Botswana

Rates and scope

The standard VAT rate of 14% applies to all taxable supplies that do not qualify for an exemption or zero-rating. There is no other higher or reduced VAT rate.

VAT is imposed on taxable supplies by a registered person and the importation of goods or services into Botswana, other than an exempt import. Any supply that is not listed as an exempt supply is a taxable supply, other than the following:

• a supply of services by an employee to an employer by way of employment

• the payment by the state of a subsidy under a subsidy scheme to defray expenses, or the payment of a bursary

• the provision of goods on consignment and the transfer of goods to a person in a representative capacity

• the supply of goods where the input VAT claim was originally denied, e.g. passenger vehicles.

A taxable supply includes a supply between related parties for no consideration, or a supply of goods for use only as trade samples, or supplies involving change of use.

Botswana has a reverse VAT charge mechanism in relation to the supply of imported services. The supply will form part of the service recipient’s taxable supplies.

VAT registration

Compulsory registration

Any person (including the state, local authorities, boards, partnerships, natural persons, trusts and companies) that carries on a taxable activity and makes taxable supplies, in Botswana pula of BWP1,000,000 (approximately USD76,500) or more per annum, or expects that this limit will be exceeded during the following 12 months, is required to register for VAT.

Auctioneers are required to register for VAT irrespective of their annual taxable turnover. The state or a local authority that carries on a taxable activity must be registered from the date of commencement of that activity.

Compulsory registration is not required if the Commissioner-General is satisfied that the value of taxable supplies exceeded BWP1,000,000 solely as a consequence of the following:

• the cessation or a substantial and permanent reduction in the size or scale of a taxable activity carried on by the person

• the replacement of capital goods used in the taxable activity carried on by that person.

A taxable activity is an activity:

• That is carried on continuously or regularly by any person in Botswana or partly in Botswana (whether or not for a pecuniary profit) that involves in whole or in part the supply of goods or services (other than an exempt supply) to another person for a consideration

• Of a local authority or unincorporated association or body that involves, in whole or in part, the supply of goods or services for consideration.

Voluntary registration

A person who makes or intends to make taxable supplies, but is not liable to register, may apply to the Commissioner-General for registration, provided that the person’s taxable supplies in a 12-month period exceed BWP500,000.

Voluntary registration will be denied if the Commissioner-General is satisfied that the person has no fixed place of abode or business or the Commissioner-General believes that the person will not keep proper records or will not submit regular and reliable tax returns as required under the Act.

Group or branch registration

Non-residents

The same rules of registration apply to non-residents if they are deemed to conduct a taxable activity in Botswana that is, or is expected to be, in excess of an annual value of BWP1,000,000.

There is no specific VAT requirement that a non-resident applying for VAT registration in Botswana must appoint a fiscal representative in Botswana. However, for income tax purposes, every company carrying on business in Botswana must be represented by a public officer residing in the country. A public officer or director is considered a representative for VAT purposes.

Application for registration

In order to be registered for VAT a person must also be registered for corporate income tax (CIT).

The registration application form BURS 1 must be completed and submitted to BURS (for all relevant taxes). The application form should be accompanied by the identity documents of the directors; work and residence permit of the non-resident director; all company registration documents; list of assets; etc.

The VAT registration form requires the person’s banker in Botswana to confirm the existence of a bank account in Botswana. Every person liable to be registered must apply to the Commissioner-General for registration within 21 days of becoming liable.

Typically, BURS will require proof of annual taxable supplies to finalise registration. Proof may be a contract or agreement, bank statements or any other financial data to support that the annual taxable supplies do, or will, exceed the registration threshold of BWP1,000,000 (or BWP500,000 voluntary registration). 

Where a person has access to BURS’ online platform — eServices — and the registering company’s tax profile, a VAT registration application may be submitted through this platform.

Failure to apply for registration when required to is an offence and attracts high penalties, which may include fines and/ or imprisonment.

