namibia and botswana - pwc · 2019-05-09 · •namibian law is rooted in south african legislation...

Doing business in Africa:Namibia and BotswanaApril 2019

Agenda

1. Why this seminar?2. Introduction to the PwC Africa Desk3. Doing Business in Namibia4. Doing Business in Botswana5. Q&A

2DbiA Namibia and Botswana – April 2019

Why this seminar

Africa continues to be a region with vast unexplored potential.

This seminar shall provide some insight on doing business in SSA, particularly Namibia and Botswana, what this area has to offer, and the risks investors should be aware of.

4

Republic of Congo

Seminars so far

Ghana

Angola (2x)

Nigeria

Botswana (2x)

Ethiopia (2x)

Kenya (2x)

Mozambique (2x)

Namibia (2x)

Rwanda

South Africa

Tanzania

Zambia (2x)

Mauritius

Seychelles

Cameroon

Malawi (Republic of)


PwC Africa Desk

The PwC presence in Africa

In Africa

• Member firms in 34 countries with over 9,000 professional staff.

• We have the largest footprint of professional services on the African continent.

• All our African firms are locally-owned.

• Provide a range of professional business advisory services to the public and private sectors throughout the continent.

• Committed to the development and prosperity of the African people and economies.


The Africa CoordinationCentre (ACC)

• The ACC acts as a one-stop shop for clients engaging in cross-border transactions across Africa, ensuring the smooth delivery of tax services.

• The Centre is staffed by analysts with multi-country experience, who speak 5+ languages fluently, including English, French, German and Portuguese.


Thought leadership – Afritax Newsletter


How the Africa Desk can support you

Managing cross border engagements with one single point of contact.

Identification of right subject matter experts and oversight of high quality advice.

Proactive regular updates on new developments in engaged countries.

Central contact for quick technical guidance.

Guidance on business practices and experiences when dealing with other African countries.

Coordinating thought leadership pieces and proposals including multiple territories.


Africa Desk Team-Johannesburg

Alan Seccombe

Partner

T: +27 11 797 4110

E: [email protected]

Fabio Henriquez

Manager

T: +27 11 797 5900


Ayuk Takor

Manager

T: +27 11 287 0741



Africa Desk Team-Cape Town

Charl du Toit

Partner

T: +27 21 529 2367


Asif Joosub

Associate Director

T: +27 21 529 2305



Doing business in Namibia

Agenda

3.1. Country Context

3.2. Business Vehicles

3.3. Legal and labour

3.4. Tax Framework

3.5. Budget Speech 19/20

3.6. Key Considerations

3.7. Contacts


Country Context

Political

• Namibia has strong democratic foundations;

• SWAPO is the ruling party in Namibia, since independence in

1990;

• The President is elected by direct popular vote for a term of five years and can be re-elected for a second term of office;

• His Excellency Dr. Hage G. Geingob, is the 3rd and current

president of the Republic of Namibia.

• Cabinet consists of the President, the Vice-president, the Prime

Minister, Deputy Prime Minister and such other Ministers from

the members of the national Assembly. There are currently 26 Cabinet Ministers.

• Namibia has a stable political environment.

Country Context

16Proprietary and confidential. Do not distribute.DbiA Namibia and Botswana – April 2019

Socio-economical

• Namibia is the 34th largest country in the world, with a 824,292

km² surface area;

• The capital city of Namibia, is Windhoek and the currency in

circulation is the Namibian Dollar (NAD);

• Namibia has an estimated population of 2,533,794 (The World

Bank, 2017);

• There is still a significant divide between the high income class

and lower income class, within Namibia;

• Namibia falls within upper-middle-income economies for income per capita;

• Namibia’s repo rate currently stands at 6.75% and the prime rate at 10.5%;

• The average inflation rate currently stands at 4.7% (Bank of Namibia, 2019); and

• Namibia ranked 107th out of 190 countries, for ease of doing

business (The World Bank Group, 2019

http://www.worldbank.org/content/dam/doingBusiness/media/Ann

ual-Reports/English/DB2019-report_web-version.pdf)

Country Context


Socio-economical

• Main exports include diamonds and uranium;

• The main industries in Namibia are mining, renewable

energy, manufacturing, fishing, agriculture and tourism;

• Key trading partners are the South African Customs

Union, South African Development Community and

European Union;

• There is a framework for national development –

‘Vision 2030’;

• Windhoek ranks 196th out of 209 cities in the global

cost of living index (Mercer’s Annual Cost of Living

Survey 2018)

• There has been significant developments in terms of

renewable energy plants, agriculture (construction of

the Neckartal dam) and the Port of Walvis Bay

(extension and improvement of harbour).

