Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Investment Guide - Botswana The information contained in this report is of a general nature and is not intended to address the circumstances of any particular individual or entity. While the information is accurate as at date hereof, there can be no guarantee that the information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. TABLE OF CONTENTS General Overview__________________________________________________________________________________4 Political Overview___________________________________________________________________________________5 Economic Overview_________________________________________________________________________________5 Regulatory Environment_____________________________________________________________________________5 Bilateral and Multilateral Treaties______________________________________________________________________6 Investment Promotion_______________________________________________________________________________6 Institutions Governing Investment Promotion 6 Investment Incentives 6 Tax_______________________________________________________________________________________________7 Income Tax 7 Withholding Tax 7 Capital Gains Tax 7 Other Tax 7 Transfer Pricing and Thin Capitalisation 8 Stamp and Transfer Duty 8 Accounting Principles_______________________________________________________________________________8 Industrial Relations_________________________________________________________________________________8 Expropriation______________________________________________________________________________________9 Corruption________________________________________________________________________________________9 Competition and Consumer Protection________________________________________________________________9 Legal Forms of Incorporation in Botswana______________________________________________________________9 Industry Sectors____________________________________________________________________________________10 Agriculture10 Banking and Financial Services 11 Energy11 Manufacturing11 Mining11 Telecommunications11 Water12 Intellectual Property_________________________________________________________________________________12 Dispute Settlement_________________________________________________________________________________12 Investment Guide 2015 - Botswana General Overview 4 Capital City: Gaborone Currency: Botswana Pula (BWP) Languages: English and Setswana Government: Parliamentary Republic President: Lieutenant General Seretse Khama Ian Khama Population: 2.039million (2014 estimate) GDP: US$14.78billion (2013 estimate) Timezone: GMT + 2 Investment Guide 2015 - Botswana Political Overview Botswana is considered to be one of Africa’s most stable countries and the continent’s longest continuing multi-party democracy. The governing party has governed since the country gained independence in 1966. The President is both the head of state and the head of government. The next elections are due in October 2019. According to the 2014 Mo Ibrahim Index of African Governance, Botswana’s Government was ranked 3rd in the continent, and it is considered one of the top five African nations in terms of ‘safety and rule of law’, ‘human development’ and ‘sustainable economic opportunity’. Economic Overview Since independence, Botswana has consistently been one of the world’s best-performing economies. Botswana has transformed itself, from a chronically poor country to a dynamic economy, encouraging private enterprise. In addition to political stability, sound management and fiscal discipline, the diamond industry has been responsible for much of Botswana’s economic expansion. Diamond mining currently accounts for one third of GDP and over 70% of export earnings. Efforts are being made to diversify the economy and consumer services, real estate, financial services and tourism are all regarded as important emerging sectors. Regulatory Environment Botswana is open to foreign investment and trade, with a straight-forward and transparent regulatory environment promoting competitiveness and flexibility. In the 2014 Index of Economic Freedom, Botswana is ranked as the 27th freest economy in the world, and the 2nd freest out of 46 countries in sub-Saharan Africa. It ranks well above regional and world averages. Several attempts have been made to diversify the economy away from diamond production and attract foreign investment. These include the introduction of competitive corporate tax rate of 22% (tax rates remain among the lowest in Southern Africa) and the streamlining of the application process for business ventures. Botswana’s independent judiciary provides strong protection of rights. Foreign exchange controls were abolished in 1999, allowing the repatriation of profits and direct investment from Botswana without restriction. 5 Investment Guide 2015 - Botswana Bilateral and Multilateral Treaties Botswana is a member of the World Trade Organisation, the African Caribbean Pacific-European Union Partnership Agreement, the Southern African Global Competitiveness Hub, the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). Botswana is also a member state of the Multi lateral Investment Guarantee Agency formed by the World Bank Group whose mission is to promote direct foreign investment into developing countries to help support economic growth, reduce poverty and improve lives. Botswana has concluded double taxation agreements with Barbados, China, France, India, Mauritius, Mozambique, Namibia, Russia, Seychelles, South Africa, Swaziland, Sweden, United Kingdom, Zambia and Zimbabwe. Double taxation agreements with Belgium, Luxembourg, Malawi and Tanzania are awaiting ratification. Investment Promotion Institutions Governing Investment Promotion The Botswana Investment and Trade Centre (BITC), is an autonomous