Any entity that should register will be deemed to have been registered and will then be liable for VAT. The registration number format is based on the unique identification number (UIN) issued to  the entity by the Companies and Intellectual Property Authority (CIPA) with an entity identifier.

Deregistration

Output tax

Advertising and prices

Exempt supplies

No VAT is charged on exempt supplies, and VAT paid on inputs acquired for purposes of making exempt supplies may not be deducted as input tax. A person making only exempt supplies is deemed not to be carrying on an enterprise and may not register for VAT purposes.

Exempt supplies include, but are not limited to, supplies of the following goods or services:

• financial services, including loans, credit, credit guarantees or any security for money, but excluding transactions rendered at a fee or commission

• educational services, including courses, school bus services, and meals provided by an exempt educational institution to its students

• medical services provided by a government-operated or -aided medical facility

• long-term residential letting and hostel accommodation on a non-profit basis

• leasing or renting of land for erecting a dwelling

• certain prescription drugs

• sectional title management levies

• domestic passenger transportation by road or rail, other than transportation of tourists

• cash grants made by or received from the state

• supply of condoms

• donations

• supply of certain agricultural farming implements and the supply of tractors specified under Customs Tariff Heading 8701.90 when acquired for farming to the extent provided in the regulations.

Zero-rated supplies

Adequate documentation must be retained to satisfy the Commissioner-General that a supply qualifies for zero-rating. Zero-rated supplies include (but are not limited to) supplies of the following goods or services:

• exportation of goods

• goods that are outside Botswana at the time of the supply

• goods supplied under a rental agreement or by a charter party exclusively in an export country

• goods or services supplied to a branch or main business outside Botswana, which can be separately identified and for which an independent system of accounting is maintained

• international transport services

• services supplied directly in connection with land outside Botswana

• services supplied directly in respect of movable property situated outside Botswana at the time the services are rendered, and goods temporarily imported

• certain services supplied directly to a non-resident, non-registered person, other than through an agent, relating to foreign-going aircraft or a container temporarily imported

• repair of a railway train operated by a non-resident, non-registered person

• services physically rendered outside Botswana

• services supplied to a non-resident who is outside Botswana when the services are rendered, except services rendered directly in connection with immovable property situated in Botswana or directly in connection with movable property situated in Botswana (unless the movable property is exported from Botswana subsequent to the supply of services), or when the supplier refrains from undertaking an activity in Botswana

• services relating to intellectual rights for use outside Botswana

• a taxable activity supplied to a registered person as a going concern

• sorghum or maize meal supplied for human consumption, but not when furnished as a meal or as cooked or prepared food

• goods or services for the personal or official use of the president or any dependent member of his family

• millet grain, millet meal, wheat grain, maize cobs, flour, sugar and Setswana beans in their natural state and not mixed with other products

• pesticides

• fertilisers

• the first 5,000 litres of water per month by the Water Utilities Corporation to a residential dwelling

• brown bread, vegetables, fruit, rice, samp, milk and bread flour as specified.

Input tax

Input tax allowed

Input tax expressly denied

VAT paid in respect of the following goods or services cannot be deducted as input tax:

• passenger vehicles designed or adapted to seat up to nine persons (including double-cab vehicles but excluding safari vehicles), except when acquired by a dealer or vehicle-letting business

• entertainment expenditure (including hotel accommodation, meals for business purposes, and refreshments for staff welfare e.g. tea and coffee), except where acquired by an entertainment business, or where entertainment is supplied to passengers in the course of a taxable transportation service

• membership subscriptions relating to sports, social or recreational organisations Input tax is also denied if the required tax invoice or other supporting documentation is not held by the registered person, the input tax is not claimed in the correct VAT period, or the input tax relates to exempt supplies.

Partial exemption

Where VAT incurred relates to the making of both exempt and taxable supplies, an apportionment method acceptable to the Commissioner-General must be used to allocate the input tax credit between the exempt and taxable supplies.

The default method is based on turnover. Where taxable supplies are 90% or more of total supplies, all VAT incurred on acquisitions may be claimed as input tax.

