Botswana follows a common law system which derives its laws from four (4) main sources: the Constitution of Botswana (CAP 00:00), various legislation, common law and customary law. The common law is a mixture of Roman Dutch law, and English law and South African law, which are persuasive.
2,024,904 (2011 Census data)
President Seretse Khama Ian Khama (since 1 April 2008).
President Seretse Khama Ian Khama will step down in April this year and the current Vice President, Mokgweetsi Masisi, will be sworn in as President until the elections in 2019.
Diamonds, copper, nickel, salt, soda ash, potash, coal, iron ore, silver, livestock processing, textiles
Pula (“BWP” or “P”)
Setswana 77.3%, Sekalanga 7.4%, Sekgalagadi 3.4%, English (official) 2.8%, Other 9.1%
Christian 73%, Folk 6%, None 19%, Other 2%
- Capital Markets
Current number of listed companies
There are 39 (thirty nine) listed companies. Twenty-four of the listed companies are domestic companies, while the other 15 (fifteen) are foreign companies. The companies are listed as follows:
- 23 – main board
- 1 – venture capital board
Find out more about listed domestic companies here.
- 6 – main board
- 5 – venture capital board
- 4 – Exchange traded funds
Find out more about listed foreign companies here.
Regulatory body or bodies
The Committee of the Botswana Stock Exchange and the Non- Bank Financial Institutions Regulatory Authority (NBFIRA).
The Botswana Stock Exchange Act (Cap 56:08) - Find out more about the regulatory framework
The Non-Bank Financial Regulatory Authority Act (CAP 46:08)
Corporate Governance Code
The BSE has a ‘BSE Code of Best Practice on Corporate Governance’, reliance is also placed on the King Report on Corporate Governance Principles for South Africa, 2009 (King III).
Takeover / merger regulations
Takeovers and mergers are regulated by the Competition Authority through the Competition Act (Cap 36:09) and the Competition Regulations, 2011. Part X of the Competition Act and Part V of the Competition Regulation of 2011, deal with the control of mergers.
Find out more about the Competition Act 2009 here.
Find out more about the Competition Regulations here.
Public offers / disclosure regulations
The Botswana Stock Exchange Act (CAP 56:08) regulates public offers and disclosure of information (see sections 16, 53, 54 and 87 thereof)
- Competition regulation
Impact of regulatory regime on business
The Competition Authority (the “Authority”) and the Competition Commission (the “Commission”) were established under the Competition Act (Cap36:09) to enforce competition law and policy. The Commission is the governing body of the Authority but also has an adjudicative function, in that, it is tasked with adjudicating the matters that fall within the Competition Act. Broadly speaking, the Authority has the mandate to: (i) regulate the merger of enterprises; (ii) investigate and resolve all anti-competitive conduct (including, but not limited to, bid rigging, price fixing and allocation of customers) in the market – this may be done by investigating a complaint brought to it or by initiating a market study into an identified sector of the market; and (iii) advising the government on laws with anti-competitive effects as well as international agreements that have a competition element.
In relation to mergers, the Competition Act and the Competition Regulations provide that a proposed merger shall be subject to control by the Competition Authority in Botswana, if:
- the turnover in Botswana of the enterprise or enterprises being taken over exceeds ten million pula (P10,000,000.00);
- the assets in Botswana of the enterprise or enterprises being taken over have a value which exceeds ten million pula (P10,000,000.00); or
- the enterprises concerned would, following implementation of the merger, supply, acquire at least twenty percent (20%) of a particular description of goods or services in Botswana.
The merger filing fee shall be zero point zero one percent (0.01%) of the merging enterprises’ combined turnover or assets in Botswana, whichever is higher.
When assessing a merger, the Authority may, in addition to other factors, consider matters of public interest. These may include the promotion of: technical or economic progress, trade, employment etc. Furthermore, the Authority plays an important “post-merger decision” role, in that, it conducts compliance monitoring and impact assessments. This helps the Authority assess the impact of mergers on business and the economy.
Competition law in Botswana is regulated by the Competition Act [CAP 46:09] and the Competition Regulations, 2011.
The Competition Act and the Competition Regulations deal with the control and investigations of horizontal and vertical agreements between entities in a particular market as well as the control of mergers between entities.
