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6.5. Deduction of Cross-Border Payments and Non-Deductible Expenses

Generally, all expenses incurred exclusively for the purpose of business are allowed as a deduction, unless specifically disallowed. Royalties, interest, and service fees paid to foreign affiliates are generally deductible, provided such amounts are at arm’s length and subject to applicable WHT.

Foreign head office expenses of a mining company in excess of 1.5% of gross income are disallowed as a deduction and taxed as constructive dividends.

If interest rate on loans is in excess of prevailing market rate, in respect of loans made by foreign mining company to its affiliate mining companies in Botswana, such excess interest is disallowed and taxed as dividends.

The following expense types are not deductible or have limited deductibility for Botswana tax purposes:

  • Amortization of goodwill
  • Pre-incorporation expenses
  • Penalties and interest
  • Any taxes paid
  • Interest paid to a non-resident is disallowed, if tax is not withheld on the same
  • Donations in excess of 20% of the chargeable income on non-fulfillment of certain conditions