Change-of-use adjustments

When assets on which VAT has been claimed as input tax are transferred to the making of non-taxable supplies, output tax based on the higher of the consideration paid or fair market value is payable. Examples of change of use are:

• transfer or sale of a company computer to an employee

• transfer of assets in a bank from a taxable to an exempt division.

Pre-registration or post-deregistration VAT 

VAT on expenses incurred on goods (including imports other than capital goods) up to four months prior to the registration date may be claimed in the first VAT period. The goods must be held on hand at the date of registration.

A person whose registration is cancelled is deemed to have made a taxable supply of goods on hand, including capital goods, unless input tax was denied. The goods on hand must be valued at the fair market value.

International trade

Imports

Goods

All goods imported into Botswana are subject to VAT, except goods expressly exempted from VAT on importation. An import of goods occurs, in the case of goods required to be entered for home consumption, when the goods are so entered, or in any other case, when the goods are brought into Botswana. Goods held in a bonded warehouse are not subject to VAT until they are cleared for use.

VAT on imports may be deferred where the importer provides adequate security, or the Commissioner-General is satisfied that the importer has regularly paid all tax due on imports within the prescribed period.

In order to obtain a deferred VAT facility, the applicant is required to execute a bond in favour of the BURS for an amount equivalent to 20% of the expected imports during a particular month or BWP20,000, whichever is higher. The maximum deferment period is 25 days after the end of the month during which the goods were imported.

As a general rule, the value of the imports for VAT purposes includes all taxes and duties payable, as well as the cost of insurance and freight. The value of goods that are imported from South Africa, Lesotho, Namibia and Eswatini includes, for VAT purposes, cost of insurance and freight costs.

Services

Only services imported for use or consumption in Botswana for a purpose other than to make taxable supplies are subject to VAT. A person making only exempt supplies is thus liable for VAT on imported services, and a person making both taxable and exempt supplies will be liable for VAT to the extent that the services are acquired for non-taxable purposes.

Where tax is payable on the import of services, the recipient of the service should furnish the Commissioner-General with an import declaration and pay the VAT due within 30 days of the import of the service.

There are no specific VAT rules on the supply of electronic services. However, with the revision of the Value Added Tax Act, 2001 it is anticipated that specific VAT rules on the supply of electronic services will be included.

Exports

As a general rule, the zero rate applies where the supplier has entered the goods for export in accordance with customs duty principles, and the supplier has exported the goods from Botswana.

The supply of various services to persons who are not residents of Botswana and are not registered for VAT purposes in Botswana is zero-rated.

It is important to note that where a registered person has applied the rate of 0% to a supply, they must obtain and retain documentary proof acceptable to the Commissioner-General to substantiate their entitlement to apply the zero rate.

In addition to the above, the minister may by order deny zero-rating of supplies exported from Botswana if such action is necessary to protect revenue or to offset restrictions placed on zero-rating of comparable supplies by the export country.

The minister may authorise the granting of a refund to a non-resident individual where the VAT paid on goods exported by that person as accompanied baggage exceeds BWP500,000. The minister may authorise a refund of tax to diplomats, diplomatic missions and other persons under certain international laws and conventions.

Place, time and value of supplies

Place of supply

Time of supply

The general rule is that a supply of goods or services occurs at the earliest of when —

• an invoice for the supply is issued by the supplier, or

• any payment for the supply is received.

Under some of the specific rules, the time of the supply is as follows:

• related persons — regarding the supply of goods: when the goods are removed or made available; or in the case of a supply of services: when the services are performed, unless the time of supply has already taken place in accordance with the general rule

• credit agreement — when the goods are delivered or the time at which any payment for the supply is received, whichever is the earlier

• lay-by agreement — when the goods are delivered to the purchaser

• change of use — when the goods or services (acquired for taxable use) are transferred to a non-taxable activity

• repossession of goods under credit agreement - when the goods are repossessed or the day after the last day of any period during which the debtor may be reinstated

• machine, metre or other device operated by coin, note or token — when the coin, note or token is taken from the machine, metre or other device by or on behalf of the supplier

