Lex Africa Guide 2012 Full - Afrer.org

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BOTSWANAARMSTRONGS ATTORNEYSFirm InformationWebsite address: www.armstrongs.bwLanguages spoken: EnglishContacts: John Carr-Hartley and Sipho ZigaTelephone: +267 395 3481Fax: +267 395 2757Email: john@armstrongs.bw and sipho@armstrongs.bwCountry InformationBotswana is a landlocked country with a population of2 038 288. The urban population accounts for about 50% of thetotal population.Type of GovernmentBotswana is a stable multiparty democracy.Latest GDP FiguresReal gross domestic product (GDP) increased by 12.4% in thesecond quarter of 2011 from 4.2% in the same quarter of 2010.The increase mainly resulted from the construction and miningsectors, which increased by 28.3% and 23.7% respectively.Inflation RateThe average year on year annual inflation rate as at October2011 was 8.8% compared with 8.2% in 2009.Investment ClimateBotswana is a stable democracy with an open economy.Implementation of the 2002 Southern African Customs Union(SACU) Agreement and the Southern African DevelopmentCommunity (SADC) Free Trade Area (launched in 2008) willcontinue to be pursued, including the establishment of thenecessary institutions and harmonization of industrial and tradepolicies. The SADC Free Trade Area involves zero tariff levels for85% of all goods traded among member states. Liberalization oftariffs on the remaining 15% of goods (considered to be sensitiveproducts) is expected to be completed in 2012. TheGovernment is making substantial efforts to create a favourableclimate for private and foreign investment by imposing minimalrestrictions on foreign investors and the privatisation of stateentities.The Botswana Export Development and Investment Authority(BEDIA) was established to operate a one-stop investor servicecentre to assist investors with permits, licences, utilitiesconnections, land and provide assistance with other regulatoryissues.BEDIA continues to seek export markets for locally producedgoods and to promote investment opportunities in Botswana.BEDIA has selected niche industries such as manufacturing oftextiles and garments, jewellery, tannery and leather products,glass and IT products, as these can be undertaken using locallyavailable raw materials. BEDIA procures factory shells and landto accommodate investors in such industries.Forms of BusinessPrivate or public limited liability companyExternal company (branch of foreign company)Company limited by guaranteePartnershipCommon law trustSole proprietorshipSocieties being associations of persons.The Companies Act provides a simplified framework for theincorporation of companies and other legal entities (like closecorporations) and imposes strict obligations on corporategovernance.Formation of a CompanyNon-residents may hold shares in a Botswana company. Twoshareholders are required and one may be a nominee for theother. One resident director is required for a private companyand two resident directors for a public company. The registeredoffice must be in Botswana. Auditors are required and must becertified public accountants practising in Botswana. Companysecretarial duties are performed by secretarial servicescompanies, most of which are attached to accounting firms.Companies are usually registered within 4 weeks.Exchange ControlsBotswana has abolished all exchange control regulations andforeign investment is welcomed. Dividends and capital gains onequity investments received from a foreign source are, subjectto tax being paid, freely remittable out of Botswana in foreigncurrency. Interest on and capital of foreign loans is freelyremittable in foreign currency. Upon disinvestment, a nonresidentmay remit capital in foreign currency. Foreign currencycan be held and earn interest with a bank in Botswana.Botswana securities denominated in a foreign currency may bepurchased using a foreign currency without converting thatforeign currency into Botswana Pula and the proceeds of suchBotswana securities may be received in foreign currency andfreely remitted anywhere in the world without notification tothe Central Bank.TaxationTax is levied on income that is actually derived or deemed to bederived from Botswana sources.Foreign source dividends and interest are deemed to be from aBotswana source and are taxable on accrual. A long awaitedsimplification of the tax system which involves the abolition ofthe two-tier corporate tax system came into effect on 1 July 2011and introduced a single corporate tax system with a flat tax rateof 22%, effective from the 2012 tax year.The 2011 tax year will be the last year that companies maygenerate any Additional Company Tax (ACT). The singlecorporate tax rate of 22% (with no set off ofwithholding tax on dividends againstcorporate tax) will apply in respect of the2012 tax year and all future tax years. All ACTmust be utilised before 30 June 2011, afterwhich any unutilised ACT will fall away.7
8The corporate tax rate for non resident companies has beenincreased from 25% to 30%. This means that it will now be moretax efficient for foreign investors to operate in Botswana througha subsidiary as opposed to a branch or external company.The tax rate for manufacturing and International FinancialServices Centre (IFSC) companies is 15% in respect of approvedactivities. These rates do not apply automatically and must beapplied for and approved by the relevant authorities.Withholding TaxWithholding tax has been reduced from 15% to 7.5% on alldividends paid from 1 July 2011.Payments of rent to a resident or non-resident for the use of anyland or building or both are subject to withholding tax at the rateof 5% unless:the rent is paid by an individual and such rent is not claimedor will not be claimed as a business expenditure by suchperson;the payment of rent is less than P36 000 during any taxyear;the rent is paid in respect of accommodation in a hotel,motel, guest house or lodge;the recipient of such rent is a person exempt from taxation.The amount of any surplus amount paid by a mine rehabilitationfund to a person who contributed to such fund is subject towithholding tax at 10%. Such withholding tax will represent afinal charge to tax and the amount paid by the minerehabilitation fund will not form part of the recipient'sassessable income.Payment of commission or brokerage for