VAT, GST and Sales Tax in Botswana

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jul-02
Trading bloc membership Southern African Customs Union, Southern African Development Community
Administered by Botswana Unified Revenue Service (http://www.burs.org.bw)
VAT rates
Standard 12%
Other Zero-rated and exempt
VAT number format C01234567890 for companies I01234567890 for individuals P01234567890 for partnerships T01234567890 for trusts
VAT return periods Monthly (annual taxable supplies in excess of BWP12 million) Bimonthly (annual taxable supplies below BWP12 million)
Registration threshold BWP1 million
Recovery of VAT by non-established businesses  No

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods and services in Botswana by a taxable person
  • Reverse-charge services received by a person making exempt supplies in Botswana
  • The importation of goods from outside Botswana, regardless of the status of the importer

Goods that are imported from countries within the Southern African Customs Union (consisting of Botswana, Lesotho, Namibia, South Africa and Swaziland) are not subject to customs duty.

Who is liable

Any registered person that makes supplies of taxable goods and services in Botswana in the course of a business is liable for VAT. For this purpose, a person includes the state, a local authority, board, natural person, trust, company and partnership.

The VAT registration threshold is BWP1 million. A taxable per­son must notify the Botswana VAT authorities of its liability to register for VAT within 21 days after becoming liable.

Group registration. The Botswana VAT Act does not permit group registration.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in Botswana. A non-established business that makes supplies of goods or services in Botswana must appoint a representative in order to register for VAT. The representative must be resident in Botswana.

Registration procedures. Application for registration is accom­plished by manually completing form BURS1 and submitting it, stamped and signed by the local bankers, to the Revenue Authority with copies of the following documents:

  • ID or passport for two directors
  • ID or passport for public officer (tax representative, who should be a resident)
  • Certificate of Incorporation
  • Memorandum and Articles of Association (if available)
  • Forms 2, 2A, B, C and D (list of directors)
  • A list of assets (if any)
  • Details of local bank accounts

Late-registration penalties. The following penalties apply if a person fails to register for VAT within 21 days after becoming liable:

  • If the failure was due to recklessness or made knowingly, a fine not exceeding BWP10,000 or imprisonment for a period not exceeding two years, or both
  • In all other cases, a fine not exceeding BWP5,000 or imprison­ment for a period not exceeding one year, or both
  • A penalty of twice the output tax payable from the time when the person became liable to the time when the person registered for VAT

Any offense committed by a corporate body is deemed to have been committed by a person acting as a representative officer, director, general manager, secretary or other similar officer of the company, or by any other person acting in such a capacity.

Tax representatives. In the case of a nonresident person, a tax representative is a public officer, director, trustee, partner, liqui­dator or other person who controls the nonresident person’s affairs in Botswana. The Commissioner General may, if he con­siders it necessary, declare any person to be a representative of a registered person.

Reverse charge. Under the reverse-charge mechanism, VAT is payable by the importer on the importation of a supply, if the supply is imported for use in making exempt or nontaxable sup­plies. The VAT is payable within 30 days of the importation. The importer of the service in Botswana is required to complete form VAT 017 when making the VAT payment.

Digital economy. No special provisions apply to digital products.

Deregistration. A person who intends to deregister is required to complete application form IRD/DE-REG1. The process takes 3 to 12 months and may involve an audit.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to a rate of VAT, including the zero rate (0%).

In Botswana, the two rates of VAT are the standard rate of 12% and the zero rate (0%). The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for the zero rate or an exemption.

Examples of goods and services taxable at 0%

  • Exports of goods and services
  • International transport
  • Sale of a business as a going concern to a registered person
  • Fuel for vehicles
  • Illuminating paraffin
  • Sorghum and maize meal for human consumption
  • Bread flour, sugar, brown bread, fresh fruits, rice, milk and samp (coarsely ground corn)
  • Intellectual property rights for use outside Botswana
  • Household consumption of water up to 5,000 liters or 25 drums of 200 liters

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to tax. Persons that make exempt supplies are not entitled to input tax deduction (see Section F).

Examples of exempt supplies of goods and services

  • Medical services provided in a public medical facility
  • Supply of prescription drugs
  • Education
  • Some agricultural farming implements
  • Financial services (unless provided for a fee, charge or commis­sion)

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” In Botswana, the basic tax point is the earlier of the issuance of an invoice or the receipt of any payment.

Other tax points are used for a variety of situations.

The following is the tax point for supplies between related per­sons:

  • For a supply of goods, either when the goods are removed or when they are made available to the purchaser or recipient of the goods
  • For a supply of services, when the services are performed

The tax point for periodic supplies is the earlier of the date on which payment is due or the date on which payment is received.

The tax point for goods or services provided to a branch or prin­cipal business outside Botswana is when the goods are delivered or when the services are performed.

Imports. The tax point for imported goods depends on the cus­toms regime that applies to the import. The following are the applicable rules:

  • For imported goods that must be cleared through customs under the Customs and Excise Duty Act, when the goods are cleared
  • For goods that are imported from the Southern African Customs Union, when the goods are brought into Botswana
  • For goods imported and entered into a Customs and Excise bonded warehouse, when the goods are cleared from the ware­house

The tax point for imported services is 30 days from the date of importation.

