Presentation on theme: "Budget Speech 2014/2015 The Botswana budget proposal for 2014/2015 presented to the National Assembly on Monday, 3 February 2014 by the Minister of Finance."— Presentation transcript:
Budget Speech 2014/2015 The Botswana budget proposal for 2014/2015 presented to the National Assembly on Monday, 3 February 2014 by the Minister of Finance and Development Planning, the Honorable O.K. Matambo.
Budget Highlights General: Budget prepared within an environment of continued uncertainties surrounding the state of the world economy and their likely effects on the local economy. Focus on improving project implementation, growing the economy and employment creation, improving productivity and sustaining sovereign rating, investing in infrastructural development to support growth, investing in human capital, enhancing people’s welfare and livelihood, strengthening the judicial system and combating crime, and strengthening local governance Priorities are to focus on service delivery, maintenance of existing infrastructure and completing on-going projects which have high rates of return. Inflation decreased 4.1% in December 2013 Foreign exchange reserves equivalent to fund 16.5 months of imports Economy grown by 4.2% in 2012 and projected to grow by 5.4% in 2013 and 5.1% in 2014 Revised budget forecast for 2013/14 is a surplus of million (down from original estimate of P779.3 million Proposed budget surplus for 2014/15 of P1.326 billion Formation of Botswana Oil Limited and storage facilities to increase fuel supply cover from 18 days to 60days Substantial construction component in infrastructure Civil servants salaries still being reviewed
Budget Highlights Fiscal: VAT registration threshold to be increased from annual turnover of P500,000 to P1 million All farming equipment and all basic food stuff which are currently zero rated will be exempted. The list of basic food stuffs will be increased to include vegetables, rice and milk Amendments to the Income Tax Act and the Value Added Tax Act will be made during the forthcoming year – no further indications given of what these changes may be changes will be presented to the Transfer Duty Act during the year to assist first time home owners.
Salient Features of the Current Tax System
Taxable Income Income from, or deemed to be from a source within Botswana is taxable in Botswana Business income from different sources is deemed to accrue from one business Farming, mining and prospecting income or losses and capital gains are ascertained separately The offset of farming losses by an individual against other chargeable income earned by that individual up to 50% of the other chargeable income Gains on disposals of property are taxable, and capital losses can be carried forward for one year only Normal business expenses wholly, exclusively and necessarily incurred in the production of assessable income are allowed as deductions Specific deductions include capital allowances, lease improvements, bad debt provisions, approved citizen training expenditure and approved pension fund contributions Assessed losses from business can be carried forward for no more than five years, except for farming, mining and prospecting losses, which can be carried forward indefinitely Special provisions apply to IFSC companies and mining businesses
Individuals Employment income Includes salaries, wages, terminal payments, directors and other fees, bonuses, commissions, allowances and the value of benefits Employment income from, or deemed to be from a source within Botswana is taxable in Botswana All employment income, including benefits in kind, is subject to monthly withholding tax (PAYE)
Individuals Exemptions and tax-free benefits for individuals Bank and building society interest of P per annum, for resident individuals (note that the 10% tax deducted by these financial institutions on interest earned by a resident individual is a final tax and the interest does not then form part of the assessable income of the resident individual) Medical fund contributions and medical attention paid for by the employee The value of contractual travel benefits for employees and their families Contractual terminal gratuities payable to expatriate employees are exempt to the extent of one-third, with a maximum of: 25% of total salary for 1st contract 27.5% of total salary for 2nd contract 30% of total salary for 3rd contract Minimum of 2 years should have been completed Should be stated in the employment contract Severance pay and certain gratuities payable (other than those mentioned above) are exempt to the extent of one third. Investment of such payments directly into an approved pension or retirement annuity fund results in 100% exemption
Individuals Exemptions and tax-free benefits for individuals (cont..) Pension fund contributions: A contribution made by a resident individual to an approved superannuation fund is deductible from that resident’s taxable income The deduction is limited to 15% of the chargeable income, excluding investment income Retrenchment package: one third or P , whichever is greater is exempt Donations: Donations made to an educational institution recommend by the Ministry of Education or to any sports club or social association recommended by the relevant Ministry and approved by the Commissioner General are deductible from chargeable income This deduction is restricted to 20% of the aggregate chargeable income for that year.