- Corruption / transparency
CPI Index rank worldwide for 2017
CPI Index score for 2017
Signatories to United Nations Convention Against Corruption (UNAC)?
Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
Signatories to the African Union Convention on Preventing and Combating Corruption?
No, but has been ratified.
Enforcement of foreign judgments
The enforcement of foreign judgments in Botswana is regulated by the Judgments (International Enforcement) Act (Cap 11:04), which provides that foreign judgments may only be enforced where the judgments are given (i) in countries which accord substantial reciprocal treatment to judgments given in Botswana and (ii) by superior courts of that foreign country. Such judgments must be final and conclusive between the parties and must be for a particular sum of money payable (except a sum of money payable on the basis of taxes, fines or penalties).
A person wishing to enforce a foreign judgment (the “Judgment Creditor”) shall apply to the High Court within six (6) years after the date of the judgment (or after the date of the last judgment where there was an appeal) to register the judgment. The Judgment Creditor may be required to provide security for costs or other information necessary to prove the registration of the foreign judgment, amongst other things.
Where the registration is successful and an order for the execution of the judgment is granted, the Judgment Creditor shall be issued by the High Court with a certified copy of the judgment and a certificate of particulars of the action, causes of action and the rate of interest.
Where a foreign judgement cannot be registered in terms of the Judgments (International Enforcement) Act referred to above, the Common Law will apply. A party in whose favour a judgement was granted by a foreign court may apply to court for an order on the same terms as the foreign judgement. In assessing whether an order should be granted, there are three (3) factors that a court may consider. These are as follows:
- the foreign court must have international competence to decide the case;
- the judgement rendered must have been final and conclusive; and
- the recognition and enforcement of the judgement must not be against public policy.
Perception of the local courts
Batswana have faith in the judicial system of Botswana and over the years, we have seen an increase in cases being registered and resolved via the court systems.
The Constitution of Botswana provides that the President of Botswana appoints the Chief Justice and the Judge President of the Court of Appeal. All other judges are appointed by the President following recommendation and in accordance with the advice of the Judicial Service Commission (the “JSC”). The JSC comprises of the Chief Justice (who chairs the JSC), the President of the Court of Appeal (not being the Chief Justice or the most Senior Justice of the Court of Appeal), the Attorney-General; the Chairman of the Public Service Commission, a member of the Law Society nominated by the Law Society; and a person of integrity and experience not being a legal practitioner appointed by the President.
Sections 96(3) and 100(3) of the Constitution provides for the qualifications for appointment as a judge of the High Court or Court of Appeal.
Arbitration proceedings in Botswana are governed by the Arbitration Act (Cap 06:01) which currently does not follow the UNCITRAL Model Law.
The Botswana Institute of Arbitration (“BIA”) is the main body that conducts arbitrations and has developed its own rules - the Rules for Conduct of Arbitration, February 2011. The rules are similar to the Rules of the Association of Arbitrators (Southern Africa) and were designed to facilitate cost effective arbitrations.
A matter is referred to arbitration if the parties have agreed (typically be way of an arbitration clause in a contract or by concluding an arbitration agreement) to submit the matter to arbitration. The parties are free to choose an abrbitration procedure which will govern their proceedings.
Furthermore, parties to an international contract may agree to apply the UNCITRAL Arbitration Rules or the ICSID Convention to the resolution of their dispute as incorporated into their arbitration agreement.
Fin out more about the Act here and the rules of conduct of abitrations here.
Effectiveness of the court system
With the introduction of a case management system, which allocates matters to judges on a random basis, and requires that a matter be allocated to one judge to handle to finality, there are a series of case management processes which enable a judge to have a more hands on approach to all matters. The introduction of the case management process was aimed at reducing backlogs caused by delays created by litigants (who previously could control the pace of litigation).
The introduction of the Court Records Management System (CRMS), an electronic database of all cases in the courts of Botswana, also facilitates greater efficiency in the court system.
