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Armstrongs P O Box 1368, Gaborone, Botswana Legal system 1. What is the legal system (civil law, common law or a mixture of both)? The legal system is common law, based on Roman Dutch law, with a mixture of legislative provision. Foreign investment 2. Are the re any restrictions on foreign investment (including authorisations require d by central or local government)? There are no restrictions on foreign investment; there are no authorisations required by central or local government. Obviously an investment is made in an industry specific business, legislation may provide that the business operation obtain a licence, i.e. in the case of banks, a banking licence under the Banking Act, in the case of an insurance company, a short term or long term insurance licence under the Insurance Industry Act. 3. Are there any exchange control or curre ncy regulations? There are no exchange controls in Botswana. 4. What grants or incentives are available to investors? Are any of these aimed specifically at foreign investors? There are no grants or incentives available to investors; there are no grants aimed specifically at foreign investors. There is opportunity however to obtain, where the business contemplated, is that of manufacturing (as defined) a reduction in corporate tax rate from 25% to 15%. There is also opportunity to negotiate, with Government through the Ministry of Finance, tax agreement for tax exemptions or tax holidays which, based on feasibility and business plans, will assist in rendering the proposed activity sustainable. Such tax agreement is approved by Cabinet, and placed before Parliament, and once ratified by Parliament, dictates the tax regime for the business operation. Business entities 5. What is the most common form of business entity used by foreign companies to conduct business in your jurisdiction? The most common form of business entity is the company incorporated in Botswana. Employees 6. Main laws regulating employment relationships? Employment Act Trade Disputes Act Employment of Non Citizen Act. 7. Is a written contract of employment required? What, if any, other terms are likely to govern the employment relationship? A written contract of employment is not required. The Employment Act sets down minimum requirements which all contracts of employment must adhere to. If there is no written contract of employment, those minimum requirements will be given effect. 8. Are employees entitled to manage ment representation and/or to be cons ulted in relation to corporate transactions (such as redundancies and dis posals)? Employees are not entitled to representation/or consultation unless that is in a collective labour agreement. 9. What statutory rules govern the termination of individual employme nt contracts? There are no statutory rules that govern the termination of individual employment contracts. However our Industrial Court, has held, in a decision that has judicial effect, that all contracts of employment, notwithstanding their terms, must be terminated for “just cause”. The term “just cause” has been interpreted to mean an employee may be terminated for justifiable reasons. Three broad grounds have been identified as constituting “just cause” namely: (i) misconduct; (ii) redundancy/retrenchment; (iii) capacity. In respect of redundancy, the Employment Act provides that as soon as the employer makes up a decision to terminate an employment contract for purposes of reducing the size of the work force, he must consult with the employees and notify the Department of Labour. In carrying out the retrenchment an employer must follow the principle of “first in last out”. With regard to incapacity this may either be physical incapacity or on grounds of poor performance. With regard to physical incapacity, an employer is obliged to establish, that the employee is incapable of performing the job for which they were employed. With regard to poor performance, the Industrial Court, has held that an employer must consult with the employee, train and counsel an employee, before finally giving the employee a final opportunity to state their case, prior to dismissing such employee. If the procedures prescribed, by the Industrial Court, are not followed, termination of a contract of employment is likely to be held to be without just cause or unfair. There is distinction between fair/justified and unfair/unjustified dismissal. There is no statutory minimum notice period subscribed, this depends on the length time which an employee is paid i.e. if the employee is paid monthly, the period of notice should be monthly. However the parties are at liberty to prescribe a longer period, in the employment contract. Termination of a contract of employment may be summarily done, without notice, in the case of “serious misconduct”. Severance pay, is not payable on a termination of employment of contract unless contractually agreed to or where the employee has worked for a continuous period for five years in which case it is payable on the basis of one day’s salary for every month worked and thereafter, i.e. after the end of the first five years, two days salary for every month worked. The remedies available for unfair dismissal, include compensation, and reinstatement. 10. Are redundancies/mass layoffs regulated? If so, please give details. Redunancies/mass layoffs are regulated by Employment Act which provides that whenever an employer has formed an intention to terminate a contract of employment for purposes of reducing the size of his work force, the employer must notify the Department of Labour and all employees likely to be affected by the retrenchment i.e. the employer must then consult with the employees, in order to find ways to minimise retrenchment. In carrying out the retrenchment the following principles apply: (i) the employer must do so in respect of each category of employee, wherever reasonably practical to do so according the to principal commonly known as first in last out, provided that in doing so the employer has taken into account (a) the need for an efficient operation of the undertaking and (b) the ability, experience, skill and occupational qualifications of each employee concerned. (ii) where contracts of employment have been terminated for the purposes of reducing the size of the work force, the employer shall if he again seeks employees in the occupations to which those contracts related, give priority of engagement to such extent as is reasonably practicable, to those persons whose contracts of employment were so terminated provided however for re-employment is within six months of termination. 