Botswana: Offshore Legal and Tax Regimes
Tax Treatment of IFSC Operations
The incentives for an International Financial Services Centre Company are:
- a corporate tax rate of 15% until June 2020;
- exemption from the obligation to withhold taxes on dividends declared;
- exemption from tax on dividends received from a company which is not resident in Botswana, where the International Financial Services Centre Company controls either directly or indirectly, alone or with connected persons, 25% or more of the share capital or 25% or more of the voting rights of the non resident company;
- exemption from the obligation to withhold tax from payments in respect of interest, commercial royalty, management or consultancy fees to non-residents.
The gross taxable income of the IFSC company includes all types of income, but excludes capital gain. Various deductions are permitted against gross income, including:
- specified foreign exchange losses debited in the profit and loss account of the International Financial Services Centre Company under commercially recognised system of accounting of tax;
- interest paid on a foreign debt of an International Financial Services Centre Company is tax deductible (provided that if at any time during the course of the tax year the foreign debt of the International Financial Services Centre Company exceeds its foreign equity then a portion of the foreign debt interest will not be allowed);
- where a portion of the total gross income of an International Financial Services Centre Company is from a source outside Botswana, a credit can be claimed for the tax suffered in the foreign country against the Botswana tax on such income, in accordance with a prescribed formula.