Botswana Double Tax Treaties

Botswana has double taxation agreements with Russia, India, Namibia, South Africa, the United Kingdom, Sweden, Mauritius and the Seychelles.

When the agreement with South Africa was signed in 2003, the IFSC's CEO Alan Boshwaen hailed it, saying SA was a key trading partner and the gesture would see an improvement in the profile of Botswana in the international financial services sector. "This is a welcome development as it gives certainty and predictability on tax treatment, both to SA companies seeking to domicile themselves in Botswana and to Botswana companies operating in SA. Our intention through the center initiative is to enable South African companies to have access to the relatively low tax and a stable environment on their doorstep as they expand north of the Limpopo", Boshwaen said.

In April, 2004, Botswana concluded and signed a double taxation treaty with Russia. "As Botswana continues to attract investors to help diversify the economy and develop international financial services capacity, a double taxation agreement will help to improve our international competitiveness and enhance our image with foreign investors," observed Finance and Development Planning Minister, Baledzi Gaolathe, of the agreement.

The deal between Botswana and Russia will lower the rates of taxation on dividends, interest, royalties and management fees in a bid to boost inward investment, Gaolathe explained.

Urging parliament to adopt the Botswana/Seychelles Double Taxation Avoidance Agreement in July, 2005, Botswanian Minister of Finance and Development Planning Baledzi Gaolathe, stated that such agreements will help support and encourage foreign investment.

Gaolathe told Parliament that the agreement covers taxes on income and provides for co-operation on avoidance of double taxation and prevention of tax evasion on income and capital gains.

The minister went on stress the importance of such agreements in the development of Botswana as an international financial services centre where firms will be conducting much of their business with foreign-based businesses.

Gaolathe explained that the Botswana/Seychelles agreement would also open up possibilities for mutual co-operation in the prevention of tax evasion, avoidance and fraud by providing for the exchange of information on taxpayers.

The DTA will enter into force in July, 2006, following the ratification of the agreement by lawmakers in both countries.

The Double Taxation Avoidance Agreement between Botswana and the United Kingdom was approved by lawmakers in the African state in January, 2006.

The accord, which was presented by the Minister of Finance and Development Planning, Baledzi Gaolathe will enter into force after it is ratified by the respective parliaments of the two countries.

Gaolathe told Parliament that the agreement also facilitates close co-operation and exchange of information between the tax authorities and addresses the problem of international tax evasion and avoidance.

"Further, double taxation avoidance agreements are of great significance as part of efforts to attract direct foreign investment," said Gaolathe.

"In establishing their business, multinational companies worldwide consider the existence of double taxation avoidance agreements as a distinct advantage as it eliminates uncertainty about how their incomes will be taxed in the contracting countries," Gaolathe added.

The double taxation avoidance agreement is a re-negotiation of the 1977 agreement between the two countries and it seeks to replace the older one.

Gaolathe explained that the salient provisions of the new Botswana/United Kingdom Double Taxation Avoidance Agreement are: "An enterprise of the contracting state will be taxed in the other state in its business income, only if it carries on business in the other state through permanent establishment".

The scope of a permanent establishment has been extended, in the new agreement to cover construction, assembly and/or installations as well as services rendered through employees.

Also income derived from, as well as gains from sale of, immovable property will be taxed only in the country where the property is situated.

The same principle applies to gains from the sale of shares in a company whose assets consist substantially of immovable property located in one of the countries.

Dividends will be subjected to five per cent withholding tax, if the company receiving such dividends holds at least 25 per cent of the shareholding of the company paying the dividend, and 12 per cent withholding tax on gross amounts where the share holding is below 25 per cent.

Botswana Other International Agreements

Botswana is signatory to the following international conventions that combat money laundering:

    * United Nations Geneva Convention, 1988;
    * Basle Statement of Principles;
    * Financial Action Task Force (FATF) 40 recommendations;
    * United Nations Convention on the Suppression of Financing of Terrorist Activities - Resolution 1373

In March, 2005, Barbados and Botswana signed a Memorandum of Understanding that it is expected will lead to agreements on Technical Co-operation and Double Taxation Avoidance.

Following President Festus Mogae’s visit to the Caribbean island, the two countries also signed a Memorandum of Understanding on Co-operation to allow the two governments and their peoples to exchange ideas and expertise in a wide range of other areas.

The signature of the agreements was interpreted by both parties as a successful conclusion to the negotiations begun between the two nations when Barbadian Prime Minister, Owen Arthur, visited the African state in 2004.

According to Mr Arthur, the signing of a Double Taxation Agreement will open up many new opportunities for business, entrepreneurs and investors from both countries and other developing nations.

"I am convinced that, with foundations such as these, our relations will go from strength to strength,” Mr Arthur remarked.

In May, 2005, Mr. Abdulrahman Saif Al Ghurair, the first Vice President of the Dubai Chamber of Commerce and Industry (DCCI), received a delegation from Botswana headed by Mr. B. Gaolatlhe, Minister of Finance and Development Planning.

The delegation, which included Mr. N. Moroka, Minister of Trade and Industry, Mr. D. N. Sertse and officials from the Botswana Export Development and Investment Authority (BEDIA), visited a number of government departments in a bid to gain an insight into the successful workings of the Dubai government.

The meetings also focused on ways of enhancing bilateral trade between the two countries and how Botswana could become involved in a number of unique projects at regional and International levels.

Mr Al Ghurair placed a strong emphasis on the transparent and visionary policies of the Dubai government. which have been responsible for Dubai's phenomenal economic growth in recent years.

He was also keen to point out the role of the DCCI in promoting investment in Dubai, which, like the government, has streamlined its bureaucratic processes.

In August, 2005, Mauritius and Botswana signed a Promotion and Reciprocal Protection of Investment Agreement (IPPA) which the countries hope will act as a spur to bilateral economic activity.

The Mauritian Minister of Foreign Affairs, International Commerce and Co-operation, Madan Dulloo, and his Botswanian equivalent Neo Moroka, signed the Agreement in Gaborone, the capital of Botswana, on the margins of a Southern African Development Community (SADC) summit.

'The signature of this accord adds an important dimension to our bilateral economic relations', said Mr Dulloo. "This IPPA will give a new impetus to investors in our two countries who wish to do business.' The Minister recalled that Mauritius had signed such agreements with many countries, including 14 African ones, and that a double tax avoidance treaty had been signed with Botswana in 1995.

'Our two countries have a long democratic history, and our economies are among the most stable in Africa, as well as being relatively free of corruption and supportive of human rights,' added the Minister.

For his part, Neo Moroka noted that the first thing investors look for in another country is protection of their capital. 'This treaty gives a guarantee against government actions which would be to the disbenefit of investors,' he said. 'The signature of this treaty with Mauritius amount to a promise on our part to maintain a business-friendly environment.'