Individuals Housing 10 % of municipal valuation or where no municipal valuation is available: 8 % of current capital valuation, (P250 x floor area) Use of employer's furniture Under P no benefit deemed to have accrued 10 % of the excess over P of the cost to the employer Loans The difference between the interest at concessionary rate and prime lending rate announced by Bank of Botswana on 1 July of the tax year Other benefits Such as school fees and utilities: cost to the employer or market value, whichever is the greater Valuation of benefits
Individuals Motor vehicles – scale of values Cost of Vehicle Value of Benefit Fuel Cost Adjustment and over 15 % on the excess of P Maximum
Individuals Residents – Business & Employment Income Rates Taxable IncomeTax Payable %Over ,5%Over %Over and over %Over
Individuals Non-Residents, Trusts and Estates of Deceased Persons – Business & Employment Income Rates Taxable Income Tax Payable % of each Pula ,5%Over ,75%Over and over %Over
Individuals Foreign Dividends received by Residents On gross amount received15%
Companies Tax Rates Resident company - manufacturing taxable income – approved 15% Resident company - other taxable income22% Non-resident company30% Capital gains22% Foreign dividends15% Mining taxable income (excluding diamonds)22% to 55% International financial services centre company15% or 22%
Companies Capital Allowances Straight Line Straight line annual allowances on plant or machinery at rates between 10% and 25% fixed by the Commissioner of Taxes: Heavy Plant or machinery used in construction25% Motor vehicles and aircraft (for passenger motor vehicles, limited to expenditure of P ) 25% Plant or machinery used directly in manufacturing or production25% Other plant or machinery including farming equipment15% Computer hardware25% Computer software - off the shelf100% Furniture and fittings including soft furnishings10%
Companies Capital Allowances (cont..) Statutory Straight Line Allowances: Industrial buildings - initial allowance (Including hotels) - annual allowances 25% 2,5% Commercial buildings - annual allowances2,5% Farm buildings, improvements, water supplies and other farm capital Works 100%
Companies Companies are required to pay quarterly SAT installments on a financial year basis. Companies with annual income tax liabilities of less than P may rather elect to make one payment within 4 months of end of the financial year. SAT is optional for non- corporate tax payers. Self Assessment Tax (SAT)
Capital Gains Tax Individuals Taxable Income Tax Payable %over ,5%over %over and over %over
Capital Gains Tax Resident Company – 22 % Non -Resident Company – 30 %
Capital Gains Tax Inclusions – disposal of: Any moveable or immovable property in Botswana Any shares or debentures of a company A residential property Assets of an IFSC company situated in Botswana Examples of exclusions: Principal primary residence of an individual who has owned the residence for at least 5 years prior to the date of disposal Any property or business (other than land and buildings) in respect of which capital allowances are claimed Shares, units or debentures of a resident public company which is traded on the Botswana Stock Exchange and at least 49% of its equity shares are released for trading on the Botswana Stock Exchange. Any property of a company carrying on the business of mining
Capital Gains Tax Deductions: Cost of acquisition of the property Cost of improvement of the property Expenditure incurred in the disposal of the property The indexed cost of acquisition, in respect of disposal of immovable property In the case of the disposal of any other property (other immovable property) 25% of the capital gain Any brought forward capital losses from the previous tax year Roll over relief: Relief is available where a person reinvests the original investment plus all or part of the gain from the disposal of the immovable property The gain reinvested will be considered for capital gains tax purposes only upon the disposal of the property in which it was reinvested The portion of the original gain not reinvested is subject to capital gains tax in the tax year in which it arose The re-investment to be made within one year of the disposal of the property
Capital Transfer Tax Where the donee is a company – 12.5% Where the donee is other than a company: Taxable Income Tax Payable % %over %over and over %over
