Botswana operates a source-based tax system, meaning individuals and companies are taxed on income derived from or deemed to be derived from Botswana. The primary legislation governing income tax is the Income Tax Act. For employees, income tax is collected through the Pay As You Earn (PAYE) system, where employers are responsible for withholding tax from employee salaries and remitting it to the Botswana Unified Revenue Service (BURS).
Understanding these obligations is crucial for employers operating in Botswana to ensure compliance and avoid penalties. The tax year in Botswana runs from July 1st to June 30th. The information provided here is based on the tax regulations generally applicable, including those for the tax year ending June 30, 2025, which impacts the 2025 calendar year.
Employer Social Security and Payroll Tax Obligations
While Botswana does not have a broad, mandatory social security contribution system based on a percentage of salary for all private sector employees akin to many other countries, employers do have other statutory obligations.
- Workers' Compensation Fund: Employers are required to contribute to the Workers' Compensation Fund. This is not a percentage of payroll but is typically based on the nature of the business and the number of employees, covering workplace injuries and illnesses.
- Training Levy: Certain sectors may be subject to a training levy, often calculated as a percentage of the total payroll, which contributes to national training and development initiatives. The specific rate and applicability depend on the industry.
- Occupational Pension Schemes: While not universally mandatory, many employers offer or are required by industry regulations or collective agreements to contribute to occupational pension schemes for their employees. Contributions to approved schemes are often tax-deductible within certain limits.
Employers are responsible for understanding which of these obligations apply to their specific industry and operations and ensuring timely payment of required contributions.
Income Tax Withholding Requirements
Employers in Botswana are mandated to withhold income tax from their employees' gross remuneration under the PAYE system. The amount of tax to be withheld depends on the employee's taxable income and the applicable tax rates and thresholds.
Taxable income includes salary, wages, bonuses, allowances, and certain benefits in kind. The tax rates are progressive, meaning higher income levels are taxed at higher rates. The tax-free threshold and tax brackets are typically reviewed annually and are applicable for the tax year (July 1 to June 30).
For the tax year ending June 30, 2025, the personal income tax rates and brackets for residents are structured as follows:
| Taxable Income (BWP) | Tax Rate (%) |
|---|---|
| 0 - 48,000 | 0 |
| 48,001 - 96,000 | 5 |
| 96,001 - 144,000 | 10 |
| 144,001 - 192,000 | 15 |
| 192,001 - 240,000 | 20 |
| Above 240,000 | 25 |
Note: These brackets and rates are based on the tax year ending June 30, 2025, and are subject to change by the government, typically effective from July 1st each year.
Employers calculate the monthly PAYE withholding by annualizing the employee's monthly remuneration, applying the annual tax rates and thresholds, and then dividing the resulting annual tax liability by twelve.
Employee Tax Deductions and Allowances
Employees in Botswana may be eligible for certain deductions and allowances that can reduce their taxable income. Employers need to consider these when calculating PAYE, provided the employee submits the necessary documentation.
Common deductions and allowances include:
- Pension Contributions: Contributions made by an employee to an approved retirement fund are tax-deductible, up to a certain limit or percentage of income.
- Medical Aid Contributions: Contributions to a registered medical aid scheme are generally tax-deductible.
- Education Allowances: Certain allowances related to education may be deductible under specific conditions.
- Other Approved Deductions: The Income Tax Act may allow for other specific deductions or allowances based on individual circumstances or government policy.
Employees are responsible for providing their employer with accurate information and documentation to claim these deductions and allowances for PAYE purposes.
Tax Compliance and Reporting Deadlines
Employers have strict compliance and reporting obligations under the PAYE system in Botswana.
- Monthly PAYE Returns: Employers must calculate and withhold PAYE from employee salaries each pay period (usually monthly). The total amount withheld must be remitted to BURS by the 15th day of the following month. A monthly PAYE return detailing the amounts withheld for each employee must also be submitted by this deadline.
- Annual PAYE Reconciliation: By March 31st following the end of the tax year (June 30th), employers must submit an annual return (Form P10) reconciling the total PAYE deducted and remitted during the tax year with the total tax liability calculated for each employee based on their annual earnings.
- Employee Tax Certificates (Form P9): Employers must issue each employee with a tax certificate (Form P9) by March 31st following the end of the tax year. This certificate summarizes the employee's gross remuneration, deductions, and total PAYE withheld during the tax year, which employees need for filing their personal income tax returns.
- Annual Employee Tax Returns: Employees are generally required to file their personal income tax returns (Form ITW1) by September 30th following the end of the tax year (June 30th).
Failure to comply with these deadlines and requirements can result in penalties, interest, and other enforcement actions by BURS.
Special Tax Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Botswana may face specific tax considerations.
- Tax Residency: An individual's tax obligations in Botswana depend on their residency status. A resident is generally taxed on their worldwide income (though Botswana primarily taxes source income), while a non-resident is taxed only on income sourced in Botswana. Residency is determined based on physical presence in Botswana (typically more than 183 days in a tax year or more than 120 days in the current year and 183 days in the preceding year).
- Non-Resident Withholding Tax: Payments made to non-resident individuals or companies for services rendered in Botswana may be subject to withholding tax at specific rates, separate from the standard PAYE system for employees.
- Double Taxation Agreements (DTAs): Botswana has entered into DTAs with several countries. These agreements aim to prevent double taxation of income and may affect the tax treatment of foreign workers and companies, potentially reducing or exempting certain types of income from tax in Botswana if already taxed in the home country. The provisions of a relevant DTA should be consulted.
- Specific Industry Rules: Certain industries, such as mining or construction, may have specific tax rules or reporting requirements that apply to both local and foreign entities and their employees.
Foreign companies employing staff in Botswana, even if they do not have a permanent establishment, may still be required to register as an employer for PAYE purposes if they have employees working in the country. Understanding these nuances is vital for foreign entities operating compliantly in Botswana.