organization, mandated by an Act of Parliament to encourage, promote and facilitate the establishment of export-orientated enterprises, work with the Government to ensure that the country has a conducive investment climate and recommend certification of international financial services centre companies. BITC also assists investors to secure licences, work and resident permits, visas, utility connections and infrastructural facilities such as land and factory space in the shortest time possible. After company startup, BITC continues to provide services addressing any problems encountered. The granting of investor support from BITC is based on whether the proposed project is in line with the Government’s diversification plans, contributes to the growth of a priority sector showing high growth potential, and provides employment and training opportunities to Botswana citizens. Investment may be made by way of proprietorship, partnership, branch (external company) or company incorporated in Botswana. Trading activities require licensing. The type of licence is industry specific and issued in terms of industry specific legislation. Investment is also assisted through the following: • • • National Development Bank Citizen Entrepreneurial Development Agency Botswana Development Corporation (BDC) Investment Incentives Notable investment incentives include an incentive for the manufacturing industry in the form of a grant, at a reduced rate of 15% in terms of a Manufacturing Order issued by the Minister. Application can be made for a tax agreement between the Government (acting through the Minister of Finance) and a taxable company, with a project which promotes the economic development of the country. The agreement may provide for the exemption of any dividend, interest, royalty, management or consultancy fee paid by the company to a non-resident, and relief from any duty, responsibility or liability under the Income Tax Act. Such agreement requires the approval of Parliament for its effect. 6 Investment Guide 2015 - Botswana Companies certified by the Minister on recommendation of BITC, as international financial services centre companies not doing business in local currency in Botswana have the following additional incentives: • A corporate tax rate of 15%; • Exemption from withholding taxes in Botswana; • Exemption from tax on dividends received from foreign source where the company holds 25% or more of the equity; • Exemption from capital gains tax in Botswana; • Credits for withholding taxes levied elsewhere; and • Access to Botswana’s Double Taxation Treaty network. Tax Income Tax Botswana’s tax regime is based on “source”– resident and non-residents are liable to tax on income sourced, or, deemed sourced in Botswana. A company is tax resident if it is incorporated, or, managed in Botswana. Corporate income tax of 22% is payable by a resident company and 30% by a non-resident company on Botswana source income. Foreign source dividends, interest and business profits of foreign source are taxable when remitted to Botswana. Branches of foreign companies are taxable in Botswana on income which has its source or is deemed to be sourced, in Botswana at the rate of 30%. 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. Such tax is a final tax on dividend in the hand of the recipient. Interest paid to a non-resident is subject to a 15% withholding tax while interest paid to residents is subject to a 10% (on excess of BWP1, 950 per quarter) tax. Such tax on interest in the hands of the non-resident recipient is a final tax. There is withholding tax on royalties, management, consultancy, technical and administration fees payable to non-residents at the rate of 15%. The values of withholding tax maybe reduced in terms of a Double Taxation Avoidance Agreement, if any, between Botswana and the country of tax residence, of the recipient. Capital Gains Tax The proceeds of disposal of capital assets form part of the gross income of a taxpayer, for tax purposes. In the case of moveable assets, 75% of the disposal proceeds of the sale, minus the expenses of the sale, the cost of acquisition and expenses incurred in the acquisition, accrue to gross income. The disposal of shares listed on the stock exchange, which have been held in excess of one year, are exempt from tax. In the case of immovable assets, 100% of the gain, equal to the disposal proceeds, less the cost of the sale, the cost of improvements, if any, which improvements are indexed from the date of improvement to present, cost of acquisition and expenses incurred when the asset was purchased indexed from the date these were incurred to the present, accrues to gross income. Other Tax Property Tax is charged on developed land, although tax holidays may be granted for new buildings and those located in specified development areas. 7 Investment Guide 2015 - Botswana Customs and Excise Duty is payable at the rate of 10% of the value of taxable goods and services supplied in or imported into Botswana. Value Added Tax is charged on all taxable activities in Botswana at the rate of 12%. Exports and the supply of certain specified goods and services are zero rated. Withholding Tax (or PAYE) is deductible from the earnings of the employee by the employer, for which the employer is required to be registered for, with the Botswana Unified Revenue Service. An employee’s earnings include accrued salary, wages, leave pay, commission and bonus pay. Withholding Tax of 3% is chargeable on payments in respect of a construction contract. Transfer Pricing and Thin Capitalisation There are no transfer pricing rules or thin capitalisation requirements (except with respect to mining companies). Stamp and Transfer Duty There is no Stamp Duty or Capital Duty on the purchase, issuance or sale of securities. Transfer duty is levied on the transfer of immovable