• goods or services supplied to a branch or main business outside Botswana — when the goods are delivered to, or the services performed for the branch or main business

• rental agreement or services supplied under an agreement providing for periodic payments - successive supplies occur when a payment becomes due or is received, whichever is the earliest

• construction services paid for in instalments or periodically — successive supplies occur when a payment becomes due or is received or when an invoice relating only to that payment is issued, whichever is earliest

• token, voucher or stamp — when the token, voucher or stamp is issued

• goods removed from a VAT-registered manufacturing warehouse, or services rendered by an international financial services centre company — when the goods are removed from the warehouse, or when the services are rendered by the international financial services centre company

• forfeiture of deposit (other than a deposit on a returnable container) — when the deposit is forfeited

• immovable property — when the transfer deed is registered with the Registrar of Deeds or when payment is received, whichever is the earlier

• an electrical connection under the Botswana Power Corporation’s Rural Electrification Scheme or housing by the Botswana Housing Corporation under the Tenant Purchase Scheme, pursuant to a hire purchase agreement — when payment is due or is made under that agreement, whichever is the earlier.

Value of supply

The general rule is that the value of a supply is the amount of the consideration for the supply.

‘Consideration’ includes the total amount in money or kind, paid or payable for the supply or import by any person, directly or indirectly, including any deposits on returnable containers, duties, levies and fees.

If the price includes VAT, the value is determined by deducting an amount equal to the tax fraction of the price:

Value = VAT-inclusive price less (14/114 x VAT-inclusive price).

Under some of the specific rules, the value of the supply is as follows:

• related persons (if the supply is made for no consideration or for a consideration less than the fair market value) — fair market value i.e. the value that the supply would generally fetch if freely offered, between persons who are not related parties

• supply made for no consideration or for consideration less than the fair market value of the supply to a charitable organisation, institution of religious worship, educational institution, old-age home, orphanage, children’s home, or institution of a similar nature — fair market value of the supply

• credit agreement — cash value of the supply

• repossession of goods under a credit agreement — an amount equal to the balance of the cash value of the supply of those goods to the debtor, that has not been recovered at the time of the supply

• granting of a right to receive goods or services for a monetary value stated on a token, voucher or stamp — an amount equal to the amount by which the consideration exceeds the monetary value of the token, voucher, or stamp

• token, voucher or stamp such as discount coupons — the value of the supply of such goods or services by the supplier includes the monetary value stated on the token, voucher, or stamp, less the tax fraction of the monetary value if the token, voucher or stamp is surrendered for a taxable supply

• mixed supplies (taxable and exempt) — the value of the supply is the part of the consideration that is properly attributable to the taxable supply portion

• transfer of goods or services to a branch or main business outside Botswana — the lesser of the cost (excluding tax) or fair market value of the supply

• supply made for no consideration — the fair market value

• bets — the amount received in respect of the bet, reduced by an amount equal to the tax fraction multiplied by the amount received in respect of the bet

• goods removed from a VAT-registered manufacturing warehouse — the fair market value of the supply

• consideration paid or payable in kind — the fair market value of the consideration.

VAT compliance

Accounting basis and tax period

Liability for output tax arises when an invoice is issued or when payment is received, whichever is the earlier. The VAT period (tax period) is two months for registered persons with annual taxable supplies up to BWP12,000,000, and one month for those exceeding BWP12,000,000 per annum.

The Commissioner-General can also require a person to report on a monthly basis on the ground that the person has regularly defaulted in performing any obligations under the VAT Act.

Returns and payment of VAT

Interest and penalties

Monthly compounded interest is levied on late payment at 1.5% per month or part of a month, on the unpaid amount, calculated from the date on which the payment was due until the date on which payment is made.

The Commissioner-General may, if satisfied that the tax is irrecoverable, remit any amount of tax, not exceeding BWP50,000, unpaid by any person in respect of any tax year. The Minister of Finance may remit wholly or in part any tax payable by any person, where satisfied that it is just and equitable to do so, or where satisfied that such tax is irrecoverable.

