Input tax allowed
Input VAT incurred on goods and services acquired solely for the making of taxable supplies is generally deductible as input tax. The Authorities are very particular that valid tax invoices be held for a claim and that the claim be made in the correct VAT period.
Input tax expressly denied
VAT paid in respect of the following goods or services cannot be deducted as input tax:
passenger vehicles designed or adapted to seat up to nine persons (including double-cab vehicles but excluding safari vehicles), except when acquired by a dealer or vehicle-letting business;
entertainment expenditure (including hotel accommodation and meals for business purposes and for staff welfare, e.g. tea and coffee), except where acquired by an entertainment business, or where entertainment is supplied to passengers in the course of a transportation service; and
membership subscriptions relating to sports, social or recreational organisations.
Input tax is also denied if the required tax invoice or other supporting documentation is not held by the registered person, the input tax is not claimed in the correct VAT period or the input tax is in connection with exempt supplies.
The input VAT claim should generally be made during the tax period in which the invoice was issued. If it was received late, the claim can be made as follows:
in the case of a one-month tax period – up to the next three tax periods; and
in the case of a two-month tax period – in the next tax period.
A person whose registration is cancelled is deemed to have made a taxable supply of goods on hand, including capital goods, unless input tax was denied. The goods on hand must be valued at the fair market value.
In determining whether VAT may be deducted as input tax when mixed supplies are being made, direct allocation must first be applied to determine whether VAT may or may not be deducted as input tax.
Where VAT incurred relates to the making of both exempt and taxable supplies, an apportionment method acceptable to the Commissioner General must be used to allocate the input tax credit between the exempt and taxable supplies. The default method is based on turnover. Where taxable supplies are 90% or more of total supplies, all VAT incurred on acquisitions may be claimed as input tax.
All goods imported into Botswana are subject to VAT, except goods expressly exempted from VAT on importation. The VAT liability on imports arises when the goods are cleared through Customs. Goods held in a bonded warehouse are not subject to VAT until they are cleared for use.
VAT on imports may be deferred where adequate security is provided by the importer for VAT due or where the Commissioner General is satisfied that the importer has a clear VAT payment record. The maximum deferment period is 25 days after the end of the month during which the goods were imported.
When assets on which VAT has been claimed as input VAT are transferred to the making of non-taxable supplies, an output VAT based on the higher of the transferred value or fair market value is payable. Examples of change of use are:
transfer or sale of a company computer to an employee; or
transfer of assets in a bank from a taxable to an exempt division.
Preregistration or post- deregistration VAT
The value of the imports for VAT purposes must include all taxes and duties payable, as well as the cost of insurance and freight. The value of goods that are imported from South Africa, Lesotho, Namibia and Swaziland includes, for VAT purposes, insurance and freight costs.
Only services imported for use or consumption in Botswana for a purpose other than to make taxable supplies are subject to VAT.
VAT on expenses, including imports other than capital goods, incurred up to four months prior to the registration date may be claimed in the first VAT period.
A person making only exempt supplies is thus liable for VAT on imported services, and a person making both taxable and exempt supplies will be liable for VAT to the extent that the services are acquired for non-taxable purposes.