Transcript Slide 1

Budget Speech 2014/2015
The Botswana budget proposal for 2014/2015 presented to the
National Assembly on Monday, 3 February 2014 by the Minister of
Finance and Development Planning, the Honorable O.K. Matambo .
Budget Highlights
General:
•Budget prepared within an environment of continued uncertainties surrounding the state of the world
economy and their likely effects on the local economy.
•Focus on improving project implementation, growing the economy and employment creation,
improving productivity and sustaining sovereign rating, investing in infrastructural development to
support growth, investing in human capital, enhancing people’s welfare and livelihood, strengthening
the judicial system and combating crime, and strengthening local governance
•Priorities are to focus on service delivery, maintenance of existing infrastructure and completing ongoing projects which have high rates of return.
•Inflation decreased 4.1% in December 2013
•Foreign exchange reserves equivalent to fund 16.5 months of imports
•Economy grown by 4.2% in 2012 and projected to grow by 5.4% in 2013 and 5.1% in 2014
•Revised budget forecast for 2013/14 is a surplus of 386.16 million (down from original estimate of
P779.3 million
•Proposed budget surplus for 2014/15 of P1.326 billion
•Formation of Botswana Oil Limited and storage facilities to increase fuel supply cover from 18 days to
60days
•Substantial construction component in infrastructure
•Civil servants salaries still being reviewed
Budget Highlights
Fiscal:
•VAT registration threshold to be increased from annual turnover of P500,000
to P1 million
•All farming equipment and all basic food stuff which are currently zero rated
will be exempted.
•The list of basic food stuffs will be increased to include vegetables, rice and
milk
•Amendments to the Income Tax Act and the Value Added Tax Act will be
made during the forthcoming year – no further indications given of what
these changes may be
• changes will be presented to the Transfer Duty Act during the year to assist
first time home owners.
Salient Features
of the Current
Tax System
Taxable Income
•Income from, or deemed to be from a source within Botswana is taxable in Botswana
•Business income from different sources is deemed to accrue from one business
•Farming, mining and prospecting income or losses and capital gains are ascertained separately
•The offset of farming losses by an individual against other chargeable income earned by that individual up to
50% of the other chargeable income
•Gains on disposals of property are taxable, and capital losses can be carried forward for one year only
•Normal business expenses wholly, exclusively and necessarily incurred in the production of assessable income
are allowed as deductions
•Specific deductions include capital allowances, lease improvements, bad debt provisions, approved citizen
training expenditure and approved pension fund contributions
•Assessed losses from business can be carried forward for no more than five years, except for farming, mining
and prospecting losses, which can be carried forward indefinitely
•Special provisions apply to IFSC companies and mining businesses
Individuals
Employment income
•Includes salaries, wages, terminal payments, directors and other fees,
bonuses, commissions, allowances and the value of benefits
•Employment income from, or deemed to be from a source within Botswana
is taxable in Botswana
•All employment income, including benefits in kind, is subject to monthly
withholding tax (PAYE)
Individuals
Exemptions and tax-free benefits for individuals
•Bank and building society interest of P7 800.00 per annum, for resident individuals (note that the 10% tax
deducted by these financial institutions on interest earned by a resident individual is a final tax and the interest
does not then form part of the assessable income of the resident individual)
•Medical fund contributions and medical attention paid for by the employee
•The value of contractual travel benefits for employees and their families
•Contractual terminal gratuities payable to expatriate employees are exempt to the extent of one-third, with a
maximum of:
25% of total salary for 1st contract
27.5% of total salary for 2nd contract
30% of total salary for 3rd contract
•Minimum of 2 years should have been completed
•Should be stated in the employment contract
•Severance pay and certain gratuities payable (other than those mentioned above) are exempt to the extent of one
third. Investment of such payments directly into an approved pension or retirement annuity fund results in
100% exemption
Individuals
Exemptions and tax-free benefits for individuals (cont..)
•Pension fund contributions:
•A contribution made by a resident individual to an approved superannuation fund is
deductible from that resident’s taxable income
•The deduction is limited to 15% of the chargeable income, excluding investment income
•Retrenchment package: one third or P36 000.00, whichever is greater is exempt
•Donations:
•Donations made to an educational institution recommend by the Ministry of Education or to
any sports club or social association recommended by the relevant Ministry and approved by
the Commissioner General are deductible from chargeable income
•This deduction is restricted to 20% of the aggregate chargeable income for that year.