A penalty of the higher of BWP50 per day or an amount equal to 10% of the tax payable for the period, per month or part of a month that VAT remains outstanding, may be imposed for late submission and/or late payment. A penalty of up to BWP5,000 may be levied on a NIL return.

Refunds

Where input tax exceeds output tax, a refund may be claimed. This may occur in the case of an export business, or where large capital purchases have been made. The refund must be paid within two months after the month end date of filing a return showing an excess of input tax over output tax, and the amount claimed must be verified as correct.

If the registered person is engaged mainly in export activities, or is defined as a VAT-registered manufacturing warehouse or an international financial services centre company, the VAT refund claim must be processed within one month from the month-end date of filing the return.

Failure to refund the amount due within the prescribed period will make the Commissioner-General liable for interest at 1% per month for the period that the refund was overdue. Excess input tax may also be offset against the person’s other tax liabilities (e.g. income tax).

Objections and appeals

Objections and appeals may be submitted where persons wish to dispute a decision of the VAT administration. Objections should be addressed to the Commissioner-General and should contain the specific grounds of objection, and they should be made within 30 days of the assessment.

Upon application in writing by a person dissatisfied with an appealable decision, the Commissioner-General may, where satisfied that owing to absence from Botswana, sickness, or other reasonable cause, the person was prevented from lodging an objection within 30 days and there has been no unreasonable delay by the person in lodging the objection, accept an objection lodged after 30 days.

The Commissioner-General shall serve the person objecting with a notice in writing of the decision on the objection.

Time limits

The maximum period for claiming input tax is as follows:

• where a person’s tax period is a period of one month — up to the next three tax periods

• where a person’s tax period is a period of two months — in the next tax period

• where a person has paid VAT in respect of any imports of goods — in the next tax period.

A claim for a refund must be made within three years from the date that the excess arose.

Assessments

The Commissioner-General may make an assessment of the amount of tax payable by the person or of the amount of tax represented by the person as payable in respect of a supply where:

• a person fails to furnish a return

• the Commissioner-General is not satisfied with a return or import declaration furnished by a person

• the Commissioner-General has reason to believe that a person has become liable for the payment of an amount of tax but has not paid such amount

• a person, other than a registered person, supplies goods or services and represents that tax is charged on the supply

• a registered person supplies goods or services and the supply is not a taxable supply or is a taxable supply charged with tax at the rate of zero percent and, in either case, the registered person represents that a positive rate of tax is charged on the supply.

The assessment may be issued at any point if the default was due to fraud or wilful neglect.

VAT records

Tax invoices

No input tax may be claimed unless the claim is supported by a valid tax invoice. Only VAT-registered persons may issue tax invoices. The following particulars must appear on a tax invoice:

• the words ‘tax invoice’ displayed prominently

• date of issue

• serial number

• names, addresses and VAT registration numbers of supplier and recipient

• clear description of goods or services supplied, including quantity and volume

• consideration for the supply, the VAT due and the consideration including the VAT.

No tax invoices are required for a supply made in cash for less than BWP20. Tax invoices may be in either English or Setswana. There is currently no legislation in the VAT Act that prescribes the acceptability of e-invoicing procedures.

Where a taxable supply has been made by a person as an agent for another person, and the recipient of the supply is a registered person, the agent may issue a tax invoice in relation to the supply as if the agent had made the supply.

Where a taxable supply has been made to a person as an agent of the principal and the principal is a registered person, a tax invoice in relation to the supply may be issued to the agent at their request.

Credit notes and debit notes

Tax credit and tax debit notes must also be issued and be clearly designated as such, providing much of the same detail as for a tax invoice, where a supplementary charge is made, or when a reduction in the amount charged or due is agreed on between a seller and a buyer.

In addition, the credit or debit note must contain the reason(s) for its issuing, reference to the previous invoice now being corrected, and the words ‘tax debit note’ or ‘tax credit note’ in a prominent place on the document.