11. What income tax or social security contributions must the following pay: Tax resident employees. Non-tax resident e mployees. Employe rs, in relation to their employees. Tax resident employees The marginal rate is 25% of any income over P120,000 per annum. Non-tax resident employees The marginal rate is 25%, for income over P120,000 per annum. Employers The tax rates for employees is based on a table commencing at 5% of income in excess of P30,000 per annum to 25% of excess over P120,000 per annum. The employer is obliged to withhold tax from employee emoluments, on a monthly basis, and submit the tax to the Commissioner of Taxes reconciled as per an ITW 8 employee income tax declaration form. The only other contributions required by employers is the payment of insurance, determined on an annual basis by the insurer, in respect of Workmens Compensation Insurance which is based on the number of employees, and the level of earnings of the employees. 12. Do foreign e mployees require work permits and/or residency permits? Yes Tax 13. In relation to business entities, what constitutes tax residency in your jurisdiction? A company is defined as a body corporate……..a collective investment undertaking……an association or society whether incorporated or registered or not. Residents in the case of company means (i) its registered office or place of incorporation is in Botswana or (ii) it is managed and controlled from Botswana. 14. What proportion of a tax resident business entity's income is taxed and what are the main taxes that potentially apply (including rates)? The gross income of every person (including a company resident or non resident) for each tax year is the total amount whether in cash or otherwise accrued or deemed to have accrued to him in that tax year from every source situated or deemed to be situated in Botswana. Generally speaking every company or business entity is entitled to deduct from such income, or expenses necessarily incurred in the production of that income, to determine chargeable income. The income tax rate for companies, on chargeable income is 25%. 15. How are the activities of non-tax resident business entities taxed? In the event an entity derives gross income in a tax year from a source situated or deemed to be situated in Botswana, that entity, whether it is resident or not, is obliged to register for tax purposes, and submit tax returns in respect of the income accrued or deemed to have accrued to it in a tax year from every source situate or deemed to be situated in Botswana and any expenditure necessarily incurred by it, in generating such income. A non resident company is liable to pay tax on chargeable income at a rate of 25%. 16. Dividends paid to foreign corporate shareholders. These are subject to 15% withholding tax. Dividends received from foreign companies. In terms of the Income Tax Act any investment made outside by Botswana or business carried on outside Botswana by a resident of Botswana is deemed to be income accrued from a source in Botswana, and would form part of the income of the Botswana recipient. Any investment made outside Botswana or business carried on outside Botswana by a resident of Botswana, who is an individual, and not a citizen of Botswana, is not taxed in Botswana. Inte rest paid to foreign corporate shareholders. Interest on foreign loan, made by foreign corporate shareholder, is subject to withholding tax at 15%. Intellectual property (IP) royalties paid to foreign corporate shareholders. Payment of a commercial royalty management or consultancy fee to a foreign corporate shareholder, is subject to withholding tax at 15%. The rates of withholding tax may defer in the event there is a Double Taxation Agreement between Botswana and the country of origin of the foreign corporate shareholder. Currently Botswana has Double Taxation Agreements with UK, South Africa, Russia, France, Sweden, Seychelles, Mauritius, Namibia. 17. Are there any thin capitalisation rules (restrictions on loans from foreign affiliates)? If so, please give details. No, save in the case of non resident controlled mining companies where the ratio debt to equity is set at 3:1. 18. Are there any controlled foreign company rules? If so, please give details. No. 19. Are there any transfer pricing rules? If so, please give details. No, save that the Commissioner of Taxes is always at pains to determine whether amounts charged in respect of goods or services or licences or royalties by a foreign corporate shareholder, to its subsidiary or associated company in Botswana is at arms length, and market related on the basis where that where the pricing from the foreign entity is inflated, the Commissioner will seek to set aside the transaction, under powers the Commissioner has under the Companies Act, in order to allow only the market related price as a deduction from income, for tax purposes. 20. How are imports and exports taxed? Imports and Exports are subject to Customs and Excise duties subject to certain goods being exempted. Imports are further subject to Value Added Tax (VAT). 