Structure of the court system
Botswana’s justice system is made up of (i) the Court of Appeal (which hears appeals of matters from the High Court), (ii) the High Court (which has jurisdiction to hear both civil and criminal matters, however, the civil matters must be valued at more than P40, 000.00. The High Court further has jurisdiction to hear appeals of matters from the Magistrates’ Court), (iii) the Industrial Court (which hears labour matters), (iv) the Magistrates Court (which has the jurisdiction to hear civil and criminal matters, the civil matters thereof being valued at P40,000.00 or less) and (v) the Small Claims Court (which has jurisdiction over claims for debts below P10,000.00).
Find out more about the hierarchy of courts here.
There is also a Customary Court which mainly deals with customary law and very basic civil/criminal matters centred in all villages in and around Botswana.
- Enforcement of arbitral awards
The Arbitration Act (Cap 06:01) regulates arbitrations and provides in Section 20, that, an arbitration award may, by leave of the Court or a Judge, be enforceable in the same manner as a judgement or order of court, and where leave is so given, judgment may be entered in terms of the award.
Botswana is also party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) which applies to awards made in another contracting state. The New York Convention is implemented in terms of the Recognition and Enforcement of Foreign Abitral Awards Act (Cap 06:02) (“REFAA Act”) . In terms of section 3(3) of the REFAA Act, arbitral awards made in contracting states of the New York Convention will only be enforceable where such a states treats similar awards made in Botswana in a reciprocal manner.
- Foreign investments
Foreign investment incentives
- The corporate tax is fifteen percent (15%) for corporates in the approved manufacturing sector and for companies holding International Financial Services Centre (IFSC) certificates issued by the Ministry of Finance and Economic Development.
- has no foreign exchange controls, therefore, foreign exchange flows freely and dividends/profits from investments are freely repatriable;
- has acceded to international conventions and is strictly observing internationally accepted guidelines on combating money laundering and financial crime;
- allows duty free importation of raw materials, machinery and equipment; and
- has a stable political environment and good governance and low corruption rates.
- Companies certified by the IFSC have additional incentives, which include:
- a corporate tax rate of 15%;
- exemption from withholding taxes in Botswana;
- exemption from capital gains tax in Botswana;
- credits for withholding taxes levied elsewhere; and
- access to Botswana’s Double Taxation Treaty network.
Foreign investor rules
There are no restrictions imposed on foreign investor participation and holdings of the Botswana Stock Exchange investments.
- Acquisition of Property Act (Cap 32:16)
- African Development Bank and Fund Act (Cap 39:08)
- Anti- Money Laundering Regulations
- Banking Act (Cap 46:04)
- Bank of Botswana Act (Cap 55:01)
- Botswana Stock Echange Act (Cap 56:08)
- Botswana Telecommunications Corporatin Act (Cap 72:02)
- Botswana Unified Revenue Service (Cap 53:03)
- Capital Transfer Tax Act (Cap 53:02)
- Cinematograph Act (Cap 60:02)
- Collective Investment Undertakings Act (Cap 56:09)
- Communications Regulatory Authority Act 19 0f 2012
- Companies Act (Cap 42:01)
- Companies and Intellectual Property Authority Act (Cap 42:13)
- Competition Act (Cap 46:09)
- Consumer Protection Act (Cap 42:07)
- Corruption and Economic Crime Act (Cap 08:05)
- Financial Intelligence Act (Cap 08:07)
- Financial Reporting Act (Cap 46:10)
- Income Tax (Cap 52:01)
- Insolvency Act (Cap 42:02)
- Insurance Industry Act (Cap 46:01)
- International Financial Organisations Act (Cap 39:05)
- International Insurance Act (Cap 46:07)
- Local Government (District Councils) Act (Cap 40:01)
- Non-Bank Financial Institutions Regulatory Authority Act (Cap 46:08)
- Registration of Business Names Act (Cap 42:05)
- Telecommunications Act (Cap 72:03)
- Town and Country Planning Act (Cap 32:09)
- Townships Act (Cap 40:02)
- Townships Act and Regulations - Gaborone City General Bye Laws (Cap 40:02)
- Trade Act (Cap 43:02)
- Value Added Tax Act (Cap 50:03)
The interest payable to residents is taxed at a rate of ten percent (10%) and to non residents, at a rate of fifteen percent (15%).
Section 46 of the Income Tax Act (Cap 52:01) regulates losses. It provides that any assessed loss determined by the Commissioner General of Botswana Unified Revenue Service as incurred by a person/company, shall be deducted to ascertain the chargeable income of that person/company for the subsequent tax year.