VAT-registered persons may apply for a VAT-deferment account. The importer is authorized to pay VAT on imports 25 days after the end of the month in which the goods are imported. To qualify for a deferment account, the importer must place with the VAT office a bond equal to the greater of BWP20,000 or 20% of its estimated monthly imports. Input tax paid through the VAT-deferment account may be reclaimed only if it has actually been paid.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. Input tax is claimed by deducting it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services purchased within Botswana and VAT paid on imports of goods.

Nondeductible input tax. VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered on certain specified business expenses.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible even if the expenditure is for purposes of making a taxable supply and examples of items for which input tax is deductible if related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Purchase and hire of passenger cars
  • Entertainment including food, accommodation and hospitality of any form
  • Sponsorship that constitutes entertainment subscriptions to sports and recreational clubs

Examples of items for which input tax is deductible
(if related to a taxable business use)

  • Purchase, hire and maintenance of non-passenger motor vehi­cles
  • Maintenance of passenger motor vehicles
  • Advertising
  • Parking
  • Mobile phones
  • Business use of a home telephone (but an employer is liable to VAT if it pays for the private telephone bills of the employee)

Partial exemption (mixed supplies). VAT directly related to mak­ing exempt supplies is not recoverable. A registered person who makes both exempt and taxable supplies cannot recover input VAT tax in full. This situation is referred to as making “mixed supplies.”

VAT that relates to making mixed supplies must be apportioned using a method acceptable to the tax authorities to allocate the VAT between taxable supplies and exempt supplies. Input tax related to taxable supplies may be deducted in full. VAT related to exempt supplies may not be deducted. If taxable supplies exceed 90% of the total supplies made by a registered person, all VAT incurred by the registered person may be claimed as input tax.

Refunds. A VAT-registered person is entitled to a refund of excess input tax if input tax exceeds output tax in a tax period. The VAT authorities must pay VAT refunds by the following deadlines:

  • One calendar month following the due date of the return for exporters, operators of VAT manufacturing warehouses and international financial service center companies
  • Two calendar months following the due date of the return for all other registered persons

Before any refund is paid, the input tax credit is applied against any tax, levy, interest or penalty payable by the registered person (under the terms of the VAT Act, the Customs and Excise Duty Act or the Income Tax Act).

Preregistration costs. Input tax deduction is allowed to a regis­tered person in the first tax period in which the person is regis­tered for VAT in respect of the following:

  • Taxable supplies of goods, other than capital goods, made to the person
  • Any imports of goods, other than capital goods, made by the person prior to becoming registered, to the extent that the goods are for use or resupply in a taxable activity carried on by the person after registration, provided the goods are not supplied or imported more than four months prior to the date of registra­tion.

Recovery of VAT by non-established businesses

Nonresidents may claim refunds of VAT paid on goods bought in Botswana that are exported as “accompanied baggage” with the claimant if the VAT paid exceeds BWP500. Otherwise, only enti­ties registered for VAT in Botswana may claim refunds of input tax.

Invoicing

VAT invoices and credit notes. Registered persons must provide VAT tax invoices for all taxable supplies made, including exports. A VAT tax credit note may be used to reduce the VAT charged on a supply of goods or services. Tax credit and debit notes must show the same information as tax invoices.

Proof of exports. Goods exported from Botswana are zero-rated. However, to qualify for a zero rating, exports must be supported by evidence that proves the goods left Botswana.

Foreign-currency invoices. A Botswana VAT tax invoice must be issued in pula (BWP). If an amount is expressed in a currency other than pula, the following are the rules for converting the VAT and value amounts to local currency:

  • For imports, the amount must be converted at the exchange rate determined by the Customs and Excise Duty Act.
  • For other supplies, the amount must be converted at the exchange rate when the amount is taken into account for VAT purposes.

VAT returns and payment

VAT returns. The VAT tax period is one month for registered persons with annual taxable supplies in excess of BWP12 million and two months for registered persons with annual taxable sup­plies of BWP12 million and below.

Returns must be filed within 25 days after the end of the tax period. Payment is due in full by the same date. If the due date falls on a Saturday, Sunday or public holiday, the due date is the last business day before the holiday.

Special schemes. Not applicable.

Electronic filing and archiving. VAT returns can be filed electroni­cally upon application for e-services, which enable taxpayers to view the VAT returns submitted and other tax information online.

Annual returns. Not applicable.

Penalties

The greater of the following penalties is imposed for the late payment of VAT:

  • BWP50 per day
  • 10% of the outstanding tax for each month

The penalty is limited to the amount of the tax due. In the case of nil VAT returns, the maximum penalty is BWP5,000.

Interest is charged on outstanding tax or penalties at a rate of 1.5% per month, compounded monthly.

Penalties may also apply to a range of other offences, including making false statements and obstructing a VAT officer. In some cases, penalties may include imprisonment for offenses commit­ted knowingly or recklessly.

Offences by corporate bodies. Any offence committed by a corporate body is deemed to have been committed by a person acting in a responsible capacity, such as a representative officer, a director, a general manager, a company secretary or any similar officer of the company or any other person acting in such a capacity.