doing business in Botswana

doing business in Botswana country profile time zone GMT+2 official language population 2 303 368 Setswana and English currency Pula ( BWP ) government structure economic data Executive: The president is both chief of state and head of government, with a five-year term limit. The president is indirectly elected by the National Assembly for a five-year term (eligible for a second term). The vice president and Cabinet are appointed by the president. Legislative: Botswana has a unicameral parliament. Judicial: The highest court is the Court of Appeal. The subordinate courts are the Industrial Court, Magistrates Courts, Customary Court of Appeal, Paramount Chief's Court/Urban Customary Court, Senior Chief's Representative Court, Chief's Representative s Court, Headman's Court. Next Presidential and Parliamentary elections: October 2019. Nominal GDP (USD billions): 11.05 GDP per capita (USD): 5 068.90 Inflation rate (% change): 3.5 Government revenue (% of GDP): 32.54 Government gross debt (% of GDP): 15.29 *Source: IMF The main economic sectors in Botswana are agriculture and mining. Botswana's major natural resources include diamonds, coal, and copper. The agriculture sector is the biggest employer, followed by the retail and manufacturing sectors. risk ratings World Economic Forum Global competitive index (2016-2017): 64/138 World Bank ease of doing business (2017): 71/190 Corruption perception index (2016): 35/176 international treaties and memberships international and regional organisations and customs unions bilateral treaties related agreements / institutions dispute resolution intellectual property ( IP ) treaties African Development Bank African Union Commonwealth European Union International Monetary Fund Southern African Customs Union Southern African Development Community United Nations World Bank Botswana has entered into bilateral treaties with China, the Czech Republic, Germany, Lesotho, Malawi, Namibia, Romania, Russia, Slovakia, South Africa, South Korea, Swaziland, Switzerland, Zambia and Zimbabwe, Treaties have been signed with Belgium-Luxembourg, the Economic Union, Ghana, Egypt, Malaysia and Mauritius. African Growth and Opportunity Act; Multilateral Investment Guarantee Agency; Overseas Private Investment Corporation; Southern African Customs Union; Southern African Development Community Protocol on Trade; and World Trade Organization. International Centre for the Settlement of Investment Disputes United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) A comprehensive list of IP-related treaties signed by Botswana is available at: http://www.wipo.int/wipolex/en/profile.jsp?code=bw See the trade mark section below for further details. 2017 08 1

legal regime applicable legal regime dispute resolution land acquisition, planning and use competition Botswana s legal system is based on a combination of statute law and Roman Dutch common law, with some minor English law influences. The general principles of Roman Dutch common law supplement Botswana s statute law. Botswana accepts binding international arbitration of disputes in accordance with the provisions of the Recognition and Enforcement of Foreign Arbitral Awards Act. Botswana currently has no restrictions on land and property ownership, whether commercial or private. The majority of land in Botswana is tribal land governed by the Tribal Land Act and administered by the Land Boards. If the land is state owned, contact should be made with the Ministry of Lands, Housing and the Environment. merger control The Botswana Competition Act regulates merger control in Botswana. The Act states that a merger occurs when one or more enterprises directly or indirectly acquires or establishes direct or indirect control over the whole or part of another enterprise. The Act sets out examples of what constitutes control for the purposes of merger regulation. A merger is notifiable if (i) the combined annual turnover in Botswana of the enterprise or enterprises being taken over exceeds BWP10- million; (ii) the combined assets in Botswana of the enterprise or the enterprises being taken over exceed BWP10-million; or (iii) the enterprises concerned would, following implementation of a merger, supply or acquire 20% of goods or services of a particular description in Botswana. The applicable filing fee is 0.01% of the merging enterprises combined turnover or assets in Botswana, whichever is higher. The Botswana Competition Authority will take public interest considerations into account in making a determination on a merger. Botswana is a pre-implementation regime, therefore approval must be sought from the Botswana Competition Authority prior to the implementation of the proposed transaction. There are no express punitive provisions in respect of failure to prenotify the Botswana Competition Authority, but where it is determined that a merger has been implemented in contravention of the Act, it may give further direction to the enterprise(s) (i) not to complete or implement a merger; (ii) to sell or otherwise dispose of any assets or shares or other interests acquired in a merger; (iii) to terminate any agreements to which a merger was subject; or (iv) to take such further measures as may be necessary to restore the conditions of competition existing prior to a merger. Botswana is not a member of any regional competition bodies. prohibited practices employment The Act prohibits horizontal and vertical agreements between enterprises, decisions by associations of undertakings, decisions by undertakings or concerted practices by undertakings that have as their object or effect the prevention, distortion or lessening of competition in trade in any goods or services in Botswana or a part of Botswana, unless they are exempt or form part of a single economic entity. Cartel conduct (including, but not limited to, price fixing, market division, collusive tendering or restraints on production of sale) and minimum resale price maintenance are prohibited by the Act. The Act prohibits abuses of dominance. The Botswana Competition Authority operates a corporate leniency programme for firms that voluntarily disclose the existence of any cartel agreement or practice and fully co-operates with the Botswana Competition Authority in its investigation. A enterprise that engages in a restrictive horizontal or vertical practice or abuses its dominant position will be liable for a penalty not exceeding 10% of the turnover of the enterprise during the breach of the prohibition (up to a maximum of three years). immigration There are no formal restrictions on the employment of foreigners. Generally, however, for every expatriate staff member, there has to be a Botswana citizen trainee/understudy, but it may be possible to institute a local training programme in lieu of the understudy requirement. Non-citizens working in Botswana are required to hold a work permit. In addition, a residence permit is required if such person is to be present in Botswana for longer than 90 calendar days per annum. In practice, a residence permit is issued automatically if a work permit has been granted. local employment vs secondment typical employment fixed term contracts and temporary employment services participation in statutory schemes In terms of Botswana s employment legislation, it is not a legal requirement for either local or foreign employees to be employed by a local entity in Botswana to work in Botswana and it is therefore possible to second a foreign employee to work in Botswana without having to conclude an employment contract with a local entity, subject to applicable immigration laws. It is legally permissible to conclude an indefinite number of fixed-term contracts with an employee. However, the continuous renewal of fixed-term employment contracts may expose the employer to the risk of the employee being able to successfully argue that he/she has been employed indefinitely by the employer. The use of temporary employment services are common practice in Botswana. There is no national social security system in Botswana. 2017 08 2