Where the assessed loss exceeds the relevant chargeable income of such subsequent tax year, the excess or amount of the assessed loss, as the case may be, shall be carried forward and deducted in like manner in ascertaining the chargeable income of the following tax year, and so on until the assessed loss has been fully allowed.
Except in the case of an assessed loss incurred in carrying on the business of mining or prospecting, no assessed loss shall be carried forward as a deduction for more than the five years next succeeding the tax year in which that loss arose.
Where an assessed loss is determined in relation to any person in the carrying on of a business, the deduction provided above shall not be affected by reason only of the temporary discontinuance of the carrying on of that business by that person.
A tax loss may not be carried forward in relation to any person whose estate has been voluntarily or compulsorily sequestrated (unless such sequestration is set aside), or in relation to the trustee of any such person in respect of any tax year subsequent to the date of sequestration.
Value added tax
The percentage of value added tax (VAT) is twelve percent (12%) for standard rated supplies. Zero rated supplies on the other hand, have a VAT rate of zero percent (0%).
Zero rated supplies include millet grain, millet wheat, maize meal, goods and services exported from Botswana, international transport services, paraffin, petrol, diesel, etc.
A supplier of goods or a service provider, whose annual turnover exceeds BWP1,500,000.00 (one million five hundred thousand Pula), is required to register for VAT. A voluntary VAT registration is allowed for a service provider or supplier of goods whose annual turnover, though not exceeding BWP1,500,000.00, exceeds BWP1,000,000.00 (one million Pula).
Technical Service Fees
The technical service fee payable to non residents is taxed at fifteen percent (15%). No tax is chargeable to residents.
Real property tax
Transfer duty is levied on the transfer of immovable property under the Transfer Duty Act (Cap 53:01) at a rate of 5% on property other than transfers of agricultural land to non-citizens. A rate of 30% applies to transfers of agricultural land to a non- citizen, with the approval of the Minister of Lands and Housing.
Payroll tax and social security
There is no specific percentage of payroll tax stipulated. The amount of tax to be deducted is determined by the tax table rates published by the Botswana Unified Revenue Services.
There is no social security contribution in Botswana.
Personal income tax
The percentage rate for the applicable tax to be deducted is determined by and published by the Botswana Unified Revenue Services.
For the percentages, please download the PDF
The tax on royalty payments to non-residents is fifteen percent (15%).This is a final tax.
Botswana has no foreign exchange controls in place.
There is no transfer pricing regime in Botswana. However, in terms of the Income Tax Act, the Commissioner General of the Botswana Unified Revenue Service may adjust the tax liability of a tax payer if it appears to him that a transaction, scheme or operation has not been entered into or carried out by persons dealing at arms-length and has the effect of avoiding, reducing or postponing the tax payers’ tax liability.
There is no stamp duty levied in Botswana.
Capital gains tax
Capital gains tax is regulated in terms of the Income Tax Act which provides that gains on the sale of shares, debentures, movable and immovable property are taxable at normal tax rates. A twenty-five percent (25%) allowance is permitted in the calculation of capital gains on the sale of shares. Capital gains from the sale of shares in respect of a company listed on the Botswana Stock Exchange are exempt from tax, as long as the shares are held by the general public. Capital gains from the sale of shares in an IFSC company as well as bonds and debentures issued by the Government of Botswana, Bank of Botswana, a statutory body or a special purpose vehicle formed by the Government of Botswana for the securitization of public debt, are exempt.
Capital losses may only be set off against capital gains in the year incurred and the immediately succeeding year. Thereafter, the loss may not be set-off.
The Income Tax Act regulates the taxation of companies. Section 9 of the Income Tax Act provides that the tax payable shall be that which accrued to a person (including a company) in that tax year (a tax year being a period of 12 months from 1 July to 30 June of the following year), from every source situated or deemed to be situated in Botswana but shall not include any amount of a capital nature, except otherwise specified in the Act.
For purpose of the Income Tax Act, a company includes: any body corporate, specified corporation, collective investment undertaking, a charitable, religious or educational institution, a trust established for public purposes and any association or society whether incorporated or registered or not, but it does not include a partnership.
