The Botswana Unified Revenue Services (BURS) could be caught off guard come July, as regulations expected to steer implementation of the new Income Tax Act of 2018 are yet to be approved by cabinet. Four months before amendments to the income tax kick off; government has not yet approved regulations to accompany the new transfer pricing section in the Act.
“We do not have the regulations at the moment. We are pushing hard to have the regulations covering documentation and guidelines published,” said William Nkitseng acting BURS Commissioner. He was addressing participants at a transfer-pricing seminar in Gaborone, this week. Nkitseng allayed fears that the delays will open up an opportunity for some multinational companies to siphon funds out of the country. Tax guru Omphemetse Chimbombi of TPExperts Training and Advisory said the country’s decision to introduce transfer pricing is in line with globalisation trends.
“The country is now realising that globalisation is at a high level,” said Chimbombi adding that multinational companies can abuse Botswana’s system to shift profits to other countries. Chimbombi said the transfer pricing will close gaps on the local tax system in relations to multinationals operating in the country. “The revenue that is supposed to be taxed in Botswana will be taxed in Botswana,” said Chimbombi. Last week, finance minister Kenneth Matambo said government is making efforts to shake-off perceptions that Botswana ‘could be a tax haven’ through amendments to legislation.
The minister said government has since reviewed the Botswana International Financial Services Centre (IFSC) tax regime and amended the Income Tax Act. “The amended regime has since been assessed by Organisation for Economic Cooperation and Development (OECD) in January 2019, which declared it not harmful,” said Matambo. The minister said the amendment also introduced transfer pricing rules and thin capitalisation provisions. “Transfer pricing rules guard against attempts by multinational corporations to minimise their tax liability by transferring profits to low tax jurisdictions in order to pay less tax,” said Matambo.
Meanwhile TXExperts has plans to roll out more transfer pricing seminars across the country to enlighten companies on the new tax requirements and will next month be in the northern part of the country. BURS is also expected to start awareness campaigns to educate companies on the new tax regime.