09 Apr 2026

Presenting the Income Tax Bill recently, Acting President and Minister of Finance, Mr Ndaba Gaolathe, indicated that the introduction of a Repatriated Profit Tax sought to ensure parity in the taxation of profits earned by foreign entities operating in Botswana through branches and those earned through locally incorporated subsidiaries, as well as eliminate what looked like discrimination between resident companies and non-resident companies.

Minister Gaolathe said the Bill also introduced general geographic source-of-income rules for Botswana, under which any income not expressly identified as Botswana-sourced would be treated as foreign-sourced.

The approach, the minister said aligned Botswana’s rules with internationally recognised source-based taxing principles reflected in tax treaties.

“Currently, the Income Tax Act imposes tax on gross income that has accrued or is deemed to have accrued from sources situated or deemed to be situated in Botswana.

The new rules therefore modernise the sourcing principles and provide greater clarity and consistency,” he said.

He added that the Bill would also introduce a simplified income tax regime for individuals and sole proprietors operating small businesses with annual gross income below P1 million and who were not registered for Value Added Tax, with the aim to ease compliance burden on micro and small enterprises. 

Currently, he said, all businesses, including sole proprietors, must maintain comprehensive business records and retain them for extended periods, a requirement that could be onerous for small operators who may lack financial resources to secure professional support for record-keeping and reporting under the standard income tax system.

Therefore, he said the Bill proposed that eligible businesses be taxed using the individual marginal tax rate structure and allow them to benefit from the zero-tax bracket on taxable income up to P48 000. Similarly, Mr Gaolathe highlighted that the Bill further introduced a variable income tax rate for diamond mining companies in which government had no ownership interest. Under the current framework, all mining companies except diamond mining companies, were subject to a variable income tax rate of up to 55 per cent.

He said extending such regime to non-government-owned diamond mining operations promoted equity in the taxation of mining companies, ensured fairer sharing of revenue and maintained Botswana’s competitiveness as an investment destination.

He further informed Parliament that the Bill introduced the deduction rules to the three phases of mining, including prospecting, development and rehabilitation stage to recognise that risks and profitability differed across phases.

Debating the Bill, Mogoditshane West legislator, Mr Galenawabo Lekau said though in support of the Bill, it was nonetheless disturbing for Botswana to permit free and full repatriation of profits, dividends and capital, as there were no foreign exchange controls. Mr Lekau said government should put measures in place and guard against foreign traders who declined electronic funds transfers. “Some enterprises in the retail industry have a way of evading paying both VAT and tax through accepting cash transactions only, thus government is losing out a lot on tax and VAT collection,” he said. Francistown West MP, Mr Ignatius Moswaane, urged for an income tax regime with a progressive tax system that subjected high earners to higher tax rates. Mr Moswaane said the progressive tax system was one way of ensuring that wealthier taxpayers contributed more to government revenue than the less wealthy community members. ends