Import declaration documents

Where tax is payable on imported goods, an import declaration shall be furnished to the Commissioner-General, in the format prescribed.

Where the entity has a deferral account, they shall be furnished by BURS with a statement generated by the customs management system (CMS statement).

Additional export documentation

The normal customs documentation forms (SAD 500), invoice, etc. should be stamped by the department of customs for proof of export.

Record-keeping

A registered person, or any other person liable for tax under the VAT Act, must maintain the following records in English or Setswana:

• original tax invoices, tax credit notes, and tax debit notes received

• copies of all tax invoices, tax credit notes, and tax debit notes issued

• customs documentation relating to imports and exports

• accounting records

• any other records as may be prescribed by the Commissioner-General.

The records must be retained for at least seven years after the end of the tax period to which they relate. Failure to maintain proper records constitutes an offence and is liable on conviction —

• where the failure was made knowingly or recklessly, to a fine not exceeding BWP10,000, or to imprisonment for a term not exceeding two years, or to both, or

• in any other case, to a fine not exceeding BWP5,000 or to imprisonment for a term not exceeding one year, or to both.

Specific VAT rules

Bad debts

VAT paid in respect of a supply which eventually has to be written off as a bad debt can effectively be reclaimed by a VAT-registered person. The amount of the deduction allowed is the amount of tax paid in respect of the supply which corresponds to the amount of the debt treated as bad.

A deduction is only allowed if the debt was written off in the enterprise’s books and the relief cannot be claimed until at least 12 months after the VAT was originally paid.

If VAT relief was allowed and the bad debt is subsequently recovered, VAT must again be accounted for by the registered person.

Land and buildings

Leasing

Promotional gifts

Second-hand goods

When a registered person supplies second-hand goods that are taxable, VAT has to be charged on such supplies, and the recipient would normally be entitled to an input tax deduction under the normal rules.

Input tax is claimable on second-hand goods acquired from a non-registered person, provided that:

• the goods must be second-hand as defined

• the goods must have been supplied by a person not registered for VAT

• the goods must be acquired from a person resident in Botswana

• the goods must be acquired in Botswana, i.e. not imported

• the amount of the claim may not exceed the tax fraction of the lower of the amount to be paid or the fair market value, including tax

• records of the transaction as required by the Commissioner-General must be kept, e.g. the full names and address of the supplier, taxpayer identification number, the date on which

• the goods were acquired by the person, the quantity/volume, a description of the goods, etc.

• the input tax credit may not exceed the amount of tax charged on the subsequent sale of the goods.

Where a notional input tax credit has been claimed in respect of second-hand goods purchased from a non-registered person, and these goods are subsequently exported at the zero rate, the amount so claimed must be declared as output tax due and shown in the return for the relevant period as an output tax adjustment.

Tourism industry

Where a non-resident sells a tourism package which includes services to be rendered to a tourist in Botswana, the domestic goods and services component will be subject to VAT.

If a Botswana travel agent supplies a domestic tour package to a person, whether resident or non-resident, the full package will be taxable at the standard rate. Where such a package includes services to be provided both within and outside Botswana, only the domestic component of the services will be taxed.

Currency conversion

Transfer of a business

Warranty repairs

Where goods or services are supplied by a VAT-registered person in Botswana in terms of a guarantee provided by a non-registered resident, the supply would be treated as a standard rated supply.

Where goods or services are supplied by a VAT-registered person in Botswana in terms of a maintenance plan or agreement with a non- registered resident, the supply would be treated as a standard rated supply.

Other indirect taxes

Import duties

Excise duties

Training levy

Training levy, although not an indirect tax per se, is a levy collected through the VAT system and is levied on all VAT registered persons at a rate of 0.05% of annual turnover in excess of BWP2bn and 0.2% on annual turnover up to BWP2bn. There is an oil industry turnover rate of 0.05% on regulated petroleum products. However, quick-shop sales attract a 0.2% rate for such oil industry companies. The rate is applied to the turnover for the tax period.