Key Benefits:
130. Status of companies: public or private
(1) For the purposes of this Act the expression "private company", in respect of each tax year, means-
(a) a company which by its memorandum or articles of association-
(i) restricts the right to transfer its shares;
(ii) limits the number of its members to fifty, not including persons who are in the employment of the company and persons who have been formerly in the employment of the company and who were while in that employment and after the termination of that employment, members of the company; or
(iii) prohibits any invitation to the general public to subscribe for any shares or debentures of the company;
(b) a company whose membership is less than seven persons; or
(c) a company which is not recognised as a public company by the Registrar of Companies under the Companies Act.
(2) For the purposes of this Act, a company, not being a private company, shall be recognised as a public company in relation to a tax year if-
(a) (i) in the case of a resident company all classes of its equity sharesare listed for quotation on the Botswana Stock Exchange on the last day of the tax year or any substituted accounting period:
Provided that in respect of a tax year prior to the establishment of the Botswana Stock Exchange all classes of its shares are listed for quotation by Stock Brokers Botswana Ltd. with the approval of the Interim Stock Exchange Committee appointed by the Minister; or
(ii) it is a subsidiary of a public company; or
(iii) it is an insurance company transacting life insurance business; or
(iv) it is a society or company registered under the Co-operative Societies Act;
(v) it is a Collective Investment Undertaking or Unit Trust; or
(vi) it is a specified corporation;
(b) in the case of a non-resident company, it is recognized as a public company under the law of the country in which it is resident.
(3) For the purposes of this section, a company is a public company in relation to a tax year if more than 50 per cent of every class of equity shares issued by it are owned, throughout the tax year, by one or more public companies.
(4) For the purposes of subsection (2)(a)(ii), a company is a subsidiary of a public company if it is controlled, directly or indirectly, by that public company; and a subsidiary of the first-mentioned company shall itself be a subsidiary of that public company.
(5) In this section, "control", in relation to a company, means that a person is able to control a majority of voting power either directly by ownership of more than 50 percent of every class of equity shares, or indirectly by ownership of shares in any other company by means of which that person is able to control a majority of voting power in the first-mentioned company.
(6) Where, by reason of changes in the constitution or shareholding of any company, or for any other reason, a company which has been recognised as a public company ceases to satisfy the requirements of subsection (2) in any tax year, such company shall be recognised as a private company in relation to that tax year.
(1) For the purposes of this section a small company means a resident private company whose gross income does not exceed P300, 000 in any tax year.
(2) In respect of any such tax year the shareholders of a small company may elect unanimously, and so notify the Commissioner General in writing, within six months after the end of that tax year, that they be treated for tax purposes as a business carried on in partnership:
Provided that, where all the shares are beneficially owned by a single resident individual, he or she may elect to be treated for tax purposes as an individual carrying on business.
(3) Where a valid election is made under subsection (2), it shall apply to that and the next two subsequent tax years, unless the company is not, or ceases to be, eligible for treatment as a small company for any of those tax years.
(4) Where, in any tax year, a company is treated as a partnership under this section, the chargeable income of the company shall be apportioned among the shareholders in the proportions in which they own the equity capital, and such apportioned shares or income shall be included in the chargeable income of such shareholders:
Provided that, if the business for any tax year results in a loss, the assessed loss shall be apportioned among the share holders in like manner.
(5) Notwithstanding the provisions of subsection (4), the shareholders may elect unanimously and apply in writing to the Commissioner General for a different basis of apportionment and, subject to subsection (6), the Commissioner General may vary the basis of assessment under subsection (4) and adopt a procedure he or she considers reasonable in respect of the apportionment of the tax withheld from dividends under the Seventh Schedule.
(6) The Commissioner General may reject an election under subsection (2), or an application under subsection (5), if he or she is satisfied that the election or application, as the case may be, is made in pursuance of a tax avoidance scheme.
