Botswana: Domestic Corporate Taxation
As a member of the Common Custom Area (CCU) along with South Africa, Lesotho, Swaziland and Namibia, Botswana follows Common Tariffs of Ad Valorem Customs Duty, Excise Duty as well as Surcharges and other duties. There is an additional Specific Excise Duty which is imposed on most luxury items.
However the Government safeguards its basic industries under the infant industry clause of the Southern African Customs Union (SACU) by providing tariff protection to such industries by levying import duties on the member countries, thereby enabling them to compete successfully with the SACU.
The Department of Industrial Affairs has a number of incentives that it offers to manufacturers to allow them to import raw materials and/or capital goods duty free for export in accordance with the provisions laid down by the Customs and Excise Act. These incentives include duty rebates, drawbacks of duty and duty exemption permits.
There are some provisions in the Customs Tariff Book exempting payment of certain customs and excise duties as well as sales tax on raw materials imported by registered manufactures or industries. One of these rebate of duty concessions, known as Industrial Rebate concession found under Schedule 3 of the Tariff book, exempts from payment of customs duties, some raw materials the products of which may either be sold locally or externally. Here the customs duty liability will cease as soon as the goods are manufactured or exported. Industrial Rebates are accessible to identified industries that government would like to stimulate such as textiles, prepared foodstuff, beverage industries.
Raw materials that are not exempted under the foregoing provision may, where they are imported for manufacturing and ultimate re-exportation, be exempted under General Rebate of duty concession provided for under Schedule 4 of the Tariff Book. Also admissible under this rebate of customs duty provision are raw materials that are unavailable locally. Once these raw materials become available, the rebate concession is withdrawn. It is perhaps worth noting that only companies that are producing exclusively for export can register for this rebate of duty concession.
One other option available to exporters is for them to claim refund on any customs duties that they may have paid on manufacturing materials that they imported into the country for their finished products. Here a trader upon exporting and within a period of six months may claim back an amount equivalent to what s/he paid as customs duties and sales tax.
The Duty Credit Certificate (DCC) Facility is a product specific (clothing and clothing accessories, household textiles, yarn, fabrics and other textiles) rebate of duty facility which is extended to companies that have been exporting products of such materials to markets outside the SACU area for a period of at least a year. Unlike other rebates of duty, the amount of duty that a company qualifies for as credit under DCC is calculated as a given percentage of the value of the exported goods as opposed to actual rate of customs duty or sales tax. At the time of writing, the value of credit certificates as a percentage of sales value of proven exports is: 25% for clothing and accessories; 8% for yarn; 17.5% for household textiles; and 12.5% for fabrics and other textiles.
Once a trader has been issued with a DCC, subsequent importation of raw materials will attract free of customs duties against the balance on the DCC.
In order for a company to be allowed to import materials under any of the above rebate of duty concessions, it must first apply to the director of customs and excise to be licensed to operate a rebate store. All materials imported under rebate of duty will be taken straight from a port of entry to the rebate store and no other material may be allowed into the rebate store. The only rebate of duty concession that does not require a bonded store is the one relating to equipment imported temporarily into Botswana for a specific project.
Application forms that must be filled out are known as CE 100 and CE 100A. These forms, which can be collected from any Customs and Excise office, captures details such as names of directors, nature and quantity of materials to be imported, expected annual production and details of the manufacturing process involved. In addition, a sketch plan of the geographical location and that of machinery layout must be attached to the application forms.
A certificate of incorporation and a trading license must also be attached to affirm that the business is legally registered to operate.
A bond form that should be authorized by a recognized bank or insurance company in Botswana must accompany a completed application form. The bond amount should be sufficient to cover potential customs duties and/or sales tax on the maximum quantity that the rebate store can hold at a given time.
An import permit must also be attached for those goods that the ministry of Trade, Industry, Wildlife and Tourism has regulated that they require such permit.
Before any establishment can be licensed as a rebate store, an inspection by the department will be carried out to ensure that it is in conformity with all requirements of a rebate store.
Any registered rebate user may at any given time submit a written request to the Director of Customs and Excise for de-registration. This will be granted once all customs duties and sales tax liabilities have been amicably settled. The Director of Customs and Excise reserves the right to de-register any rebate user if any provision under which the rebate was given is violated.
Equipment that is imported on a temporary basis for a given project is also admissible under the General Rebate of duty concession. Here it is important to note that the equipment and parts thereof should be imported under cover of a bond the amount of which is equivalent to customs duties and sales tax applicable. The bond is valid for a limited period only, as follows: equipment attracting sales tax is covered by a three (3) months bond while equipment attracting customs duties is covered by a six (6) months bond.
That is to say, after the elapse of the bond period, applicable customs duties and/ or sales tax becomes due and payable and, the bond will then be called to suit as customs duties and/ or sales tax. A bond form can be collected from the headquarters of the department of Customs and Excise (Excise Unit) and lodged with any recognized commercial bank or insurance company in Botswana.