property at a rate of 5% on property, other than transfers of agricultural land to non-citizens, which is levied at a rate of 30% and which requires the approval of the Minister of Lands and Housing. Transfer duty is deemed input Value Added Tax and deductible from output Value Added Tax. Accounting Principles Botswana applies International Accounting Standards and International Financing Reporting Standards. Industrial Relations Botswana’s employment regulations are relatively flexible. The Employment Act [CAP. 47:01] provides basic guidelines for employment in Botswana. The legislation sets industry specific minimum wages, length of work weeks, annual and maternity leave, hiring and termination. Furthermore, the country adheres to International Labour Organisation conventions protecting worker rights, the Industrial Relations Division of the Ministry of Labour and Home Affairs is responsible for ensuring compliance with these conventions. Work and resident permits are required for expatriates seeking employment in Botswana. Work permits are generally granted only when local citizens do not possess the necessary industry specific expertise. The granting of such permits to expatriates may be made contingent upon establishment of demonstrable “localisation” efforts. The work and residence permits of senior executive expatriates companies within the international financial services centre are fast tracked. 8 Investment Guide 2015 - Botswana Expropriation The Constitution prohibits the expropriation/nationalisation of private property without compensation and the independent judiciary provides strong protection of property rights. Corruption Administrative corruption is low. The 2014 Corruption Perception Index compiled by Transparency International, ranked Botswana 31st out of 174 countries. Botswana has specific anti-corruption legislation, a dedicated enforcement unit the Directorate on Corruption and Economic Crimes (DCEC) and significant criminal penalties for acts of corruption. Overall, DCEC is regarded as an active and effective organisation. Competition and Consumer Protection Competition is regulated in terms of the Competition Act, [CAP46:09] which governs inter alia mergers and acquisitions, market inquiries which may be conducted by the competition authorities, prohibited practices such as horizontal and vertical trade agreements, price fixing, market allocation, bid rigging, restraints on production or supply, collusion and abuse of dominance. The Consumer Protection Act, [CAP42:07] provides for the protection of consumers by means of investigation, prohibition and control of unfair business practices. Legal Forms of Incorporation in Botswana The principal business entities are public or private companies with liability limited by shares, or, public, or, private companies limited by guarantee, close company and external company. The Registrar of Companies and Intellectual Property, part of the Ministry of Trade and Industry, is responsible for company incorporation, registration of business names and protection of intellectual property rights. A private company cannot have more than 25 shareholders and must have a minimum of one shareholder (if limited by shares), and one director, must be ordinarily resident in Botswana. There is no restriction on the number of shareholders in a public company but there is a requirement for a minimum of 2 directors to be ordinarily resident in Botswana. Audited financial statements must be prepared within five months and seven months of the year end, for a public and private company, respectively, and filed with the Registrar of Companies. A qualified company secretary must be appointed. The World Bank Group rates Botswana 74th out of 189 economies in terms of the ease of doing business. The table below provides a summary of the procedures and the indicative timelines and cost for setting up a trading company. 9 Investment Guide 2015 - Botswana Procedure Time to complete Cost to complete (BWP - Botswana Pula) 1 Select and reserve company name 10 days BWP 20 2 Sign the declaration of compliance of statutory requirements for incorporation before a commissioner of oaths 1 day BWP 75 3 Return the complete statutory return to the Registrar of Companies in respect of re-allotment, directors, auditors, company secretary, and registered officers 1 day BWP 2000 where registration is done by an agent 4 Register the company with the Registrar of 2-3 weeks Companies at the Ministry of Trade and Industry 5 Complete application forms for Trade licence 6 Obtain an approval of the working conditions after an inspection of company premises. As part of the licence application process the company’s premises will be inspected by the health and environmental authorities to ensure compliance with minimum standards 2 days No charge as this procedure is done by the municipal authorities (called Councils) 7 Advertise the intention of applying for a license in the official gazette 3 weeks BWP 80 8 Obtain trade licence from the, Ministry of Trade and Industry; or obtain a trading license from the Council 4 weeks Fees for licences are dependent on type of trade licence required 9 Register for Income Tax and VAT with the Botswana United Revenue Services, (BURS) and obtain the approval from the BURS for the appointment of a public officer who is in charge of tax return 10 days No charge 10 Register employees for work injury insurance 7 days No charge BWP 360 (registration of constitution) Industry Sectors Agriculture Agriculture meets only a small portion of food needs and contributes a very small amount of GDP (1.9%). However, despite its low significance to GDP, agriculture remains an important part of the economy as a large portion of the population lives in rural areas and is dependent on subsistence crop and livestock farming. 