(1) For the purposes of this section and sections 133 and 134, and subject to subsection (2), a "close company" is a resident company recognized as a private company in accordance with section 130(1) in which a person (in this section and sections 133 and 134 referred to as a "participator") is, either on his or her own or with a relative or nominee-
(a) the beneficial owner of or able to control, directly or indirectly, five per cent or over of the equity share capital of the company;
(b) the beneficial owner, directly or indirectly, of shares in the company carrying five per cent or over of the voting powers; or
(c) a loan creditor.
(2) The expression "close company" referred to in subsection (1) does not apply-
(a) to a company in which the Government of Botswana owns shares; or
(b) to a company with which the Government of Botswana has a tax agreement under section 54.
(3) In subsection (1)(c), the term "loan creditor", in relation to a company, means a creditor or other person having a beneficial interest in respect of any redeemable loan capital issued by the company or any debt incurred by the company-
(a) for any money borrowed or capital assets acquired by the company; or
(b) for any right to receive income created in favour of the company:
Provided that a person carrying on a business of banking shall not be deemed to be a loan creditor in respect of any loan capital or debt issued or incurred by the company for money lent by him or her to the company in the ordinary course of that business.
(1) Where any amount paid by a close company in any tax year to or for a participator, or to a relative or nominee of such participator is-
(a) a gratuity in respect of employment;
(b) the cost of any passage or other benefit or advantage granted in respect of that participator's employment which has not been included in his or her gross income under section 32;
(c) the cost of any other passage, travel or entertainment which, in the opinion of the Commissioner General, has not been incurred by the company wholly, exclusively and necessarily in the production of its assessable income; or
(d) a loan made to the participator, relative or nominee out of amounts available for distribution to shareholders, including distribution from reserves, either free of interest or on conditions which, in the opinion of the Commissioner General, are not characteristic of a transaction between independent persons dealing at arms length,
such amount shall, notwithstanding any provision to the contrary in this Act, be treated as dividend income for that tax year accrued and shall form part of the taxable income of such a participator and be charged to tax at the prevailing dividend withholding tax rate to the participator:
Provided that the amount shall not be so treated if the Commissioner General is satisfied that it is the cost of a passage such as is referred to in paragraph (b) paid to a participator not more than once in every two years during his or her residence in Botswana and does not exceed the reasonable cost of direct travel between Botswana and the participator's country of permanent residence.
(2) Where in any tax year any loan made by a close company under subsection (1)(d) to a participator has been repaid, in whole or in part, during the tax year and no further loan has been made to the participator within nine months of the repayment, then in arriving at the amount to be treated as dividend income of the participator under subsection (1)(d), there shall be deducted from the amount of any loan made under the said subsection so much of the amount that has been repaid.
(3) For the purposes of subsection (1)(d), where a loan is made by a close company to a person who is not a participator in that company but is a participator in another company and the companies are acting under arrangements made between them, then the loan shall be treated as having been made by that other company.
134. Interest payable to participator
(1) Where in any tax year a loan is made by a participator, or by a relative or nominee of a participator, to a close company, either free of interest or at a rate of interest lower than the commercial rate generally prevailing at the time the loan is made, and the Commissioner General is of the opinion that the loan is not one between independent persons dealing at arm's length with each other, interest on the loan shall be deemed to have accrued to the participator for that tax year and any subsequent tax year in which the loan remains unpaid at such commercial rate as the Commissioner General deems reasonable in the circumstances.
(2) In the case of a person who is not resident in Botswana, every amount of interest deemed to have accrued to him or her by virtue of subsection (1) shall be deemed, for the purposes of section 58, to have been paid to him or her.
(3) Any amount of interest which is deemed to have accrued to any person by virtue of this section shall not be deducted in ascertaining the chargeable income of the company for that tax year.
(4) If a loan referred to in subsection (1) is repaid in full by the issue of equity shares in any tax year to the participator, the provisions of subsection (1) shall not apply to that tax year.