Country Context


Business Vehicles

2.1 Types of Entities 2.2 Company vs Branch

Business Vehicles


1. Public or Private

Company2. Branch of a Foreign

Company

3. Sole Proprietor 4. Partnerships,

including joint

ventures

Types of entities

21

5. Close Corporation 6. Business Trust

DbiA Namibia and Botswana – April 2019

Step 1: BIPA

Business and

Intellectual Property

Authority

• Home of Business

and IP

Registrations,

Administration and

Regulations in

Namibia.

• In an effort to

improve service

delivery and ensure

the effective admin

of business and

intellectual property

rights (IPRs).

Business Entities Incorporation

Step 2: Inland Revenue/NAMRA

Ministry of Finance

• To administer the tax laws in an efficient and effective manner to maximize State Revenue from internal taxation sources.

• Recently implemented the ITAS online e-filing system, in improving administration of taxes

Step 3: Social Security Commission

Social Security Act 34 of 1994

• To professionally administer the Funds for the benefit of its members and their dependents. Accordingly, the administration of Funds involves the collection of contributions, registration of members

Step 4: Relevant governing bodies/authorities

Certain trades may require registration or application.

• Namibia Tourism Board

• Namibia Qualifications Authority

• Namibian Competition Commission

• Communications Regulatory Authority of Namibia

Step 5: Local

municipal

requirements

Your business may

require a fitness

certificate in order to

trade or operate from

a specific location.

• City of Windhoek

(fire brigade

building inspection)


Business VehiclesCompany versus Branch

Item Distinguishing factor Company Branch

1 Legal personality Yes That of parent company

2 Tax personality Yes Yes

3 Liability Limited to shareholding Limited to shareholding

4 Number of shareholders 1 up to 50 1 up to 50

5 Incorporation/set up costs Lower Higher

6 Stakeholders perception Long term presence Short term presence

7 Audit requirements Mandatory Mandatory (Separate tax calculation)

8Taxation of dividend distribution (to non resident) Varies between 10% and 20%

Possible double taxation agreement relief

from withholding tax (NRST)

9 Liquidation/business closure Complex Complex

10 Annual duties Based on local share capital Based on foreign share capital

11

Shareholders/Directors requirements No specific requirements

All shareholders and directors of the

foreign company, must be shareholders

and directors of the branch.


Example

Namibian Border

Holding

Company

Subsidiary

Company

Namibian Private Company Scenario

Branch Scenario

Foreign

Entity


Legal and Labour

3.1 Legal system at a glance 3.2 Labour

Legal and labour

26

3.3 Bank of Namibia Requirements


Legal system at a glance

• Namibian law is rooted in South African legislation and

legal principles;

• Judiciary operates with total independence;

• The Government is committed to a free market economic

system, to promote the private sector development;

• Courts in Namibia consist of traditional courts, lower

courts, the high court and the supreme court;

• The Law Society of Namibia (LSN) is a self-regulating

body created in terms of the Legal Practitioners Act

(1995) which serves the profession and the public by

promoting justice, protecting the independence of the

judiciary and upholding the Rule of Law; and

• No Electronic Communications Act (as of yet).

Legal and labour


Labour – Investor Considerations

• Namibia has an abundant supply of unskilled labour;

• Social security contributions are compulsory (by law) and

provide for maternity leave, sick leave and death

benefits;

• Employment Equity Commission - The Affirmative Action

(Employment) Act, 1998 (Act 29 of 1998) was passed by

the Namibian Parliament with a view to redress

imbalances at the workplace, arising from the

discriminatory socio-economic dispensation which had

previously existed in this country;

• Vocational and Education Training Levy applies to all

employers whose annual payroll costs exceed N$1

million (approx. USD 70k) in a financial year, and this

levy is regulated by the Namibian Training Authority.

Legal and labour


Labour – Immigration documents

Immigration documents available to foreign

employees:

• Business Visa (non-remunerated) – valid up to 3 months;

• Work Visa (remunerated) – valid up to 3 months;

• Work permit (Employment permit) – for period exceeding

3 months;

• PRP (permanent residence permit) – no fixed period,

favourable significant associated investment, need not

be in country specific period, if travelling renewal every 2

years.

Legal and labour


Most topical must and must not do's:


It is advisable to• decide on type of entity in advance, especially where a shelf

company or Cc is purchased;

• not conclude contracts without consulting on any relevant local

legislation, for example WHT on imported services, incurring

significant expenses before being VAT registered and terms

on importation or transportation of imported goods;

• analyse key stakeholders in advance, define their interest in

your local business activity and plan accordingly; and

• apply well in advance for required work visas or permits and

also for the repatriation of funds.

