UK-Botswana DTA Comes Into Force

by Jason Gorringe, Tax-News.com, London

20 September 2006

Earlier this month the Double Taxation Convention between Botswana and the United Kingdom entered into force.

The agreement was signed in Gaborone on 9 September 2005 and entered into force on 4 September 2006. The double taxation avoidance agreement is a re-negotiation of the 1977 agreement between the two countries.

Under the terms of the updated agreement, 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 5% withholding tax, if the company receiving such dividends holds at least 25% of the shareholding of the company paying the dividend, and 12% withholding tax on gross amounts where the shareholding is below 25%.

In the United Kingdom the provisions of the Convention will take effect from 1 April 2007 (for corporation tax purposes), and from 6 April 2007 (for income tax and capital gains tax purposes). In Botswana, the provisions will take effect from 1 July 2007.

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