or in connection withthe procurement of goods or services is subject to withholdingtax at the rate of 10%. Such withholding tax will only apply topayments in excess of 36 000 Pula in any tax year.The exemption from withholding tax on commercial royaltypayments made to non-residents in respect of the leasing ofaircraft has now been withdrawn.Capital Gains TaxTax is payable on capital gains at the income tax rate of theparticular tax payer in respect of:immovable property as to 100% of the gain, which iscalculated by deducting from the sale price the cost ofacquisition and the cost of any improvements. A prescribedescalator factor is applied to such costs;other movable property, including shares in a company, asto 75% of the gain which is calculated by deducting fromthe sale price the cost of acquisition of the property sold.Capital gains tax is however not payable on the sale of shares in apublic company as defined in the Income Tax Act.Double Taxation AgreementsBotswana has double taxation agreementswith South Africa, United Kingdom,Zimbabwe, Seychelles, Sweden, Mauritius,France, Lesotho, Swaziland, Barbados andRussia.VATValue Added Tax (VAT) is levied at 12% and came into effect on1 April 2010.Import/Export Incentives/SupportThe Botswana Export Development and Investment Authority(BEDIA) facilitates the establishment of export-orientedenterprises and selected services.Monetary PolicyImplementation of monetary policy is entrusted to the CentralBank of Botswana. Price stability is the main goal of monetarypolicy using indirect policy instruments and a framework forforecasting inflation.Legal SystemThe legal system of Botswana is a mixture of Roman-Dutch andEnglish common law principles. There are also local systems oftribal law and custom in rural districts, which govern everydaydisputes and property relations but are subordinate to statutorylaw. The superior courts in Botswana are the Court of Appeal,the High Court and the Industrial Court.Intellectual PropertyIntellectual property is protected by the Industrial Property Actwhich gives effect to various international conventions, treatiesand protocols to which Botswana is a party.Financial Services/InsuranceBanking services are regulated by the Banking Act, the Bank ofBotswana Act and the National Clearing and Settlement SystemsAct with the Central Bank as the regulatory authority.Legislation has been introduced which renders the writing ofcheques against insufficient funds an offence. Arrangementshave been made linking all ATMs in the country via the VISAswitching network.Anti-money laundering legislation was adopted in 2003 in termsof which every financial organisation is required to effect antimoneylaundering measures. Non-bank financial services areregulated by the Non-Bank Financial Institutions RegulatoryAuthority.Key Strategic Growth Initiatives by Government/PrivateSectorsThe Government accepts that growth will depend largely on thecountry’s success in enhancing the performance of the nonminingsectors. Key to this goal is investment in technical skillsand resources. Botswana has substantial funds ready for suchinvestments.The Government realises that sustainable employment creationwill require local and foreign investment, concentrating onSouthern Africa and development in key niche areas whereBotswana has a natural advantage (for example tourism).The Government remains committed to privatisation and thePrivatisation Policy adopted in 2002 has been reinforced by theapproval of a Privatisation Master Plan. The overriding goal ofthe policy is to improve effectiveness in the delivery of services,raise Botswana's growth potential and competitiveness whileincreasing entrepreneurship and citizen participation in theeconomy.
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Page 16 and 17: three or more shareholders. The boa
Page 18 and 19: turnover of each business. There ar
Page 20 and 21: CENTRALAFRICANREPUBLICJOHN FFOOKS &
Page 22 and 23: In 1995, Socatel introduced the CAR
Page 24 and 25: egistration form with the the Finan
Page 26 and 27: COTE D’IVOIREANYRAY & PARTNERS LA
Page 28 and 29: investments signed with Germany, It
Page 30 and 31: EGYPTNADOURY & NAHAS LAW OFFICESFir
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Page 34 and 35: employee and if the employee is lia
Page 36 and 37: protected during the author’s lif
Page 38 and 39: occurred). The tax may be paid in t
Page 40 and 41: law in the realm of marriage and su
Page 42 and 43: capital gains tax applies subject t
Page 44 and 45: Exchange ControlsThe Exchange Code
Page 46 and 47: Sole trader.SACRANIE, GOW & CO.MALA
Page 48 and 49: MALIJOHN FFOOKS & CO PROJECT FINANC
Page 50 and 51: Membership of International and Reg
Page 52 and 53: the financial year (applicable to c
Page 54 and 55: Tax holiday of freeport operators w
Page 56 and 57: MOZAMBIQUECOUTO, GRAÇA & ASSOCIADO
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protected by this legislation which
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Treaties and Bilateral AgreementsNa
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Traditional and customary courts he
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General Application in force in Eng
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Economic Co-operation and Developme
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SENEGALMAME ADAMA GUEYE & ASSOCIÉS
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South African business and Governme
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client” information gathering req
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use of interest rates or usury tran
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Khair Port.Sudan has a modern road
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Trade and IndustryTextiles.MiningCo
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facing unprecedented decline in dem
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UGANDAKATENDE, SSEMPEBWA & COMPANY
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exemption for interest paid abroad
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estrictions on externalising profit
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ZIMBABWESCANLEN AND HOLDERNESS LEGA
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