Individuals
Valuation of benefits
Housing
Use of employer's furniture
Loans
Other benefits
• 10 % of municipal valuation or where no municipal valuation is
available:
• 8 % of current capital valuation, (P250 x floor area)
• Under P15000.00 - no benefit deemed to have accrued
• 10 % of the excess over P 15 000.00 of the cost to the employer
The difference between the interest at concessionary rate and prime
lending rate announced by Bank of Botswana on 1 July of the tax
year
Such as school fees and utilities: cost to the employer or market
value, whichever is the greater
Individuals
Motor vehicles – scale of values
Cost of Vehicle
Value of Benefit
1 -
Fuel Cost Adjustment
50 000
2 500
1 000
50 001 - 100 000
5 000
2 000
100 001 - 150 000
7 500
3 000
150 001 - 200 000
10 000
4 000
200 001 - and over
15 % on the excess of P 200 000
5 000 Maximum
Individuals
Residents – Business & Employment Income Rates
Taxable Income
0 - 36 000
Tax Payable
0
36 001 - 72 000
0 + 5%
Over
36 000
72 001 - 108 000
1 800 + 12,5%
Over
72 000
108 001 - 144 000
6 300 + 18.75%
Over
108 000
Over
144 000
144 001 - and over
13 050 + 25%
Individuals
Non-Residents, Trusts and Estates of Deceased Persons
– Business & Employment Income Rates
Taxable Income
0 - 72 000
Tax Payable
5%
of each Pula
72 001 - 108 000
3 600 + 12,5%
Over
72 000
108 001 - 144 000
8 100 + 18,75%
Over
108 000
Over
144 000
144 001 - and over
14 850 + 25%
Individuals
Foreign Dividends received by Residents
On gross amount received
15%
Companies
Tax Rates
Resident company - manufacturing taxable income – approved
15%
Resident company - other taxable income
22%
Non-resident company
30%
Capital gains
22%
Foreign dividends
15%
Mining taxable income (excluding diamonds)
22% to 55%
International financial services centre company
15% or 22%
Companies
Capital Allowances
Straight Line
Straight line annual allowances on plant or machinery at rates between
10% and 25% fixed by the Commissioner of Taxes:
Heavy Plant or machinery used in construction
25%
Motor vehicles and aircraft (for passenger motor vehicles, limited to
expenditure of P 175 000)
25%
Plant or machinery used directly in manufacturing or production
25%
Other plant or machinery including farming equipment
15%
Computer hardware
25%
Computer software
- off the shelf
Furniture and fittings including soft furnishings
100%
10%
Companies
Capital Allowances (cont..)
Statutory Straight Line Allowances:
Industrial buildings
(Including hotels)
Commercial buildings
- initial allowance
- annual allowances
- annual allowances
Farm buildings, improvements, water supplies and other farm capital
Works
25%
2,5%
2,5%
100%
Companies
Self Assessment Tax (SAT)
Companies are required to pay quarterly SAT installments on a financial
year basis. Companies with annual income tax liabilities of less than P
50 000 may rather elect to make one payment within 4 months of end
of the financial year. SAT is optional for non-corporate tax payers.
Capital Gains Tax
Individuals
Taxable Income
Tax Payable
0
-
18 000
0
18 001
-
72 000
0
+
5%
over
18 000
72 001
-
108 000
2 700
+
12,5%
over
72 000
108 001
-
144 000
7 200
+
18.75%
over
108 000
144 001
-
and over
13 950
+
25%
over
144 000
Capital Gains Tax
Resident Company – 22 %
Non -Resident Company – 30 %
Capital Gains Tax
Inclusions – disposal of:
•Any moveable or immovable property in Botswana
•Any shares or debentures of a company
•A residential property
•Assets of an IFSC company situated in Botswana
Examples of exclusions:
•Principal primary residence of an individual who has owned the residence for at least 5 years prior to the date
of disposal
•Any property or business (other than land and buildings) in respect of which capital allowances are claimed
•Shares, units or debentures of a resident public company which is traded on the Botswana Stock Exchange and
at least 49% of its equity shares are released for trading on the Botswana Stock Exchange.
