For tax purposes, the following are taxed at individual rates; Employee, Director, Pensioner, Farmer, Sole Trader ,Partners in a Partnership and Trustee in a Trust. Applicable tax rates depend on the residential status of the individual.
“Resident in Botswana” in relation to any tax year, means in case of an individual, that
1. His permanent place of abode is in Botswana
2. He is physically present in Botswana for not less than 183 days in that tax year, whether or not he maintains a place of abode in Botswana
3. He maintains a place of aboard and is physically present in Botswana for not less than183 days and for the purpose of this paragraph he shall deemed to be physically present in any part of the period notwithstanding that he is temporarily absent for business , recreation or similar purposes; or
4. He is physically present in Botswana for any period in that tax year and such period is continuous with a period of physical presence in the immediately preceding or succeeding tax year, and provided he is treated as resident for such preceding or succeeding tax year under subparagraph 3.
The income received from different sources is added together at the end of the tax year to determine the tax liability. To report the income received, an individual needs to complete an individual tax return.
SOURCES OF INCOME
1. Deemed Sources
The gross incomes from other sources include income from sources deemed to be situated in Botswana. Refer to Section 11 of the Income Tax Act Chapter 50.01.
According to 2011 Tax Amendments every person whose taxable income during any tax year exceeds P36000 shall apply for registration to the Commissioner General and be allotted a TIN Taxpayer Identification Number. For more information refer to section 64A of the 2011 Tax amendments of the Income Tax Act Chapter 50.01. You are required to file a tax return even if your only source of income is from employment on which tax has been deducted at source through Pay as you earn (PAYE) system.
3. Letting of Property
Whether or not an agreement is signed, any rental received is treated as income for that year. Allowable expenses against rental income are all revenue expenses incurred in the production of rental income e.g repairs and maintenance. Capital expenses are not allowed as deductions because they add value to the property eg erecting the screen wall. The expenses claimed should cover the period for which the property was let in any particular year. The taxpayer may be asked to produce evidence on any expenses claimed. As a result, proper records on the transactions should be kept.
4. Disposal of Property
Income from any property disposed off should be reported in the individual tax return. The taxpayer will be required to attach disposal computation which will show, in case of any immovable property:
I. Date the property was sold
II. Selling price
III. Selling expenses
IV. (The cost of acquisition X cost of living index at date
of sale)/Cost of living index at date of acquisition
V. (Cost of improvements X cost of living index at date of
sale)/cost of living index at date improvements were made
VI. Expenses incurred on acquisition
VII. NET GAIN / LOSS = xxxxxxx
5. Sale of Shares
Less: cost of shares + Selling expenses = Gain / Loss
If the net result is a gain deduct 25% of net gains and the remaining 75% is taxable. This deduction is not applicable in a loss situation.
The disposal loss incurred is set off against any disposal net gain in that tax year. The disposal loss is carried forward to the following year. If there is no disposal gain to set off in the following year, the loss will be lost and not carried forward.
6. Pension and Old Age Pension Benefit (Tandabala)
Pension paid to the taxpayer which is in excess of the threshold is subjected to PAYE. The pension payment which is less than the threshold will attract tax at the end of the tax year when it is added together with income from other sources. Any individual including a pensioner may apply for variation of tax.
Taxable income includes interest payable,
a) by any Banking Institution in excess of P7800.00
b) on loans to a company.
Any individual who has more than 300 heads of cattle or more than 100 hectares of land or 1800 goats or sheep is required by law to pay tax. But if there are less than 300 heads of cattle or less than 100 hectares of land the taxpayer has an option to declare the income. If he so wishes to be treated as a farmer for tax purposes, he will be required to elect in writing within six months after the end of the tax year that his farming operations be included together with other sources of income. If the election is done outside this period, farming operations will not be considered in that tax year.
If the farming operations have resulted in a loss , the taxpayer may elect in writing to have that loss set off against other income, provided the loss does not exceed 50% of the chargeable income. When the loss exceeds 50% of the chargeable income , the balance will be carried forward to be set off against future farming profit.
Farming income is declared using form 101 which is part of the individual tax return (ITA20BF). Only expenses relating to farming operations are allowable. Proper records of farming operations must be kept for verification of farming transactions.
9. Sole Trader / self employed
This is the simplest form of business enterprise and is often referred to as the one person business.
A sole trader must keep proper records of the business transactions to verify business transactions. At the end of the tax year, he will be required to complete an individual tax return and declare income from that business and from other sources.