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13.4.3. Documentation Requirements

Standard Documentation

Taxpayers are required to maintain transfer pricing documentation to substantiate the arm’s length nature of their transactions.  Effective 1 July 2019, taxpayers are required to prepare a master file and local file in line with the OECD guidelines:

Local File

The local file is required to be prepared in respect of transactions entered into with related persons. The requirement also applies to domestic transactions in cases where one or both parties is an International Finance Services Center (IFSC).  Effective 1 July 2019, taxpayers having total related party transactions in a tax year of more than BWP 5 million are required to prepare and submit the local file  along with the annual tax return.

Master File

Effective 1 July 2019, taxpayers having total related party transactions in a tax year of more than BWP 5 million are required to prepare and submit a master file along with the annual tax return. Earlier, taxpayers were required to submit the master file only on the request of the tax authority.

Country-by-Country (CbC) Reporting

Botswana has not yet introduced a Country-by-Country reporting requirement. However, Botswana has joined the OECD’s Inclusive Framework, which implies a commitment to implement the BEPS minimum standards, including Country-by-Country reporting.

Language of Documentation

The local file is required to be prepared in the Setswana or English languages.

Penalties

Failure to submit transfer pricing documentation attracts a penalty of up to BWP 500,000 (increased from BWP 250,000 effective 1 July 2019).

In case the tax authorities find that the transaction is inconsistent with the arm’s length principle, they are empowered  to adjust the taxable income and impose a penalty  of BWP 10,000 or 200% of the additional tax assessment, whichever higher.