A company is taxed on its income after deducting expenses that are “wholly, exclusively and necessarily incurred” for the production of that income. The income is then subject to tax at the rate of 22% for resident companies and 30% for non resident companies, except for: a) approved manufacturing companies – 15%; b) IFSC Companies – 15%; and c) Pension and Provident funds not approved by the Commissioner – 7.5%.
All companies pay tax under the Self Assessment system. This is a system where a Taxpayer is charged with the responsibility of making his own assessment and pays the necessary tax in quarterly installments. A company has to estimate the taxable income for the tax year to the best of its ability based on the past and current performance of the company. The company must then:
- apply the rates of tax as appropriate to the tax year;
- arrive at tax payable for the year;
- divide the tax payable in quarterly installments; and
- pay the tax in advance for each quarter.
The exact tax payable for the year will only be known when completing the Self Assessment Tax return which is due four months from financial year end. If there is any difference between the amounts of tax paid in advance and the amount in the return, the balance should be paid at the time of submitting a return in case of an underpayment. If the balance is an over payment a refund will be payable. The payments are made at three months interval, the first quarter payment being due three months from the beginning of the company’s financial year.
A company is tax resident if it is incorporated or managed in Botswana. Corporate income tax is levied on taxable Botswana source income of all companies, with the exception of tax exempt entities such as pension funds and charities. Foreign source dividends and interest are deemed to be from a Botswana source and are taxable on accrual. Business profits are taxable when remitted to Botswana. Branches of foreign companies are liable on the same basis as resident companies but these companies are subject to a single tax rate of 22%.
In relation to withholding tax, all dividends paid by a resident company to a resident or non-resident are subject to a withholding tax of 7.5% on the gross amount paid. Where in a tax year, a company is liable to deduct tax from dividends in accordance with the Income Tax Act, and has paid such tax to the Botswana Unified Revenue Service and such company is also liable for Additional Company Tax (ACT), the amount to be withheld shall be set-off against withholding tax for a period of more than five (5) years following the tax year in which it is paid.
The Companies Act (Cap 42:01) regulates how dividends are dealt with.
In terms of section 60(2) of the Companies Act, when the board of a company authorises a dividend, it must do so in respect of all the shares in a class. Further, the board may not authorise a divided of a greater amount in respect of some, but not other, shares in the in the same class, except where:
- the amount of dividend is reduced in proportion to any liability attached to the shares under the company constitution, or
- a shareholder has agreed in writing to receive no dividend, or a lesser dividend than would otherwise be payable.
Section 61 of the Companies Act provides that subject to the constitution of the company, the board may issue shares to any shareholders who have agreed to accept the issue of shares, wholly or partly, in lieu of a proposed dividend or proposed future dividends if:
- the same right has been offered to all shareholders of the same class on the same terms;
- in the event that all shareholders elect to receive the shares in lieu of the proposed dividend, the relative voting or distribution rights in relation to the shares would be maintained;
- the shareholders to whom the right is offered are afforded a reasonable opportunity to accept it;
- the shares issued to each shareholder are issued on the same terms and subject to the same rights as the shares issued to all shareholders in that class who agree to receive the shares; and
- the board complies with the provisions (specifically,section 50) relating to issuing of shares that confer rights other than the right (i) to one vote on a poll at a meeting of the company on any resolution, (ii) an equal share in dividends authorised by the board, and (iii) equal share in the distribution of the surplus assets of the company.
Where declared, dividends are taxed at the rate of 7.5% as final tax. Where a double taxation agreement applies (in respect of the following countries: Barbados, France, Mauritius, Russia, Seychelles, the UK and Zimbabwe), the dividend tax rate becomes 5%, provided that the beneficial owner is a company and it holds (twenty five percent) 25% or more of shares in the declaring company.
Thin Cap Regulations
There are no thin capitalisation regulations or requirements (except with respect to mining companies). In respect of mining companies, where the debt to equity ratio of a foreign controlled resident mining company exceeds 3:1, interest paid by the mining company on the excess debt is disallowed and treated as a dividend on which withholding tax is payable.
Similarly, for IFSC companies, the debt equity ratio is 2:1 for banks and 3:1 for all other accredited companies.