Bank of Namibia Requirements

Foreign exchange regulations:

• All remittances of dividends, interest, royalties etc. to

countries outside the common monetary area need

approval from the central bank.

• No foreign exchange restrictions or regulations apply if

money is remitted to / from South Africa, as the money

will flow within the same common monetary area.

• It is advised that all foreign investments are registered

with the Bank of Namibia (“BON”).

• It is advised that an authorised dealer should be

consulted prior to effecting any forex movements.

Bank of NamibiaRequirements

31Proprietary and confidential. Do not distribute.



The procedures:

• Administered by Bank of Namibia;

• Authorised dealers – commercial banks in the country.

Control applies to all Namibian residents, as well as to

foreign-owned business undertakings operating in

Namibia;



Bank of Namibia RequirementsProcedures - continued

Payments unrestricted -

presentation of the prescribed

supporting documentation

Direct investment

through equity or loan capital,

or a combination

Prior approval is required for loan funds –limitations on interest rate

Important to

declare equity

capital before

investment

Dividends made freely –documentary requirements

Documentary requirements for royalties,

services, interest etc



The procedures:

• Applicable to Loans and Shares/Dividends

• 3:1 ‘Thin Capitalisation’ Ratio;

• Prior approval:

- Loan applications

- Loan agreement

- Amortisation schedule

- Interest rates

- Payment dates



Tax Framework

4.1 Tax Overview 4.2 Tax Incentives

Tax Framework

4.3 Structuring


Tax FrameworkOverview

Item Tax or Levy Type Rate

1 Corporate Income Tax

Non-mining companies – 32%

Diamond mining companies – 55%

Mining companies (other than diamond) – 37.5%

Long term insurance companies (40% x 32%) – 12.8%

Petroleum companies (exploration, development and production operations) – 35%

2 Dividends paid to non-residents

10% withholding tax (where more than 25% shareholding is held by a company)

20% in all other cases

(DTA relief may apply)

3 Capital gains Sale of mining rights and/or petroleum licenses

4 Individual Income Tax Ranges between 18% and 37%

5 Value Added Tax 15%

6 Import VAT 16.5%

7 Property Transfer Tax 0% - 12%

8Social Security

0.9% (employee)

0.9% (employer)

PwC Namibia Tax Rate and Reference Card Link: https://www.pwc.com/na/en/publications/namibia-tax-rate-card.html




9Stamp duties 0.2% – 1.2%

10 Mining royalties 2% – 5%

11 Transfer pricing Acknowledge OECD Guidelines

12Withholding tax on interest

Paid to non-residents - 10%

Paid to resident persons (other than Namibian Companies) - 10%

13 Withholding tax on royalties 10% of amount paid to non-residents (DTA relief may apply)

14 Withholding tax on services 10% of amount paid to non-residents (DTA relief may apply)

15Permanent Establishment

In terms of double taxation agreements that Namibia has concluded, when a

permanent establishment is created in Namibia, it will give Namibia a taxing right on

income derived from such a permanent establishment. Income tax is levied at the

corporate tax rate of 32%

16

Environmental levies

Duty payable on electric filament lamps (N$3.00 per lamp), all pneumatic tyres -

new, used or re-treaded (N$10.00 per tyre) and carbon dioxide emissions for

certain vehicles (rate varies per level of emission).





17Export levies 0% – 2%

18

Indirect disposal of shares in companies holding

(directly or indirectly) a mining right or petroleum license

Any amount received from the sale, donation, expropriation, cession, grant or other

alienation or transfer of ownership of a licence or right to mine minerals, petroleum

license or right to extract petroleum, is specifically included in the definition of ‘gross

income’ for income tax purposes.

Legislation makes provision for the deduction of certain costs against the

consideration/market value, provided that it does not create a loss.

19 Group relief No group relief available

20 Other considerations Customs duties, Excise duties and Municipal duties



Cost of Non compliance


• Late filing penalties: N$100 per day

• Late payment penalties: 10% per month

• Interest : 20% per month

• No VDP, had Tax Amnesty program with sunset

date

• Penalties, removal of “pay now fight later”, can

apply waiving with good cause shown, limited

opportunity

• Interest no waiving opportunity

Tax FrameworkProposed Amendments – Income Tax

Item Proposed Tax Implementation or Change Amendment detail

1

EPZ

Repeal the EPZ Act and introduction of Special

Economic Zones (with

sunset clause).

2 Basis of taxation Taxing foreign income of Namibian residents.

3Non-deductibility of royalties

Non-diamond mining entities will not be allowed to deduct royalty charges

4 Tax Incentives Phasing out manufacturing incentives.

5 Trusts Providing for specific taxation of trusts and abolishing the conduit principle

6 Charitable, religious and educational institutions Taxing commercial income of charitable, religious, educational institutions.

