Transfer pricing - Botswana

Transfer pricing rules have been introduced into the Income Tax Act in the form of a new section 36A) with effect from 1 July 2019. The rules require that the taxable income derived by any person engaging directly or indirectly in any transaction, operation or scheme with a connected person should be consistent with the arm’s length principle. The regulations are based on the OECD Transfer Pricing Guidelines.

The transfer pricing rules require transactions between directly or indirectly connected persons to be consistent with the arm’s length principle. Transfer pricing applies to transactions with non-residents and transactions with Botswana resident IFSC accredited related companies. The terms “connected person” and “control” are defined in the income tax law.

Transfer Pricing in Botswana

Persons engaged in transactions covered by the transfer pricing provisions are required to maintain the required documentation as prescribed by the Minister of Finance.

Any company undertaking related party transactions exceeding BWP 5 million should prepare the Master File. The head of tax agency can ask the taxpayer to submit the equivalent of an OECD Master file within seven days from the date of the request in cases when transactions with a connected person exceed BWP 5 million.

As per the regulations, the Local File is required to be prepared contemporaneously as it is to be filed together with the tax return on the prescribed return-filing date within four months of the end of the financial year.

The Commissioner General on 1 September 2021 issued a blanket ruling setting a threshold for the preparation and filing of transfer pricing documentation. The ruling exempts taxpayers from preparing and filing transfer pricing documentation in cases where the “cumulative arm’s length value” of connected party transactions in a tax year do not exceed BWP 5 million. The said ruling is effective retroactively from July 2019 (2020 tax year).

If aggregate arm’s length value of connected party transactions is less than BWP 5 million, there is no obligation to prepare and TP documentation.

TP documentation is to be prepared in English.

There is no requirement to prepare a CbCR.

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Master File starting at

BWP 15,000

Local File starting at

BWP 22,000

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