10 Investment Guide 2015 - Botswana Banking and Financial Services Botswana’s competitive banking system is one of Africa’s most advanced and it contributes to 7.4% of the GDP. The commercial banks in Botswana are small by international standards. Currently, there are eleven commercial banks, namely, African Banking Corporation of Botswana Limited (trading as “Banc ABC”), Bank Gaborone Limited, Bank of Baroda (Botswana) Limited, Bank of India (Botswana) Limited, Barclays Bank of Botswana Limited, Capital Bank Limited, First National Bank of Botswana Limited, Kingdom Bank Africa Limited, Stanbic Bank Botswana Limited, Standard Chartered Bank Botswana Limited and State Bank of India (Botswana) Limited. The Government is involved in banking through state-owned financial institutions such as the NDB, Botswana Building Society, Botswana Savings Bank, addressing the main needs of citizens. In addition, the International Services Centre was set up in 2003 to establish and develop the country as a centre for cross border financial and business services into Africa, and aimed at increasing Botswana’s status as a financial hub. The majority of financial services are in the areas of international banking, funds administration, corporate treasury management, captive insurance operations, venture and private equity investment and investment holding companies. In addition, credit is allocated on market terms, although the Government also provides subsidised loans. Global standards in the transparency of financial policies and banking supervision are generally adhered to in Botswana. Energy The state-owned power company, Botswana Power Corporation, imports approximately 75% of the country’s energy needs from South Africa. Expansion of Botswana’s single power station, Morupule Power Station, is currently ongoing and aimed at reducing Botswana’s dependence on power from South Africa. Manufacturing The manufacturing sector accounts for an estimated 4.2% of GDP. As most of Botswana’s exports are in unprocessed form, the Government has sought to encourage the establishment of processing and manufacturing companies and has setup agencies such as BITC to encourage the export of goods manufactured within the country. The BDC promotes industrial development through project identification, joint venture partnerships and site developments for small manufacturers. Mining Diamond mining accounts for approximately one-third of Botswana’s GDP and approximately 70% of its export earnings and 34.7% of the country’s GDP. However, the industry is capital intensive and accounts for less than 5% of private sector employment. Mining activities, although not as extensive, are also conducted in respect of coal, copper, gold, nickel and soda ash. Coal-bed methane gas has been discovered in the north-eastern part of the country; however, development of these gas fields has been slow. Telecommunications The Department of Telecommunications was established to develop and implement infrastructure development strategies for the telecommunications. A major role is to develop the national fibre backbone infrastructure and establish international connectivity with the rest of the world through projects such as the West Africa Festoon Fibre System and the East Africa Sea Cable System. 11 Investment Guide 2015 - Botswana Water The Water Utilities Corporation, a corporate body wholly owned by the Government, was established in terms of the Water Utilities Act with a mandate to provide potable water and waste water resources country wide and for developing the nation’s water resources. Botswana does not have a formal policy framework for Trans-boundary natural resource management. However, the country has shown its commitment to promote equitable and beneficial use of international watercourses; Botswana has ratified the Revised Protocol on Share Water courses in the SADC and the International United Nations Convention on the Non-navigational Uses of International Watercourses (SADC2003). Intellectual Property Botswana is a member of the World Intellectual Property Organisation and party to the Berne and Paris conventions, the Hague Agreement, the Madrid Protocol, Patent Cooperation Treaty and the African Regional Intellectual Property Organisation. Protection of intellectual property rights in Botswana has improved significantly. Botswana is ranked 31st out of 97 countries in the 2014 International Property Rights Index, second only to South Africa among sub-Saharan Africa countries. The Registrar of Companies and Intellectual Property, is responsible for the protection of intellectual property rights. Dispute Settlement The Botswana legal system is largely based on Roman-Dutch law. The Constitution provides for an independent judiciary and the legal system is sufficient to enforce secure commercial dealings. During the past two years, the judiciary has brought down the average time to conclude civil cases from more than 20 months to fewer than 11 months and improvements continue to be made. Furthermore, residents and non-residents have equal access to the judicial system. Botswana is also a member of the International Centre for the Settlement of Investment Disputes and the Multilateral Investment Guarantee Agency. It consequently accepts binding international arbitration of investment disputes. As a member of the New York Convention (Convention on the Recognition of Foreign Arbitral Awards), Botswana recognises and enforces foreign arbitral awards given in countries which are signatories to the Convention. 12 Collins Newman & Co. A: Dinatla Court, Plot 4863 P: P.O. Box 882, Gaborone, Botswana T: +267 395 2702 F: +267 391 4230 E:[email protected] ALN Head Office A: Apollo Centre, 2nd floor, Wing A, Ring Road Parklands. P: P.O. Box 200-00606, Sarit Centre, Nairobi, Kenya T: +254 20 364 0000, +254 703 032 000 E:[email protected] W:www.africalegalnetwork.com