7 Fees not deductible unless WHT withheld Limit the deductibility of fees and interest for income tax if no WHT has been paid

8 Dividends Tax Levying of a 10% dividends tax on Namibia residents

9Deductions allowed on pensions & annuity funds

To increase the maximum deduction threshold from N$40,000 per tax year to a

27.5% of income, limited to N$150,000 per tax year.


Tax FrameworkProposed Amendments – Indirect Taxes


1Listed Asset Managers Levying of Value-Added Tax on the income of listed asset managers.

2Sale of shares or members interest in a PropCo

Levying of Value-Added Tax on the sale of shares or member’s interest of a

company which owns a property.

3 Fuel levy increases An increase of fuel levies by 25cents per litre

4 Expansion of export levy Export levy expansion on agricultural, forestry, game and mining products.

5 Remove zero rating of sugar Removal of VAT zero rating in respect of sugar

6 Export of dimension stones Increase export levy on dimension stones from current 2% to maximum of 15%

7 Introduction of timber export levy To impose an export levy of 15% for timber specifically

8Lubricant oil, batteries and plastic bags

Levy of N$1.80 per litre on lubricant oil, 5% environmental levy on primary

cells/batteries, levy on plastic carrier bags

42

Tax FrameworkUncertain Amendments – no further clarity provided


1Thin capitalisation rules

Introducing specific thin capitalisation rules to combat transfer pricing on interest

paid on foreign loans.

2 Betting and gaming activities Taxed at 37%

3

Individual income tax brackets

Individual Tax:

a) Lower bracket – 17% from 18%

b) Higher brackets

> N$1.5mil 39%,

> N$2.5mil 40%

4 National sin tax Additional National Sin Tax on Alcohol and Tobacco products levied at 5%

5 Carry forward of tax losses Limit the carry forward of tax losses to 5 years

6 Capital allowances Change capital allowance on moveable assets from 3 years to 5 years

7 Dividend definition Changes to include all distributions and share buy backs

8 Prohibited deductions Foreign loss, distributions by trusts to beneficiaries

9 Tax credits Providing for foreign tax credits


Total Tax Rate (%)

The total tax and contribution rate

measures the amount of taxes and

mandatory contributions borne by the

business in the second year of

operation, expressed as a share of

commercial profit.

20.7% 302 27

Tax FrameworkPaying Taxes

Time to comply (hours)

Time is recorded in hours per year.

The indicator measures the time taken

to prepare, file and pay three major

types of taxes and contributions: the

corporate income tax, value added or

sales tax, and labor taxes, including

payroll taxes and social contributions.

Number of payments

The tax payments indicator reflects the

total number of taxes and contributions

paid, the method of payment, the

frequency of payment, the frequency

of filing and the number of agencies

involved for the standardized case

study company during the second year

of operation

PwC Paying Taxes 2019 Link: https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2019.html

Namibia ranked 81st

for ease of paying taxes out of 190 economies


Tax FrameworkPaying Taxes

Angola #104

Zimbabwe #145

Namibia #81

Botswana #51

South Africa #46

Zambia #17

Namibia ranked 4th,

for the ease of

paying taxes in

comparison to

neighbouring

countries:

This is how

Namibia

compares with

the number of

tax payments

to our

neighbouring

countries.

Zimbabwe 51

Namibia 27

Angola 31

South Africa 7

Botswana 34

Zambia 11

In Southern Africa,

Namibia ranks last for

the amount of hours in a

year it takes to comply

with taxes.

Zimbabwe 242

South Africa 210

Zambia 164

Namibia 302

Botswana 120

‘Total Tax & Contribution

Rate’ underlines the fact, that

this not only includes taxes,

but also compulsory social

contributions borne by the

case study company.

49.1%

Zambia

Namibia

Botswana

South Africa

Zimbabwe

Angola

29.1%

25.1%

20.7%

15.6%

31.6%


Tax FrameworkPermanent Establishment

Only considered where double taxation agreements are concluded with Namibia.