•Any property of a company carrying on the business of mining
Capital Gains Tax
Deductions:
•Cost of acquisition of the property
•Cost of improvement of the property
•Expenditure incurred in the disposal of the property
•The indexed cost of acquisition, in respect of disposal of immovable property
•In the case of the disposal of any other property (other immovable property) 25% of the capital gain
•Any brought forward capital losses from the previous tax year
Roll over relief:
•Relief is available where a person reinvests the original investment plus all or part of the gain from the disposal
of the immovable property
•The gain reinvested will be considered for capital gains tax purposes only upon the disposal of the property in
which it was reinvested
•The portion of the original gain not reinvested is subject to capital gains tax in the tax year in which it arose
•The re-investment to be made within one year of the disposal of the property
Capital Transfer Tax
•Where the donee is a company – 12.5%
•Where the donee is other than a company:
Taxable Income
Tax Payable
0 - 100 000
0
+
2%
100 001 - 300 000
2 000
+
3%
over
100 000
300 001 - 500 000
8 000
+
4%
over
300 000
16 000
+
5%
over
500 000
500 001
and over
Other Income Tax Rates
Unapproved Pension and Provident Funds on Investment Income
Standard Rate
7,5%
Transfer Duty – Immovable Property
Urban property transfers (waived where VAT is payable)
5%
Agricultural land transfers - citizens (waived where VAT is payable)
5%
Agricultural land transfers - non-citizens (duty equivalent to VAT payable is waived)
30%
The first P 200 000 of the purchase price in the case of a citizen of Botswana is exempt from transfer duty
Residents
Non-residents
3%
3%
10%**
15%
5%
5%
10%
10%
10%
10%
12%
10%
10%
7,5%
10%
10%
15%
10%
10%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
5%
7.5%
15%
10%
10%
15%
15%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
12,5%
10%
10%
10%
10%
10%
10%
10%
10%
10%
7,5%
10%
10%
15%
15%
10%
10%
10%
10%
7,5%
7,5%
10%
Payments to
Entertainers and
Sports persons
Management or
Consultancy fees
Commercial
Royalties
Commission
Dividends
Rent
Interest
Construction
contract payments
Withholding Tax
10%
Treaty Countries
Barbados
France
India
Lesotho
Mauritius
Namibia
Russia
Seychelles
South Africa
Swaziland
Sweden
United Kingdom
Zimbabwe
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
* 5% applies where beneficial owner is a company with at least 25% shareholding
** final tax where interest is earned from deposits with financial institutions.
5% /7.5%*
5% /7.5%*
7.5%
7.5%
5% /7.5%*
7.5%
5% /7.5%*
5% /7.5%*
7.5%
7.5%
7.5%
5% /7.5%*
5% /7.5%*
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
10%
Value Added Tax (VAT)
•VAT is imposed comprehensively on an end-user basis at the rate of 12% on
standard rates supplied. Certain specified supplies are either zero rated or exempt
from VAT – including certain farming implements, such as ploughs, planters and
harvesters
•Registration is mandatory where 12 months turnover is expected to be P500 000 or
more
•VAT is payable by the importer of services not utilised in the making of taxable
supplies
•Input tax includes:
•Transfer duty payable under the Transfer Duty Act
•Any tax deemed to have been paid in respect of supplies of second hand
goods
Value Added Tax (VAT)
•Input tax claims should be made within the following time limits:
•For those who file monthly returns, within a period of four months
•For those who file returns every tow months, within two tax periods
•For tax paid in respect of imports, within two tax periods
•Late VAT returns penalty: the greater of P 50 per day or 10% of the tax due ( nil and
refund vat returns – penalties limited to P5,000)
•Late payment of VAT: compound interest at 1.5% per month or part thereof on both
outstanding tax and any penalties charged
•VAT refunds – Interest at 1% per month or part of a month is payable if the refund is not
made within two calendar months of the due date of the return (1 month for IFSC
companies, approved manufacturers and exporters)
Value Added Tax (VAT)
Zero-Rated Supplies:
Exports of goods and services
International transport services
Sorghum, maize meal, millet, wheat, sugar and flour for human consumption
Fertilizers, some pesticides and farming tractors
first 5,000 liters per month of water supplied to a residential property (some exceptions apply)
Supplies to the Head of State
Exempt Supplies:
Prescription drugs and condoms
Residential accommodation
Education at approved institutions
Donations
Public medical services
Non-fee based financial services
Passenger transport (excluding the transportation of tourists)
farming implements such as ploughs, planters and harvesters
Interest & Penalties
Interest/penalty
Charge
Interest – late payment of tax
1.5% per month or part of a month, compounded monthly
Interest – on penalties arising from failure to submit a return
1.5% per month or part of a month, compounded monthly
Penalty – failure to register
P10,000 and above
Penalty – failure to provide information
P10,000 and above
Penalty – subsequent failure to provide information
P20,000 and above
Penalty – failure to submit VAT returns
P50 per day or 10% of tax payable – whichever is greater
Penalty – failure to submit income tax return
P100 per day up to a maximum not exceeding tax payable
Important Dates - summary
Self-assessed tax (SAT)
- equal quarterly installments beginning 3 months from start
of accounting year i.e. 25% (with an 80% accuracy) of the estimated tax liability
(no quarterly payments are required if total company tax charge is less than
P50.000)
Final payment of
income tax (company)
Annual income tax return
submission (company)
Annual income tax return submission
(individual)
- 4 months from the end of the accounting year
PAYE / WHT
- 15th of the following month
Annual return of WHT
- 31 July following the tax year
VAT returns and Payments
- 25th of the month following the VAT period
- 4 months from the end of the accounting year
- 30 September following the tax year
Contact Information
Email - [email protected]
Francistown
2413607
Plot 337/8, Khama St/Selous Ave, Francistown
Maun
6860506
Plot 529, Mophane Ave, Maun