Government has embarked on campaign trail designed to combat tax violation, which seems to be the norm amongst foreign companies and take constringent measures against the perpetrators.
Answering a question from Serowe North east MP Ramadeluka Seretse, the assistant Minister of Finance and Development Planning, Charles Tibone, assured parliament this week his ministry was working around the clock to combat the problem, insisting those violating the stipulated laws will be dealt with accordingly by the on-going BURS exercise.
Taking advantage of the country’s loose laws and lackadaisical human resources, foreign companies defer contributing to government revenue by failing to pay tax resulting in heavy losses.
“Foreign companies or sole traders, who trade in Botswana for a period in excess of six months, are required by law to register and declare their incomes to BURS. Consequently, as registered taxpayers, they will be required to declare and pay VAT they collect,” Tibone maintained, insisting that “as foreign companies or sole traders who do not comply with the foregoing requirements are violating Botswana’s revenue laws”.
“The Commissioner General of BURS is empowered to take action against the transgressors, whenever they are discovered,” he warned, saying he has no doubt that “they will be discovered during the ongoing BURS compliance campaign”.
In terms of the revenue laws, foreign companies, or sole traders that conduct business in Botswana for a period of six months or less are not required to register for tax purposes in Botswana.
However, they would be required to pay withholding tax on the services they provide in Botswana with the withholding tax collected by the recipient of the service or employer.
As to the Value Added Tax payable on imported services, Tibone says the tax is payable by the importer of the service directly to the Botswana Unified Revenue Service (BURS), not to the foreign supplier.
He would not encourage the minimum threshold to be placed on Foreign Direct Investment (FDI) because in business, companies usually start small and grow overtime hence using the VAT threshold for FDI attraction may prevent potential investors from doing business in Botswana.
He dismissed suggestions the Botswana Revenue Laws registration requirements for the Botswana Revenue Laws registration requirements for VAT and Income Tax purposes are discriminate, adding the tax treatment between domestic and foreign companies are the same.
“Therefore applying different registration procedures for foreign companies may result in inequitable treatment of taxpayers and increase compliance costs for the tax administration,” he revealed, concluding, “My ministry therefore does not intend to make it compulsory for foreign entities trading in Botswana to register for income tax and Value Added Tax, if they trade in Botswana for shorter than the required six months period.”