A permanent establishment is defined in the DTA as a “fixed place of business through which the business of an

enterprise is wholly of partly carried on”. It also includes:

- a place of management;

- a branch;

- an office;

- a factory;

- a workshop;

- a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

- a warehouse, where storage facilities are provided to parties other than the enterprise;

- a guest farm or other operation of a similar nature; and

For South Africa, it furthermore includes:

- a building site, a construction, assembly or installation project or supervisory activities in connection therewith,

but only where such site, project or activities continue for a period of more than six months;

- the furnishing of services, including consultancy services, by an enterprise through employees or other

personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for

the same or a connected project) within the Contracting State for a period or periods aggregating more than

six months within any twelve-month period.46DbiA Namibia and Botswana – April 2019

Tax FrameworkPermanent Establishment

Specific considerations:

• Risk for PE where person (in Namibia) acting on

behalf of an enterprise

• Allocation of business profits

• Withholding taxes

• Elimination of double taxation

• Organisation for Economic Co-operation and

Development (OECD) guidance


Tax Incentives

Includes:

• Export Processing Zones (EPZ entities)

- No Income Tax;

- No Value Added Tax;

- No Stamp Duty on goods and services required for EPZ activities;

- No Transfer Duty in respect of acquisition on any immovable property situated in the EPZ; and

- No import duties on machinery, equipment and raw materials

imported into Namibia for manufacturing purposes.

• Registered Manufacturers

- 17A Remuneration and training allowance, 17B Export

marketing allowance, 17C Export allowance and 17D Land-

based transport allowance.

Tax Framework


Tax Structuring

Considerations:

1. Repatriation of funds

2. Exit Strategy

3. Which holding location to select?

Tax Framework


Tax Structuring

Namibia has concluded double taxation agreements

with:

• Botswana

• France

• Germany

• India

• Malaysia

• Mauritius

• Romania

• Russia

• South Africa

• Sweden

• United Kingdom

Tax Framework

50Proprietary and confidential. Do not distribute.


Tax FrameworkStructuring considerationsRecipient WITHHOLDING TAX (%)

Dividends Interest Royalties Technical fees,

consulting, admin,

management fees

Directors fees

Non-treaty 10 / 20 10* 10 10 25

Botswana 10 10 10** 10** 25

France 5 / 15 10 10** 0 25

Germany 10 / 15 0 10** 0 25

India 10 10 10** 10** 25

Malaysia 5 / 10 10 5 5 25

Mauritius 5 / 10 10 5 0 25

Romania N/A 10 5 0 25

Russian Federation 5 / 10 10 5 0 25

South Africa 5 / 15 10 10** 0 25

Sweden 5 / 15 10 5 10** 25

United Kingdom 5 / 15 N/A 5 0 25

• Namibian companies are taxed at the corporate tax rate on interest received.

• ‘N/A’ means that the provisions of the tax treaty limited the rate to a rate that is higher than the local Namibian rate. It should be noted that a treaty may only provide tax

relief and cannot impose a higher tax rate.

• ** - no relief as the statutory rate is the same as in the DTA


Budget Speech 19/20

Budget Speech 19/20

Overview

Revenue as

a % of GDP

Spending as

a % of GDP

Deficit as a

% of GDP

29.7%

33.8%

-4.14%


Budget Speech 19/20

Overview ANGOLAZAMBIA

ZIMBABWE

BOTSWANA

SOUTH AFRICA

Tombua Cahama

Caiundo

Mavinga

Luiana

Kataba

SeshekeLivingstone

Tsau

OrapaGhanzi

Kang

Mamuno

TshabongMafikeng

Kuruman

Springbok

Bitterfontein

Victoria West

De Aar

KimberleyUpington

Gaborone

NAMIBIA

KongolaRundu

Opuwo

Tsumeb

OkakararaKhorixas

EpataOmaruru

Gobabis

Aranos

Maltahöhe

Lüderitz Aroab

Karasburg

Walvis Bay

Windhoek

South Atlantic Ocean

0 50

50

100

100

150 Kilometers

0 150 Miles

NAMIBIA

Unemployment

Rate

37%

GDP Growth

1.0%

Inflation at

February 2019

4.4%

USD: NAD

Exchange Rate(March 2019)

N$ 14.60

49.2%

Debt Stock as

% of GDP

FY2019/20

N$96.3bn 2019/202018/19 N$87.5bn

Debt

Stock


Key Considerations

Key considerations

1. New Equitable Economic Empowerment Framework (NEEEF)

2. Foreign Ownership of Agricultural Land

3. Foreign Investment Act (Namibian Investment Centre)

4. Integrated Tax AdministrationSystem (ITAS)

5. Namibia Revenue Agency (NamRA)


6. Exploration companies – Indirect Tax (VAT)

7. Harambee Prosperity Plan (HPP)

8. Public Private Partnerships (PPP)

9. National Elections

10. Ancestral land committee

Key considerations


In summary


• Significant focus on policy reforms at present

• Projects around PPP is high on GRN agenda

• Foreign Investor confidence not restored and will

take time, however in the delivery of the past two

SONA the President confirmed his commitment

towards developing Namibia and called upon the

public and private sectors to continue promoting

compelling investment opportunities in our

country so as to encourage investments and create

jobs.

