April 18, 2005
Protocols to remove trade obstacles

PARLIAMENT - Double Taxation Avoidance Agreements are an established feature of the international fiscal scene and their primary function is to remove fiscal obstacles to bilateral trade and investment.

The Minister of Finance and Development Planning, Baledzi Gaolathe, told Parliament on Friday that the agreements cover taxes on income and provides for co-operation on avoidance of double taxation and prevention of tax evasion on income and capital gains.

Asking Parliament to adopt the Botswana-Seychelles Double Taxation Avoidance Agreement Order, Gaolathe said the right to tax capital gains is however given to the state of the taxpayer's residence except where the gains relate to immovable property situated in another country or relate to property of a permanent establishment located in Botswana.

Gaolathe said to support and encourage foreign investment, including the development of Botswana as an International Financial Service Centre (IFSC), it was important to extend the range of Botswana's double taxation agreements.

He said IFSC companies were required to do business mainly with companies outside Botswana and they are taxed on their world-wide income, which can result in the double taxation of their income.

Foreign companies operating in Botswana will also benefit from a network of double taxation agreements, which ensure that any income accruing to them is not taxed twice in Botswana and in their home countries.

Even if so taxed, full credit is given by their home countries for the tax payable in Botswana.

Salient provisions of the Botswana-Seychelles Double Taxation Avoidance Agreement include an enterprise of a contracting state, which will be taxed in the other state on its business income only if it carries on business in the other state through a permanent establishment.

Gaolathe said the scope of permanent establishment has been extended to cover services rendered through employees.

The agreement would also open up possibilities for mutual co-operation in the prevention of tax evasion, avoidance and fraud by providing for the exchange of information on taxpayers and transactions where one country may need assistance from the other.

The Double Taxation Avoidance Agreement between Botswana and Seychelles will enter into force on ratification by Parliament and notification of the same to Seychelles. The agreement would be applied from July 1 of the year next following its entry into force. BOPA