21. Is there a wide network of double tax treaties? If so, please give details. Botswana has Double Taxation Agreements with South Africa, UK, France, Sweden, Mauritius, Seychelles, Namibia, Russia. Competition 22. Are restrictive agreements and practices regulated by competition law? No. Currently there is no competition legislation. Intellectual property 23. Outline of the main intellectual property rights that are capable of protection in your Bots wana: Nature of right. How protected. How enforced. Length of protection. Patents Nature of right. An invention shall be patentable if it is new, involves an inventive step, and is industrially applicable. How protected. Registration at the Registrar of Marks, Patents and Designs. How enforced. The owner of the patent can institute court proceedings. The remedies available are (i) interdict, (ii) damages, (iii) delivery up or destruction of any infringing product, article or product of which the infringing product forms an inseparable part, (iv) an account of the profits derived from the infringement. Length of protection. 20 years and the right is renewable. Trade marks Nature of right. A mark shall not be registered if it is: (i) incapable of distinguishing the goods and services of one enterprise or business from those of another enterprise or business, (ii) contrary to public order or morality, (iii) likely to mislead the public in trade circles, (iv) identical to, or is an imitation of, or contains an element, an armorial bearing, flag or other emblem, a name, abbreviation or initials of, or official sign or hallmark, (v) identical to, or confusingly to, or constitutes a translation of, a mark or trade services of another enterprise, or if it is well known, and registered in Botswana, (vi) identical to a mark, or if it so nearly resembles a mark belonging to a different owner of a registered mark and already on the register. How protected. Registration at the office of the Registrar of Marks, Patents and Design. How enforced. The registered owner may institute Court proceedings. The remedies available are an interdict, delivery or destruction of any infringing product, article or product of which infringing product, damages or an account of the profits derived from the infringement. Length of protection. Ten (10) years and the right is renewable. Registered designs Nature of right. 1. The design must be new (a design is deemed to be new if it has not been disclosed to the public anywhere in the wo rld by publication in a tangible form, or by use or in any other way, prior to the date of the application for registration). 2. The design is not contrary to public order or morality. How protected. Registration at the Office of the Registrar of Marks, Patents and Designs. How enforced. The owner of the patent can institute Court proceedings. The remedies available are (i) interdict, (ii) damages, (iii) delivery up or destruction of any infringing product, article or product of which the infringing product forms an inseparable part, (iv) an account of the profits derived from the infringement. Length of protection. Five (5) years but may be renewed subject to renewal fees for only two consecutive terms of five years each. Unregistered designs Nature of right. Unregistered designs are not protected under Botswana laws. Copyright Nature of right. 1. The work must be original. 2. It must not be contrary to public policy. 3. The first publication of the work must have taken place in Botswana. 4. The author of the work was a qualified person at the time when the work was first published. How protected. The author of the work enjoys protection from the moment the work is created. How enforced. The owner of the copyright can institute court proceedings. The remedies available are by way of an interdict and damages. Length of protection. Fifty (50) years. Confidential information Nature of right. 1. The information must be the product of time, money, effort and experimentation. 2. It must not be public property or public knowledge. How protected. The owner of the ideas/information enjoys protection from the moment the work is created. The Common law provides the basis for the protection. How enforced. By instituting Court proceedings based on the Acquilian action. Length of protection. From the date of inception. Marketing agreements 24. Are marketing agreements regulated? : Agency. Agency agreements, per se are not regulated. The Commissioner of Taxes will investigate whether fees payable to the agent are market related. In certain circumstances an agent will require an agency licence under the Trade Act. Distribution. Agency agreements, per se are not regulated. The Commissioner of Taxes will investigate whether fees payable to the agent are market related. In certain circumstances the distributor, operating in Botswana will require a wholesale and distributors licence, under the Trade Act. Franchising. Franchise agreements are not regulated in our jurisdiction. The Commissioner of Taxes will always seek to investigate that the agreement is on arms length market related terms. In certain circumstances the franchisee will require a trade licence under the Trade Act. E-commerce 25. Are there any laws regulating e-comme rce (such as electronic signatures and distance selling)? No. Data protection 26. Are there any data protection laws? The only protection afforded to data is through the Banking Act which prohibits the disclosure of a customer’s information or any of the customer’s banking transactions by a bank. In so far as electronic banking exists, this protection would extend to electronic transactions. Product liability 27. Are there any laws regulating product liability and product safety? The Consumer Protection Act provides protection for consumers in circumstances where a supplier employs a deceptive method, act or practice that constitutes an unfair business practice. In addition the common law provides for two actions, one based on a contractual claim and the other based on the Delictual Action. The Contractual claim, in addition to the usual elements that one has to prove in a claim based on contract has to prove that the other party was a manufacturer who publicly confessed to having the skill and expert knowledge of the product. The Delictual Claim is based on the Aquilian remedy.
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