payment in local currency restraint of trade agreements foreign regime regime registration / licensing non-industry specific registration/ licences operating permit/business permit/trading licence Botswana United Revenue Authority ( BURS ) There is no requirement for remuneration to be paid in local currency. This is a contractual issue between the employee and employer. Restraint of trade agreements are valid and enforceable in Botswana, subject to the requirement that it is reasonable and does not offend public policy. Botswana does not have specific foreign legislation, but in Botswana is regulated by a broad range of laws, many of which are sector specific. The government s promotion measures were formerly pursued mainly through the Botswana Export Development and Investment Authority ( BEDIA ) and the International Financial Services Centre ( IFSC ), which promoted and accredited financial services undertaken in Botswana. BEDIA and IFSC have been merged to form the Botswana Investment and Trade Centre ( BITC ), which provides administrative and business support to facilitate investor applications for business registration, licensing, work and residence permits. There are no restrictions on ownership, size of or source of funds, but a number of trades and businesses (mainly small businesses) are limited to Botswana nationals. Registration with BITC is generally not compulsory, but investors wishing to invest in the financial services sector and take advantage of the various incentives available to the industry must register with BITC and obtain the necessary certificate entitling them to such incentives. The following general non-industry specific registration/licences may also be required: Businesses operating in Botswana must hold a valid trading licence in one of the following three classes: trade licences, industrial licences and liquor licences. The Office of Commercial Affairs is mandated to issue trading licences on behalf of trade, industrial development and liquor committees. Trading licences are generally restricted to a specific premises. All tax registrations are done with the central tax authority, BURS. Entities are required to complete a single form for the registration of income tax, employees tax ( PAYE ), other withholding taxes and value-added tax ( VAT ). If an enterprise s turnover exceeds the annual VAT registration threshold (currently BWP1-million), it should specifically apply for VAT registration. social security There is no social security system in Botswana. Botswana Qualifications Authority industry-specific licences A training levy, based on the annual turnover of any Botswana company that is registered under the VAT Act or is liable for VAT, is payable to the Botswana Qualifications Authority. No separate registration is required in respect of this levy. Industry-specific licences may also be required. incentives Companies that set up an approved training programme for Botswana citizen employees are entitled to a deduction of 200% of related expenditure. The Minister of Finance may issue a development approval order granting additional tax relief to any project that he/she considers beneficial to the development of the Botswana economy or to the economic advancement of its citizens, having consideration to the number of Botswana citizens to be employed, the effect the activity is expected to have on stimulating the development of other economic, industrial or commercial activities in Botswana. Approved companies engaged in manufacturing in Botswana are subject to corporate income tax at a reduced rate of 15% and companies engaged in the farming and mining industries may also qualify for tax relief. IFSC registered companies are taxed at the rate of 15% on income from approved financial transactions with non-residents and are generally exempt from withholding tax on payments to non-residents. exchange control regulation types of entities available for foreign Botswana abolished foreign exchange control in February 1999. Private or public limited liability company limited by shares; external company (branch of foreign company); company limited by guarantee; common law trust; partnership; close company; sole proprietorship; and societies being associations of persons. 2017 08 3

