The International Financial Services Centre (IFSC)

Botswana established the International Financial Services Centre in the hopes of reaping the following benefits:

• The development of sustainable employment opportunities for suitably qualified citizens;

• The broadening and sophistication of the skills base of the Botswana workforce;

• The diversification of the country’s revenue base;

• The encouragement of the introduction and increased use of modern financial services technology.

• The augmentation of Botswana\'s already stellar reputation in the international financial community.

Botswana intends to concentrate on the following core activities via International Financial Services Centres:

• banking and financing operations executed in foreign currency;

• the broking and trading of securities denominated in foreign currency;

• investment advice;

• management and custodial functions in relation to collective investment schemes;

• insurance and linked activities including captive insurance and administration thereof;

• registrar and transfer agency services;

• exploitation of intellectual property;

• creation and supply of computer software for use in the services described above;

• cross border leasing;

• capital raising.

An IFSC Certification Committee has been legislatively established. Its function is to make recommendations to the Minister of Finance and Development Planning for the issuance of a tax certificate valid until 2020.

In considering an application for a certificate, the Committee will have regard to:

• how many Botswana citizens may be employed in relation to the approved operation and the capacities in which they will be employed;

• facilities proposed to be used for the training and imparting of skills to citizens;

• plans developed for the eventual replacement of non-resident employees by Botswana citizens;

• plans developed for the participation by Botswana citizens in the management of the business.

Forms of IFSC Operation

Companies in possession of IFSC Certificates may trade directly or through 100% subsidiaries. They are not allowed to do business with persons in Botswana with the exception of other IFSC companies.

A company holding an IFSC Certificate is required to obtain approval from the Minister of Finance for any change to the beneficial ownership of 25% or more of its capital or voting rights.

IFSC companies are permitted to invest in Botswana resident companies but dividends flowing from such companies will be subject to a 15% withholding tax.

IFSC Operations and Taxation

The following incentives are available to International Financial Services Centre Companies:

• a corporate tax rate of 15% up until June 2020;

• exemption from the obligation to withhold taxes on dividends declared;

• exemption from tax on dividends received from a company that is not resident in Botswana in the case that the International Financial Services Centre Company controls, either directly or indirectly, alone or with connected persons, 25% or more of the share capital or 25% or more of the voting rights of the non resident company;

• exemption from the obligation to withhold tax from payments in respect of interest, commercial royalty, management or consultancy fees to non-residents.

The gross taxable income of the IFSC company includes All types of income earned by IFSC companies is part of its gross capital income with the exception of capital gains. The following deductions are permitted against gross income:

• specified foreign exchange losses debited in the profit and loss account of an International Financial Services Centre Company under the commercially recognized system of accounting of tax;

• interest paid on a foreign debt of an International Financial Services Centre Company is tax deductible as long as at some time during the course of the tax year, the foreign debt of the International Financial Services Centre Company exceeds its foreign equity in which case a portion of the foreign debt interest will not be allowed;

• if some part of the total gross income of an International Financial Services Centre Company is from a source outside Botswana, a credit can be claimed for the tax suffered in the foreign country against the Botswana tax on such income in accordance with a prescribed formula.