Contacts

ContactsWhat we offer

60

A team of focussed experts enthusiastic to serve you

In building the largest tax and legal compliance practice in Namibia, our

team consists of Chartered Accountants, Lawyers and professional

experienced tax and company law consultants.

This means, that:

• They work in these technical areas every day;

• They attend monthly training sessions on changing legislation/practises;

and

• As we continuously grow our teams, we have sufficient capacity to assist

you quickly.

We will be here tomorrow

PwC Namibian’s Business Continuity Processes are accredited by the British Standard Institute.

We maintain all records electronically.

This means that we will not lose your documents and will be able to continue services within days

after a major crisis.

Relationships with Inland Revenue, Ministry of Industrialisation,

Trade and SME Development and other regulatory authorities

• As the largest professional services firm in Namibia, our relationships

and profile with authorities are key to our business.

• This means that we invest heavily in building trusting relationships with

them.

• Through this we are able to assist our clients with access to the right

teams and people to solve your problems.

Global quality standards

We cannot afford to make mistakes. For this reason PwC’s global quality assurance processes

are core to our being - we check ourselves all the time.

And if something slips through, we are responsible and geared to sort it out.

Namibian knowledge resources

Stay informed through our publications and training on legislation and best practices in the

Namibian business arena. This includes:

• Business Law Quarterly, HR Quarterly and Monthly Tax Newsletters.

• Namibian Business and Investment Guide

• Business School training sessions

• Updated on-line tax reference and rate card


ContactsOur Business Set-up Leadership Team

61

Nelson Lucas

PartnerIndirect Tax Services

[email protected]

T: +264 (61) 284 1203

Johan Nel

PartnerCorporate Tax Services

[email protected]

T: +264 (61) 284 1122

Chantell Husselmann

PartnerTax Leader / Legal Entity

Compliance Partner

[email protected]

T: +264 61 284 1327

Riana Esterhuyse

Associate DirectorTax Services – Walvis Bay

[email protected]

T: +264 (64) 217 736


Doing business in Botswana

Agenda

4.1 Country Context

4.2 Business Vehicles

4.3 Immigration and labour law

4.4 Tax Framework

4.5 Budget Speech 19/20


Country context

Political

• Framework of a parliamentary representative

democratic republic

• The President of Botswana is both head of state and

head of government

• The country has a multi party system

• Executive power is exercised by the government

• Legislative power is vested in both the government and

Parliament

• The Judiciary is independent of the executive and the

legislature

• Botswana is a multiparty constitutional democracy

• Botswana Democratic Party: Ruling since

independence in 1965, still dominating political

environment

• Elections are held every five years

Country Context

• Next general election October 2019

• The leader of the ruling party is allowed only two terms

in power.

• The country has maintained political stability since

independence to date

• The current president is Dr Mokgweetsi Eric Keabetswe

Masisi


Legal Framework

• Mixed legal system of civil law influenced by the

Roman-Dutch model and also customary and common

law

Sources of Law

• The Constitution

• Customary law

• Common law

• Legislation

• Judicial precedent

The Constitution

• The Constitution is strictly followed in application of any

law.

• The courts’ independence is enshrined in the

Constitution.

Country Context

Customary Law

• Prior to the establishment of the Bechuanaland

Protectorate there existed a variety of indigenous legal

systems living in tribal areas which is now collectively

called customary law.

• The 1891 proclamation instructed the High

Commissioner to respect the native laws.

• Therefore these indigenous peoples’ laws received

recognition but did not get to be incorporated into the

general law of the country.


Legal Framework continued

Common Law

• Roman Dutch law is said to be the common law of

Botswana which was inherited from the Cape Colony.

• Over the years it has been influenced by the English

Common law after British protectorate.

• The Criminal Law of Botswana is originated from the

English and evidence is based on South African Law. In

Botswana, it has been developed over years by

statutes passed by the Parliament and Judicial

decisions.

Country Context

Developments

• Extensive legal reforms made as part of the transition to

free market economy.

• New commercial, inward investment, tax and customs

laws have been introduced.

• Reform of tax system started in 1995.

• VAT was introduced in 2002.

• Public Sector reforms including simplification of

procedures.

• Reforms of sector legislation, such as mining and the

financial sector.

• IFRS has been adopted.


Population and economics

• The Botswana economy has been one of the best performing in Africa over many years.

• Botswana has experienced a dramatic growth in average real incomes.

• In the past 50 years the growth was led by the development of diamond mining and export of rough diamonds, along with the spending by Government of Botswana of tax and related revenues received from diamond mining.