private limited liability company minimum number of shareholders minimum share capital A minimum of one shareholder is required and the maximum allowed is 25 (excluding employees). There is no requirement to have local shareholders. There are no prescribed for minimum capital, and companies are normally formed with either 100 or 120 shares. directors A private company must have at least one director who must be ordinarily resident in Botswana. It is not required for such person to be a citizen of Botswana. company secretary Every company must appoint a company secretary, who must be: a natural person ordinarily resident in Botswana; or a firm or corporation of which at least one member or director is ordinarily resident in Botswana and accepts responsibility for the work of the firm or corporation as secretary. auditor Every non-exempt private company must appoint a local auditor. A company shall be an "exempt private company" if it is a private company that, in respect of its last preceding financial year, satisfied all of the following criteria: the total assets of the company are less BWP5-million; the annual turnover of the company is less than BWP10-million; and none of the shareholders in such company is a company. registered address A company must have a registered office in Botswana to which all communications and notices may be addressed and which may constitute the address for service of legal proceedings on the company. The company s registered office may be at those of any firm of a chartered accountant, attorney or any other person. shelf companies Shelf companies are available to be purchased in Botswana. registration process Companies are registered with the Registrar of Companies and it takes two to four weeks to finalise registration once all the required documents have been submitted. tax tax system Botswana has a sourced-based taxation system. corporate residence corporate tax rate capital gains tax ( CGT ) withholding tax ( WHT ) rates double tax agreements ( DTAs ) A company is considered a resident of Botswana if: its registered office or place of incorporation is in Botswana; or if the company is managed and controlled in Botswana. Resident companies are subject to corporate income tax at a rate of 22% and permanent establishments of foreign entities 30%. Approved manufacturing and IFSC registered companies are taxed at 15%. Mining profits, other than profits from diamond mining are taxed according to a specific formula, whereas diamond mining is usually taxed in terms of an agreement with the Government of Botswana. Gains from the disposal of specified assets, including immovable property and marketable securities, are included in normal taxable income and taxed at the rate of 22% for resident companies and 30% for non-resident companies. Where the gain arises from the sale of shares, only 75% of the amount realised is taxable and gains from shares listed on the Botswana Stock Exchange are exempt if the seller holds less than 49% of the shares. WHT rate (%) payment to residents non-residents branch profits N/A N/A dividends 7.5% 7.5% interest 10% 15% royalties N/A 15% management or technical fees N/A 15% DTAs are in force with Barbados, France, India, Ireland, Mauritius, Russia, Seychelles, South Africa, Sweden and the United Kingdom. losses Ordinary losses are deductible and may be carried forward for five years. Special rules are applicable to mining and farming companies. transfer pricing thin capitalisation There are no specific transfer pricing regulations, apart from the general anti-avoidance rules. Where the Commissioner General is of the opinion that a transaction, operation or scheme, including a transaction for alienation of property, is fictitious or artificial or is entered into or carried out otherwise than as a transaction between independent persons dealing at arm s length and the transaction has the effect of avoiding, reducing or postponing the liability of tax to any person for any tax year, then he/she may disregard the transaction and determine the liability for the tax chargeable as if the transaction had not been entered into or carried out. Thin capitalisation legislation applies in respect of only mining companies and IFSC companies. 2017 08 4

employee taxes social security contributions The income tax rates applicable to resident individuals, effective 1 July 2011, are: annual chargeable income (BWP) tax rate up to 36 000 0% 36 001-72 000 5% 72 001-108 000 12.5% 108 001-144 000 18.75% above 144 000 25% Botswana does not have national social security legislation that requires contributions by employers or employees. Employers in the non-public sector are required to make provision for contributions to the appropriate privately established insurance and pension schemes for their employees. These contributions are deductible up to a maximum of 15% of the employee s income. payroll taxes There is no payroll tax in Botswana. stamp duty There are no stamp duties in Botswana, but the free transfer or disposal of tangible or intangible movable or immovable property is subject to capital transfer tax levied under the Capital Transfer Tax Act. VAT taxable supplies VAT rate 12% registration threshold reverse VAT on imported services VAT is levied on the supply of goods and services by taxable persons in Botswana and on the import of goods and services into Botswana. A company must register for VAT if at the beginning of any 12-month period there are reasonable grounds to believe that the total value of annual taxable supplies will exceed BWP1-million. The recipient of services imported for use or consumption in Botswana for a purpose other than making taxable supplies are liable to declare output VAT on such services in terms of a reverse-charge mechanism. Such VAT is not available as an input credit. trade marks international conventions, treaties and arrangements African Regional Intellectual Property Organization (Banjul Protocol) World Intellectual Property Organization World Trade Organization Paris Convention Madrid Protocol (enabling local legislation enacted) classification The International Classification of Goods and Services applies. A single application may cover any number of classes of goods and/or services. categories of trade marks filing Provision is made for: service marks; and collective marks. Full particulars of the applicant; Power of Attorney, simply signed; electronic prints of the trade mark; and certified copy of the priority document (if applicable). procedure Applications are examined as to formal and substantive in terms of the Trade Marks Act. Accepted applications are published for opposition purposes. oppositions Opposition may be lodged within three months following the date of advertisement of the trade mark application. Extension of the opposition period is possible at the discretion of the Registrar. duration and renewal A trade mark registration is effective for an initial period of 10 years and, thereafter, renewable for further periods of 10 years. For more information or assistance please contact: Celia Becker executive Africa regulatory and business intelligence cbecker@ensafrica.com cell: +27 82 886 8744 2017 08 5