Botswana's Parliament Approves Double Tax Agreement With UK

by Robert Lee, Tax-News.com, London

04 January 2006

A Double Taxation Avoidance Agreement between Botswana and the United Kingdom has been approved by lawmakers in the African state.

The accord, which was presented by the Minister of Finance and Development Planning, Baledzi Gaolathe was approved before Parliament adjourned last Thursday and will enter into force after it is ratified by the respective parliaments of the two countries.

Gaolathe told Parliament that the agreement also facilitates close co-operation and exchange of information between the tax authorities and addresses the problem of international tax evasion and avoidance.

"Further, double taxation avoidance agreements are of great significance as part of efforts to attract direct foreign investment," said Gaolathe.

"In establishing their business, multinational companies worldwide consider the existence of double taxation avoidance agreements as a distinct advantage as it eliminates uncertainty about how their incomes will be taxed in the contracting countries," Gaolathe added.

The double taxation avoidance agreement is a re-negotiation of the 1977 agreement between the two countries and it seeks to replace the older one.

Gaolathe explained that the salient provisions of the new Botswana/United Kingdom Double Taxation Avoidance Agreement are: "An enterprise of the contracting state will be taxed in the other state in its business income, only if it carries on business in the other state through permanent establishment".

The scope of a permanent establishment has been extended, in the new agreement to cover construction, assembly and/or installations as well as services rendered through employees.

Also income derived from, as well as gains from sale of, immovable property will be taxed only in the country where the property is situated.

The same principle applies to gains from the sale of shares in a company whose assets consist substantially of immovable property located in one of the countries.

Dividends will be subjected to five per cent withholding tax, if the company receiving such dividends holds at least 25 per cent of the shareholding of the company paying the dividend, and 12 per cent withholding tax on gross amounts where the share holding is below 25 per cent.

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