Botswana: Domestic Corporate Taxation
Dividends: 7.5% (15% prior to July 2011) on dividends paid to residents and non-residents, unless the withholding tax rate is varied by a Double Taxation Avoidance Agreement.
Interest: 15% on interest paid to non-residents. 10% on amounts in excess of BWP1,950 (BWP1,500 prior to July 2011) in a quarter or BWP7,800 (BWP6,000 prior to July 2011) per year.
Commercial Royalties: 15% tax to non-residents for use of or rights to patents; trade-marks; copyrights; secret formulas; and industrial, commercial or scientific equipment or information.
Management or Consultancy Fees: 15% on payment to non-residents.
Entertainment Fees: 10% on payments to non-resident entertainers.
Construction Contracts: The Commissioner of Taxes must be advised of all non-resident contracts relating to construction contracts which are in excess of BWP5,000.00. Payments under such contracts are subject to a withholding tax of 3%.
In the case of all other withholding taxes, the tax withheld is the final tax. Non-residents need not file tax returns if they have no other income.
Amendments to the Income Tax Act passed in 2004 include a tighter definition of the 3% withholding tax charged on construction contracts in order to combat evasion of the levy in the sector, and the removal of the exemption from the 15% withholding tax on dividends for associated companies (a firm where the parent company holds more than 20% of its stock.)
In its 2006 budget, the government announced that any interest payable to residents in excess of P6,000 per year or P1, 500 per quarter or P500 per month, payable by banks and financial institutions on deposits, Bank of Botswana Certificates, bonds and securities, except in the case of entities that are exempt from payment of tax, will be subject to 10% withholding tax.
This will not be a final tax as taxpayers will still be allowed to file their tax returns and claim credit for tax withheld, if any. However, interest received by IFSC companies, banks and financial institutions, which are supervised by the Bank of Botswana or other statutorily established agencies will continue to be exempted from withholding tax.