Botswana: Offshore Legal and Tax Regimes
Undertakings for Collective Investment
Apart from the Income Tax Amendment Act 1999, the Bank of Botswana Act 1999, and the Collective Investment Undertakings Act 1999, CIUs are also covered by The Collective Investment Undertakings Regulations 2001.
CIUs can be organised in the form of trusts or investment companies, including variable capital companies and unit trusts. Open and close ended funds are permitted. A management company must be constituted separately from trustees, and must have its registered office and head office in Botswana.
The Bank of Botswana issues licences for a CIU after approving the management company, the trust deed, the choice of trustees and its name. There are controls over management charges, particularly as between unit trusts in common ownership.
A trustee can be a licenced bank or a company wholly owned by such a licenced bank, or a properly-licensed financial institution inside or outside Botswana. A trustee must satisfy the Regulatory Authority that it has the appropriate expertise and experience to carry out its functions under the Act.
A CIU may not invest more than 10% of its net assets in securities which are not traded in or dealt in on a market which is provided for in the trust deed or articles of association. Restrictions in respect of markets may be imposed by the Regulatory Authority on a case by case basis. There are other prudential and fiduciary requirements similar to those contained in the EU's UCITS legislation.
CIUs are permitted to borrow up to only 25% of their net assets.
A CIU must publish a prospectus which must be dated and the essential elements must be kept up to date. There must be sufficient information for an investor to make an informed judgment. Material changes to the prospectus must be notified to the unit holders in subsequent periodic reports. The prospectus and any amendments thereto must be submitted to the regulatory authority for their prior approval.
Funds of Funds schemes and Umbrella schemes are allowed as are various other types of schemes. Each such scheme needs to be approved by the regulatory authority.
A non resident collective investment scheme which has received its licence from the regulatory authority in its country of residence will be allowed to market its units in Botswana on condition that it is in compliance with the provisions of the Botswana Collective Undertakings Act no.20 of 1999.
So long as the CIU has obtained the prior approval of the Regulatory Authority for its prospectus there are no restrictions on the use of the Internet for marketing purposes.
Any collective investment undertaking is exempt from tax. Taxation of resident unitholders/investors in a resident fund will be based on the income realised during the tax year i.e. income from the sale of units or other forms of distribution from the fund.
Resident unit holders/investors of a non-resident collective investment undertaking will be taxed on income received during the tax year either from the sale of units or by way of a distribution.
Non resident unit holders of a resident collective investment undertaking will not be taxed.
There is no transfer tax, stamp duty or capital duty on the purchase, issuance or sale of shares or securities by a collective investment undertaking.