On 4 February 2019, Botswana's Minister of Finance & Development Planning (the Minister), the Honorable O. K Matambo, presented the 2019 budget to Parliament.

This Alert outlines the key proposals.

Economic highlights

The 2019/2020 budget proposals emphasize the need for Botswana to consolidate development gains for further economic development. According to the Minister, this will be achieved through:

• The reform of macro-economic policies
• Streamlining service delivery processes

Through the above agenda items, the domestic economy growth rate is forecasted to be 4.5% (2018) and 4.2% (2019) against the global growth rates of 3.5% and 3.6% for 2019 and 2020 respectively.

The Minister confirmed that Botswana continues on a trajectory towards becoming a fully-fledged upper middle income economy.

Key statistics

• Expected budget deficit of P7.34 billion for 2019/20 which is 3.5% of Gross Domestic Product, against the 2018/19 figure of 1.1%.
• Positive economic growth of 4.5% expected for 2018 and forecasted growth to reach 4.2% in 2019 and 4.8% in 2020.

Fiscal legislation

The Minister reported on the passage of the following Acts:

• The Customs Act
• Company Registration Amendment Act
• Registration of Business Names Amendment Act
• The Companies Amendment Act
• Re-registration of Business Act

There is a commitment to conclude the amendments to the Transfer duty Bill and Trade Act during 2019.

In addition, the Minister confirmed the publication of the Income Tax (Amendment) Act, 2018 – Act No.38 of 2018 amending the anti-avoidance provisions and introducing Transfer Pricing (TP) legislation. The effective date of the legislation is 1 July 2019.

Key features of the amendments include:

• Arm's-length principle – All transactions entered into by Botswana resident persons directly or indirectly with connected persons must be at arm's-length.
• Commissioner General's (CG) powers – CG is given powers to make an adjustment to taxable income where a transaction between connected persons is inconsistent with the arm's-length principle.
• Documentation requirements – Botswana entities entering into transactions with connected persons must prepare, keep and furnish TP documentation upon request.
• Advance Pricing Agreements (APAs) Taxpayers may apply to the CG to enter into an APA, and the terms and conditions of the APA are still to be prescribed by the Minister through regulations.
• Repeal of the thin capitalization rules.
• Codification of the International Financial Services Centre Company (IFSC) definition.
• Penalties for non-compliance with transfer pricing.

For the complete budget speech go to www.finance.gov.bw.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Advisory Services (Pty) Ltd, Gaborone

• Bakani Ndwapi
  bakani.ndwapi@za.ey.com
• Thomas Chitambo
  thomas.chitambo@za.ey.com
• Cleverent Mhandu
  cleverent.mhandu@za.ey.com
• Gladys Makachiwa
  gladys.makachiwa@za.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg

• Marius Leivestad
  marius.leivestad@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Rendani Neluvhalani
  rendani.mabel.neluvhalani@uk.ey.com
• Byron Thomas
  bthomas4@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York

• Dele A. Olaogun
  dele.olaogun@ey.com

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ATTACHMENT

PDF version of this Tax Alert