INVESTORS SET UP STEPS / PROCEDURE

February 8, 2019
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1. COMPANY FORMATION

We assist clients with company formations and we keep registered companies to allow clients the flexibility to choose from a list of registered companies (shelf companies).

This process involves 2 procedures to be followed: one is reserving your business name, and the second is company registration.

Reserving a Company Name – Before setting up your company in Botswana, you need to reserve your business name,

Name reservation might take up to 5 days, and the reserved name is valid for a period of 30 days. The Registrar of Companies will accept a valid name and if you have crossed the limit of 30 days, you will have to go through the business name reservation process again.

Company Registration – In Botswana, all the companies need to be registered with the Registrar of Companies and Intellectual Property (ROCIP), which is the initial step for business setup in Botswana.

2. OPENING A BUSINESS BANK ACCOUNT

Botswana has eight functional commercial banks. These are Banc ABC, Bank Gaborone, Bank of Baroda, Barclays Bank, Capital Bank, First National Bank, Stanbic Bank and Standard Chartered Bank. Each bank has got a list of requirements for opening a bank account2.

3. ENROLMENT FOR TAXATION

Taxation in Botswana – Every business in Botswana needs to be enrolled for taxation process and acquire a Tax Identification Number (TIN) from the Botswana Revenue Service. Then, the company needs to register for Value Added Tax (VAT) with the Department of Customs and Excise. The entire registration can take up to 7 days.

Tax registration – Botswana Unified Revenue Services (BURS), a semi- autonomous body is responsible for registration of tax payments. BURS offices are countrywide. Up to five types of taxes may require registration:

Company Tax
Pay As You Earn (PAYE)
Capital Transfer Tax
Value Added Tax (VAT)
Withholding taxes (in relation to dividends, management fees, etc.).

Working in Botswana – Individuals’ residents have a threshold of P30 000 (US$ 5000. 00) while non –residents have no threshold. The rates for tax brackets are the same.

Doing business in Botswana

Companies: Current tax rate for residents and non-residents is 25%

Withholding tax rate: 15% on commercial royalties and management fees payable to non-residents.

15% on interest payable to both resident and non-residents;
15% on dividends payable to both residents and non-residents
10% on entertainment fees payable to non-residents

Domestic Foreign Tax Relief – Since Botswana is a source-based country, there is not much foreign earned income that we tax, except where the amounts are deemed to be sourced in Botswana. In such cases, we achieve this through issuance of credits, which are limited. If the income taxable in Botswana was taxed in another jurisdiction that has a Double Taxation Avoidance Agreement with Botswana the taxpayer is given credit for the tax paid in that other jurisdiction. The credit is limited to the amount of tax payable in Botswana.

Application of Income Tax to Foreign Income of a Resident – Income from any investment made outside Botswana or any business carried on outside Botswana by a resident of Botswana is deemed to be sourced in Botswana and is taxable in Botswana. If the income was taxed in the country where business is located or situated then a credit will be given and then the income will be still taxable in Botswana provided there is a double taxation avoidance agreement between Botswana and the jurisdiction where the income was sourced. This does not apply to foreign investment income of non-citizens resident in Botswana.

Taxation of non-residents in Botswana – The taxable income of a non-resident is charged to tax on an agent in the same amount as would have been charged on the non-resident. An agent should be related to the non-resident in the sense that the agent is a resident in Botswana and has the management and control of property in Botswana of such non-resident or who is appointed by a non–resident to act on his behalf.

INCOME OF NON- RESIDENTS:

Exemption from Tax – Any amounts accrued from a business or employment carried on in Botswana by a citizen of any other country or by a company registered under any law in force in any other country, where such business or employment is carried on in Botswana under an agreement with the Government for the provision of technical assistance to the Government to the extent to which the Minister may, by notice in writing to the Commissioner, declare such amounts to be exempted from tax.

Any amount accrued from an employment carried on by a non-resident aboard an aircraft or road or rail vehicle in course of the operation of an international transport service by a non-resident.
Any amount payable as a pension under the Overseas Officers’ Pensions Agreement (Implementation Agreement.)
Any amount accrued to the government of any other country, or to any non –resident institution or company by way of interest or interest on any loan, to the extent to which the Minister is satisfied that the exemption of such amount is in the public interest.

Fiscal Promotions for Companies – Botswana has a very good tax incentive package. For instance, we tax the manufacturing and the International Financial Services Centre at a reduced rate of 15% (compared to the current corporate tax rate of 25%)

Promotions for companies are covered under Development Approval Order. – Under this order, depending on the scale and the magnitude of the project companies can apply for tax holidays. Normally it is granted to companies, which are carrying out big projects. The tax holidays are restricted to five or ten years depending on the scale and the magnitude of the project.

Training Benefits – Taxation – The other fiscal promotion benefited by companies is that companies are allowed to deduct 200% as an allowable expense from their income after training their employees at Botswana accredited institutions.

4. TRADING LICENSE

The next step for your business in Botswana would be getting an operating authority/ license from the relevant authorities

Acquiring a license would take you 3 weeks but this is done in parallel with the inspection of company premises by the relevant authorities, which takes 6-7 days. We assist in applications of all licensing documentation on behalf of our clients, through representation and providing guidance to the client on all issues required to fulfill council regulations by prospective applicants.

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