• Population: 2 million

• Urban population: 60%, principal urban centre –Gaborone

• High GDP growth between 1970s – 1980s due to Diamond production

Country Context

• Long term downward trend in GDP growth rates,

• GDP per capita (PPP) $15 800, growth rate 4.10% (World Bank: 2017).

• Lowest level of corruption in Africa (TI Corruption Perceptions Index)

• Investment Grade Credit Rating by Moody’s 2018: A2. Highest in Africa.

• Transformation from predominantly agricultural economy, to primarily mining focused revenues (18% of GDP - 2017) and in transition to diversify increasingly towards the services sector (Budget 2019).

• State funded education programs abroad results in ‘brain drain’

• Biggest export partners: Belgium, India, UAE, South Africa, Singapore, Israel, Hong Kong, Namibia


Business Vehicles

Doing Business in Botswana Comparing Botswana with SA

Rank out of 190

Aspect Botswana South Africa

Ease of doing business 86 82

Starting business 157 134

Construction permits 31 96

Getting electricity 133 109

Registering property 80 106

Getting credit 85 73

Protecting investors 83 23

Paying taxes 51 46

Trading across borders 55 143

Enforcing contracts 134 115

Resolving insolvency 81 66

Source: World Bank – Doing business 2019


Minimum requirements when doing business in Botswana

ProcedureEst. Time to

complete*

Est. Associated

costs*

1. Reserve a unique company name 5-10 working days BWP 20

2. Register the company at the Companies & Intellectual Properties

Authority(CIPA)2-3 Weeks BWP300 for application

BWP 60 for certificate

3. Opening a bank account 3-4 Days No charge

4. Receive inspection of company premises 1 Day No charge

5. Apply for a trading license 1 Week License fees:

Min BWP 250

Max BWP 1,500

6. Obtain a tax identification number from BURS 5-10 Days No charge

7. Register for employees for workplace injury insurance 1 Day No charge


Industries


Company vs Branch

Item Distinction Factors Company Branch

1 Legal personality Yes Yes

2 Tax personality Yes Yes

3 Liability Limited to amount of company's

share capital

Head office is fully responsible for

the branch's liabilities

4 No. of shareholder Minimum of 1 N/A

5 Registration costs Lower Higher


Types of legal entities


Type of Legal entityA company Limited by guarantee

under the companies Act

A public company limited by

shares under the companies Act

A private company limited

by shares under the

companies Act

Ease of set up and Time

implications

Relatively simple but not as fast as

companies limited by shares.

Simple and fast Simple and fast

Cost of Set Up Low Low Low

Separate legal Existence Yes Yes Yes

Limitation of Liability of

shareholder

Yes Yes Yes

Immigration and labour law

ImmigrationCurrent market conditions

• Implementation of an internal tracking system

• Technical delays impact lead times

• Current environment – stable with intermittent issues (delays)

• Work permits generally limited to middle management and above except where skill cannot be found locally for junior level positions

• Increased focus on certain professions:

• Need to prove skills, experience and benefit to industry

• Legal, accounting, engineering, construction, medical, financial, mining and IT Consulting

• Aversion to unskilled labor – should be sourced locally

• Simpler process with expedited processing times

• Scarce skills can be discretionary – e.g. Gardener


ImmigrationVisas

Visa exempt Nationals

• Receive/Issued upon arrival in Botswana

• Passport: 6 month validity period from date of departure

Non visa exempt Nationals

• Apply at Consulate in Home country prior to travel to Botswana (Lead time: 7 – 14 working days)

• Present visa at Port of Entry

Established Multinationals: Where a clear benefit to a specific industry exists, the Botswana Investment and

Trade Centre will motivate the need for a work permit application.


ImmigrationWork permits

Short Term Work Permit

• Issued for 90 days

• May be renewed / extended if proof of a pending Long Term work permit application is provided and / or urgent project requirements (Discretionary)

• Lead time: 7 – 14 days

Long Term Work Permit

• Issued for 1 – 5 years (depending on contract)

• Advertising the position in a National Newspaper required

• May be renewed / extended if continuing need for skill exists and proven inability to Identify / train local resource

• Lead time: 2 – 3 months


ImmigrationGeneral considerations

• Develop key relationships with all stakeholders

• Expectation Management: Immigration

• Authorities prone to unexpected delays (challenges with internal network system from September 2013)

• Be Flexible: Requirements / procedures subject to change (Government Notifications coincide with implementation of changes)

• Be Available: Presentation to Immigration / Labor Department recommended to build profile of organization with Authorities

• Be Prepared: If all documentary requirements are met (with no internal delays), permits should be issued timeously


