Barbados Botswana Tax Treaty
The Barbados Botswana Tax Treaty connects Barbados’ international business sector to one of Africa’s leading economic powerhouses.
Botswana has experienced rapid, long-term growth since independence from Britain in 1966, averaging around 9% annually. This growth has transformed the country from relative poverty into a country with standard of living on par with Turkey.
Botswana’s economic success is the result of good governance and effective development of its mineral resources. Botswana’s mines and natural resources have provided economic opportunity, with prudent fiscal policies generating budget surpluses and building strong foreign exchange reserves. In addition, the country is the least corrupt in Africa according to Transparency International.
Botswana has undertaken a program of signing Double Taxation Agreements with foreign governments in order to facilitate and promote international investment in the local economy while also diversifying the country’s economy into the financial services sector.
Barbados Botswana Double Taxation Agreement
Double Taxation Agreements (DTAs) promote international business by preventing double taxation between treaty countries. This has the effect of minimizing the international tax rates paid by companies and investors who operate internationally. This facilitates conditions within the business environment that promotes trade and investment between partner countries.
Barbados and Botswana both avoid double taxation by allowing the tax payable in the partner country to be deducted in the home country as a tax credit. This system of offering tax credits prevents the same profits from being subjected to undue double taxation, which otherwise may present an unfair tax burden for the business.
Double taxation is avoided as follows:
• Tax payable in Botswana on profits or income from sources within Botswana shall be allowed as a credit against any Barbados tax computed by reference to the same profits or income.
• In the case of a dividend paid by a company that is a resident of Botswana to a company that is a resident of Barbados and which holds directly at least 25% of the capital of the company paying the dividend, the credit shall take into account the Botswana tax payable in respect of the profits out of which such dividend is paid.
• Tax payable in Barbados on profits or income from sources within Barbados shall be allowed as credit against any Botswana tax payable in respect to the same profits or income by which the Barbados tax is computed.
The Barbados Botswana Double Taxation Agreement also outlines the maximum withholding taxes that can be charged by both treaty partners.
The Barbados Botswana Tax Treaty applies withholding taxes as follows:
• Dividends: The withholding tax charged shall not exceed 5% if the beneficial owner is a company which holds directly at least 25% of the capital of the company paying the dividends. In all other cases, the maximum withholding tax is 12%.
• Interest: The maximum withholding tax charged shall not exceed 10%.
• Royalties: The maximum withholding tax charged shall not exceed 10%.
An African Leader
Botswana is an economic powerhouse on the African continent which is rich in natural resources and boasts low levels of corruption. The country provides an attractive investment opportunity for foreign investors.
Barbados is a leading hub for international business and the addition of a double taxation agreement with Botswana means that Barbados now offers international investors an attractive means through which to channel their investment into Botswana.
The Barbados Botswana Tax Treaty features attractive tax rates that will allow international investors to register a Barbados company to act as an effective channel for investment into Botswana.