An expert says while the new tax regime is welcome because it eases the burden for Batswana, it is likely to diminish the property purchasing pool because the surcharge on foreigners is too steep.

Botswana’s newly enacted tax laws have removed equal treatment in acquisition of land between Batswana and foreigners, The Business Weekly & Review has established.  

Under the new tax regime, the transfer duty on land for non-citizens has grown from 5 percent to 30 percent. Before the new laws, the transfer duty on land for both Batswana and non-Batswana stood at 5 percent, except when the land was for agriculture. 

According to tax specialist Jonathan Hore, this increase is likely to make acquisition of property by non-citizens a huge task due to the costs involved. The overall effect of this is likely to a slowdown in property sales as non-citizens are removed from the purchasing pool. 

However, if a foreigner buying land is registered for Value Added Tax (VAT), he or she will pay only 18 percent as the difference between 30 percent and the 12 percent of VAT. 

This is arguably the single piece of legislative territory that came with the most tax exemptions in the past decade, most of which are designed to enable citizens to own immovable property. One of the major changes is the exemption of first–time citizen homeowners or acquirers of undeveloped land for developing into a home. This exemption will apply on both actual purchases and donations of immovable property, regardless of the value.

A massive concession to Batswana is how they can buy property valued at P1 million of less without any surcharge. This is an   increase of 400 percent because the previous ceiling was P200 000. Hore says that the amendment means Batswana will not pay tax on the first P1m of the value of immovable property which is not also covered by another exemption. This P1m exemption can be enjoyed multiple times in a tax year or in one’s lifetime as it is not limited. 

Another major exemption relates to the donation or transfer of property to orphans under the age of 18, the destitute, the disabled and institutions taking care of such underprivileged persons. The same exemption applies to sporting clubs and associations. This new exemption brings with it much financial relief to such persons as they usually do not have the resources with which to pay taxes. 

Before the amendment, transfer duty was not applicable on transfers of property situated in tribal areas. Under the new regime, the transfer of immovable property in such areas will be subject to the tax. This is not likely to affect the majority of property acquirers, particularly citizens, as they will enjoy the P1m exemption. 

The Transfer Duty Amendment Act 2018 also imposes transfer duty on the transfer of shares in a company where the transfer changes the beneficial ownership of the immovable property of such a company. This new amendment means that the acquirer of shares in a company with immovable property, no matter how insignificant the value of such property may be as compared to other assets, will have to pay transfer duty on the transfers. 

Hore says Botswana Unified Revenue Service (BURS) will administer the law, taking over from the Registrar of Deeds. He believes this will promote economies of scale in tax collection and simplify tax compliance as taxes will be handled by the same authority.