ImmigrationOther considerations

Urgent Projects (exceeding 3 months)

• Apply for Long Term work permit and Short Term work permit simultaneously

Residence Waivers

• Required in addition to work permit authorisation

• Applied for following arrival in Botswana

Accompanying Family Members

• Residence waiver linked to main applicant

• No separate study permit required

Appeal Procedures

• Work permit rejections – appeal to be lodged within 30 days of negative decision

• Full motivation submitted to Department of Labour

• Lead time: 1 – 3 months


Tax Framework

Tax FrameworkCorporate Tax

Resident company tax 22%

Resident manufacturing (approved) 15%

Non-resident companies /Branches/Permanent Establishment 30%

Capital gains tax – Resident company 22%

Capital gains tax – Non-Resident company 30%

Dividends accruing outside Botswana 15%

International Financial Service Centre Company

• Income from approved financial transactions with non-residents,

IFSC Companies and Specified Collective Investment Undertakings 15%

• All other Income 22%


Tax FrameworkWithholding tax rates for non DTA countries

Payments ResidentsNon-

residentsFinal tax or advance tax

Interest 10% 15% Final tax for non-residents

Dividends 7.5% 7.5% Final tax for residents if the interest is

from Bank or Building society

Commercial royalties - 15% Final tax

Management and consultancy fee - 15% Final tax

Entertainment fee - 10% Final tax

Construction 3% 3% Advanced tax

Mine rehabilitation 10% 10% Final tax

Payment of rent 5% 5% Advanced tax

Brokeage or commission 10% 10% Advanced tax


Double Taxation AgreementsPayment to residents of Dividend Interest Royalties Management,

Consultancy, Technical

fees

Barbados 5%*/7.5% 10% 10% 10%

France 5%*/7.5% 10% 10% 7.5%

India 7.5% 10% 10% 10%

Mauritius 5%*/7.5% 12% 12.5% 15%

Namibia 7.5% 10% 10% 15%

Russia 7.5% 10% 10% 10%

Seychelles 5%*/7.5% 7.5% 10% 10%

South Africa 7.5% 10% 10% 10%

Sweden 7.5% 15% 15% 15%

UK 5%*/7.5% 10% 10% 7.5%

Zimbabwe 5%*/7.5% 10% 10% 10%

Mozambique 7.5% 10% 10% 10%

Zambia 5%*/7% 10% 10% 10%

Ireland 5% 7.5% 5%*/7.5% 7.5%

Swaziland 7.5% 10% 10% 10%

China 5% 7.5% 5% 5%

*Where the beneficial owner is a company and holds 25% of shares or higher 84DbiA Namibia and Botswana – April 2019

IFSC regime

General

The aim is to establish and develop

Botswana as a world class hub for cross

border financial and business services into

Africa and the region

Main benefits

Lower tax rates

IFSC company Normal

company

Capital Gains tax 0% 22%

Value Added tax 0% 12%

Withholding tax 0% 15%

Corporate tax rate 15% 22%


IFSC regime - continued

Additional Benefits

• Botswana has no foreign exchange control regulation.

• Botswana has 16 double tax treaties in force.

• Unilateral credit for tax paid outside Botswana in respect of foreign income where Botswana does not yet have a Double Tax Agreement. Such credit shall be lesser of the tax paid in the other country or tax payable on such amount in Botswana.

• The IFSC company is allowed to elect its functional currency.

Key requirements

• A business plan that demonstrates the capacity to engage in cross-border financial services.

• Services must be provided to/for clients outside Botswana and in currencies other than the Pula and the promoters of the project must be able to satisfy the regulatory requirements of the Botswana authorities.


Tax FrameworkNew tax legislation

BURS has introduced a new legislation on

• Transfer pricing rules

• Thin capitalization rules

• The Bilateral agreements have increased to 16 and there are about 13 which are still under negotiations


Contacts

PwC Botswana Tax Contacts

Nilusha Weeraratne

Senior ManagerTax Services

[email protected]

T: +267 395 2011 (ext. 248)

Butler Phirie

PartnerTax Leader

Compliance Partner

[email protected]

T: +267 395 2011 (ext. 291)


Questions

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individual or his/ her entity’s requirements. The information should not be regarded as professional or legal advice or the official opinion of

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reasonable steps to ensure the quality and accuracy of the information, accuracy is not guaranteed. PwC, shall not be liable for any

damage, loss or liability of any nature incurred directly or indirectly by whomever and resulting from any cause in connection with the

information contained herein.

DbiA Namibia and Botswana 91

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namibia and botswana - pwc · 2019-05-09 · •namibian law is rooted in south african legislation...

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