Other Income Tax Rates Unapproved Pension and Provident Funds on Investment Income Transfer Duty – Immovable Property Standard Rate7,5% Urban property transfers (waived where VAT is payable)5% Agricultural land transfers - citizens (waived where VAT is payable) 5% Agricultural land transfers - non-citizens (duty equivalent to VAT payable is waived) 30% The first P of the purchase price in the case of a citizen of Botswana is exempt from transfer duty
Withholding Tax Constructio n contract payments Interest Rent Dividends Commission Commercial Royalties Management or Consultancy fees Payments to Entertainers and Sports persons Residents3% 10%**5%7.5% 10%--- Non-residents3% 15%5%15% 10%15% 10% Treaty Countries Barbados3%10%5%5% /7.5%* 10% France3%10%5%5% /7.5%* 10% 7,5%10% India3%10%5%7.5% 10% Lesotho3%10%5%7.5%10% Mauritius3%12%5%5% /7.5%* 10%12,5%15%10% Namibia3%10%5%7.5% 10% 15%10% Russia3%10%5%5% /7.5%*10% Seychelles3%7,5%5%5% /7.5%* 10% South Africa3%10%5%7.5% 10% Swaziland3%10%5%7.5%10% Sweden3%15%5%7.5% 10% 7,5%10% United Kingdom3%10%5%5% /7.5%* 10% 7,5%10% Zimbabwe3%10%5%5% /7.5%* 10% * 5% applies where beneficial owner is a company with at least 25% shareholding ** final tax where interest is earned from deposits with financial institutions.
Value Added Tax (VAT) VAT is imposed comprehensively on an end-user basis at the rate of 12% on standard rates supplied. Certain specified supplies are either zero rated or exempt from VAT – including certain farming implements, such as ploughs, planters and harvesters Registration is mandatory where 12 months turnover is expected to be P or more VAT is payable by the importer of services not utilised in the making of taxable supplies Input tax includes: Transfer duty payable under the Transfer Duty Act Any tax deemed to have been paid in respect of supplies of second hand goods
Value Added Tax (VAT) Input tax claims should be made within the following time limits: For those who file monthly returns, within a period of four months For those who file returns every tow months, within two tax periods For tax paid in respect of imports, within two tax periods Late VAT returns penalty: the greater of P 50 per day or 10% of the tax due ( nil and refund vat returns – penalties limited to P5,000) Late payment of VAT: compound interest at 1.5% per month or part thereof on both outstanding tax and any penalties charged VAT refunds – Interest at 1% per month or part of a month is payable if the refund is not made within two calendar months of the due date of the return (1 month for IFSC companies, approved manufacturers and exporters)
Value Added Tax (VAT) Zero-Rated Supplies: Exports of goods and services International transport services Sorghum, maize meal, millet, wheat, sugar and flour for human consumption Fertilizers, some pesticides and farming tractors first 5,000 liters per month of water supplied to a residential property (some exceptions apply) Supplies to the Head of State Exempt Supplies: Prescription drugs and condoms Residential accommodation Education at approved institutions Donations Public medical services Non-fee based financial services Passenger transport (excluding the transportation of tourists) farming implements such as ploughs, planters and harvesters
Interest & Penalties Interest/penaltyCharge Interest – late payment of tax 1.5% per month or part of a month, compounded monthly Interest – on penalties arising from failure to submit a return 1.5% per month or part of a month, compounded monthly Penalty – failure to registerP10,000 and above Penalty – failure to provide informationP10,000 and above Penalty – subsequent failure to provide information P20,000 and above Penalty – failure to submit VAT returns P50 per day or 10% of tax payable – whichever is greater Penalty – failure to submit income tax return P100 per day up to a maximum not exceeding tax payable
Important Dates - summary Self-assessed tax (SAT) Final payment of income tax (company) - equal quarterly installments beginning 3 months from start of accounting year i.e. 25% (with an 80% accuracy) of the estimated tax liability (no quarterly payments are required if total company tax charge is less than P50.000) - 4 months from the end of the accounting year Annual income tax return submission (company) - 4 months from the end of the accounting year Annual income tax return submission (individual) - 30 September following the tax year PAYE / WHT - 15th of the following month Annual return of WHT- 31 July following the tax year VAT returns and Payments- 25th of the month following the VAT period