000 for the acquisition of assets outside Botswana.
Persons in Botswana are permitted to hold foreign currency accounts in US Dollars, Pound Sterling, Deutsche Marks or SA Rands.
Temporary resident individuals, i.e. expatriates on contract are entitled to remit 100% of such earnings net of tax out of Botswana.
Foreign owned or controlled companies may borrow locally the equivalent of 4 times equity.
The Trading Act regulates wholesale, retail representative and agency businesses, and licences are required.
The Insurance and Pension and Provident Industry is regulated by the Insurance Act and Pension and Provident Fund Act and regulations.
There is no regulation of competition or of mergers, acquisitions and takeovers.
The Botswana Stock Exchange is the forum for the listing and trading of shares in public companies, and is regulated by the Stock Exchange Act. The Act and its regulations govern dealings on the Botswana Stock Exchange.
The government, in conjunction with Botswana Development Corporation Limited, commissioned a consultancy for the development of a collective investment undertaking industry in Botswana. Legislation in this regard has been drafted and it is anticipated that such legislation will be promulgated and commence in the first half of 1996.
The government and the Botswana Development Corporation Limited also commissioned a consultancy with regard to the viability of establishing an international financial services centre in Botswana and the corresponding development of legislation to cover that and the ability to set up international business companies in Botswana. That study, recently released, is positive and the principals have commissioned the drafting of legislation which it is hoped will be promulgated and commence in early 1997.
Protection is provided for by statute.
There is a registry for business names, designs, patents and trademarks.
Botswana is not an original registry for designs, patents and trademarks but registers designs, patents and trademarks registered in South Africa and the United Kingdom.
Botswana is a member of the Southern African Customs Union (Lesotho, Namibia, South Africa and Swaziland) and hence imposes the same import tariffs as South Africa, subject to GATT. Import permits are generally required.
A trade agreement with Zimbabwe exists in terms of which certain goods are exempted from import and export duty.
Financial assistance to manufacturing operations exists by way of the financial assistance policy ("FAP") which was previously effectively limited to manufacturing, medium and small scale mining and agriculture other than cattle and most rain fed crops. The government intends extending FAP to the service sector including tourism.
Under FAP, the following grants are available to an investor in a new enterprise -
- a five year "step down" tax holiday (involving reimbursement of company tax paid), of 100% in each of the first two years of operation, and 75%, 50% and 25% in the third, fourth and fifth years respectively;
- a step down reimbursement of unskilled labour costs of 80% in the first two years of operation, and 60%, 40% and 20% in the third, fourth and fifth years respectively;
- a training grant reimbursement of 50% of approved training costs in the first five years of operation;
- a capital grant being the lesser of a fixed percentage of the capital investment (the minimum being 40% of capital investment in urban areas and the maximum being 85% of capital investment in certain rural areas) or P1,000 per citizen job created where the investor is a non citizen.
Grants under FAP are exempt from income tax .
Membership of International & Regional Organisations
Southern African Customs Union, Southern African Development Community, World Bank, International Monetary Fund, Organisation of African Unity, United Nations Organisation, British Commonwealth, Lome Convention and a signatory to GATT.
Legal Disclaimer: This information is not intended for use without professional advice
For further information please contact: Werksmans Attorneys Werksmans Chambers, 22 Girton Road, Parktown, Johannesburg 2193 or P.O. Box 927, Johannesburg 2000 South Africa Enquiries: Mr Charles Butler Telephone 27 (011) 488-0000 Telefax 27 (011) 484-3100/3200 E-Mail Address Click Contact Link Or visit the Werksmans web site, at Click Contact Link