(5) The provisions of this section shall not apply to transactions between companies which are participators of each other.
(1) Every company carrying on business in Botswana shall at all times be represented for the purposes of this Act by a public officer residing in Botswana and duly appointed by the company or its authorized agent or attorney.
(2) Every company, if it has not appointed a public officer and an address for service of notices before the commencement of this Act, shall appoint a public officer and an address for service of notices-
(a) within two months after the commencement of this Act; or
(b) in the case of a company which begins to carry on business in Botswana after the commencement of this Act, within one month after the commencement of business.
(3) Every change of public officer or of the address for service of notices on the company shall be notified to the Commissioner General by the public officer within 15 days of such change occurring.
(4) No appointment of a public officer shall be deemed to be duly made until notice thereof in writing, specifying the name of the public officer and an address for service of notices, has been given to the Commissioner General.
(5) The appointment of a public officer shall be subject to the approval of the Commissioner General, who may decline to approve the appointment of a public officer or may subsequently withdraw his or her approval of a person who had previously been appointed.
(6) The public officer shall be answerable for the doing of all such things as are required under this Act to be done by the company of which he or she is the representative and in case of default he or she shall be liable to the same penalties.
(7) Everything done by the public officer, which he is required to do in his or her representative capacity, shall be deemed to have been done by the company, and any notice given to or request made upon the public officer shall be deemed to be given to or made upon the company.
(8) The absence of or failure to appoint a public officer shall not excuse a company from the necessity of complying with any of the provisions of this Act, and the company shall be subject to and liable to comply with its provisions as if there were no requirement to appoint a public officer.
(9) Every notice, process or proceeding which under this Act may be given to, served on or taken against any company may be given to, served on or taken against the public officer, and if at any time there is no public officer then any such notice, process or proceeding may be given to, served on or taken against any officer or person acting in the management of the business of the company or as agent for the company, and such person shall have the same liability in respect of that notice, process or proceedings as the company or public officer would have had if it had been given to, served on or taken against the company or public officer.
(10) In the event of any company being placed in liquidation or under judicial management the liquidator or judicial manager, as the case may be, shall be required to exercise all the functions and assume all the responsibilities of a public officer under this Act during the continuance of the liquidation or judicial management, and any person previously appointed as public officer of the company shall cease to be public officer at such time.
(1) Every partnership carrying on business in Botswana shall at all times be represented by a resident individual who shall be-
(a) the precedent partner; or
(b) if no acting partner is resident in Botswana, the agent of the partnership in Botswana.
(2) The precedent partner shall be the person who, being an acting partner resident in Botswana-
(a) is first named in the partnership agreement;
(b) if there is no partnership agreement, is specified by name or initial singly or with precedence to the other partners in the usual name of the partnership,
or, in any case where neither paragraph (a) or (b) is applicable, such other person as is specified by the partnership.
(3) Every partnership shall notify the Commissioner General of the name of the precedent partner or, if there is no acting partner resident in Botswana, shall appoint and notify the Commissioner General of the name of its agent in Botswana-
(a) if it is carrying on business at the commencement of this Act, within two months after such commencement; or
(b) if it begins to carry on business after the commencement of this Act, within one month after the commencement of business.
(4) Every partnership shall within the period specified in subsection (3) appoint an address for service of notices.
(5) Every change of precedent partner or agent of the partnership or of address for service of notices shall be notified to the Commissioner General within 15 days of such change.
(6) The precedent partner or the agent, as the case may be, shall be answerable for the doing of all such things as are required under this Act to be done by the partnership of which he or she is the representative and in case of default he or she shall be liable to the same penalties.
(7) Everything done by the precedent partner or the agent, as the case may be, which he or she is required to do in his or her representative capacity, shall be deemed to have been done by the partnership, and any notice given to or request made upon the precedent partner or the agent shall be deemed to have been given to or made upon the partnership.
