Tax help from Botswana

How Botswana’s International Financial Services Centre company regime can help you save on tax.

Tax help from Botswana
- Advertisement -

At the beginning of February, Botswana’s finance minister, Kenneth Mathambo, delivered the annual budget proposals for the 2013/2014 tax year. Botswana’s tax laws don’t change very much over the years, and this year’s budget was fairly similar to previous years, with some small amendments. The tax rates stay quite similar, with adjustments for inflation and so on, and a budget surplus is expected, which is very welcome.

READ:Withholding tax

Some people have criticised the country’s financial policies, saying that it might be better to stimulate the economy with borrowed money, thus reducing the projected budget surplus, or even posting a deficit. My view is that the current policy is very sensible. The international credit rating agencies seem to agree and continue to rate Botswana very highly.

- Advertisement -

Two proposed changes to the Botswana income tax laws are noteworthy. Firstly, in a move to foster a stronger savings culture in Botswana, tax upon interest earnings for residents has been done away with, leaving only the withholding tax that’s withheld by financial institutions (10%). The other major change is the proposed scrapping of the ‘sunset clause’ in terms of the International Financial Services Centre (IFSC) company regime.

Botswana has legislated the IFSC regime, which provides for a company tax rate at a reduced 15% and the concession that no withholding taxes are withheld upon commercial royalties, dividends and the like, when business is done outside Botswana. Salaries are the only amounts subject to the withholding tax of the IFSC in the form of PAYE. The IFSC regime is an Irish invention. Ireland implemented it some years ago and it’s been responsible for large-scale job creation in the financial services sector there.

Many of the top financial institutions in the world now make use of the tax and other benefits to be had under this regime.
Botswana hopes the IFSC will prove to be a strong drawcard for companies in the SADC region to set up such structures and do business from there. Botswana doesn’t have exchange controls. Thus many companies in the region that deal all over Africa make use of this jurisdiction as a base from which to run payroll and other administration aspects of their enterprises.

Because the idea of an IFSC company is that it should be set up to do business outside Botswana, an attractive use for such a firm could be international marketing of agricultural products. Gaborone is situated centrally in the region, giving access to SADC countries and the international markets.


IFSC dividends may be repatriated in the currency of choice of the shareholders. Setting up an IFSC company takes time but, given the strong upsurge of interest in Africa and between the various states, the Botswana IFSC must be an attractive option for serious players.

Peter O’Halloran is head of tax at BDO, Gaborone. Contact him on 00267 390 2779 or at [email protected]. Please state ‘Tax’ in the subject line of your email.