Botswana to Introduce VAT on Foreign Digital Services in 2025

March 1, 2025

On February 5, 2025, the Botswana Minister of Finance gave an annual 2024 Budget Speech, addressing the economic progress and presenting budget and tax proposals for fiscal year 2025-26, which will be further discussed and debated in the National Assembly.

In the Budget Speech, the Minister announced plans to increase corporate and personal tax rates, diversify and expand the revenue base, and simplify and modernize the VAT system.

Impact on the VAT System

Part of the Minister's proposal to simplify and modernize the VAT system includes enacting a new Tax Administration Act to harmonize VAT and Income Tax Act rules. This measure aims to reduce tax compliance time for taxable persons and eliminate duplication in filing and payment procedures.

Another essential proposal is to broaden the tax base and impose VAT on foreign service providers' digital sales of goods and services to consumers located in Botswana.

Currently, foreign digital service providers do not have to charge, collect, and remit VAT on their sales. However, if the Minister's proposal is adopted and corresponding amendments to the VAT Act are implemented, foreign digital businesses will have to apply 14% VAT on transactions relating to digital services.

The implementation date of the proposed measures is unknown. However, at this point, it is known that foreign digital service providers will have to appoint a local tax representative to fulfill their VAT requirements.

Conclusion

Considering that the introduction of the VAT on foreign digital services providers is more or less certain, taxable persons who have customers in Botswana and provide services such as online advertising, streaming games, music, apps, and films or supply e-books, e-journals, software, and internet services should monitor for updates on the implementation timeline, VAT registration threshold, filing, and payment requirements.

Additional considerations for foreign digital businesses include identifying reliable local tax representatives for VAT purposes since they must appoint one.

Source: 2024 Budget Speech

What is Botswana’s proposed VAT on foreign digital service providers?

The proposal would require foreign digital businesses to charge, collect, and remit 14% VAT on digital services sold to consumers in Botswana.

Which digital services will be subject to VAT in Botswana?

Services such as online advertising, streaming, gaming, software, e-books, e-journals, apps, and internet-based services will be subject to the new VAT rules.

When will the VAT on foreign digital services take effect in Botswana?

The exact implementation date is not yet confirmed, but businesses should monitor updates from the Botswana government for compliance timelines.

Will foreign digital businesses need to register for VAT in Botswana?

Yes, foreign digital service providers must register for VAT and appoint a local tax representative to manage tax compliance and reporting.

What is the VAT rate for foreign digital services in Botswana?

If implemented, foreign digital service providers will need to apply a 14% VAT rate on relevant transactions with Botswana-based consumers.

How should foreign digital businesses prepare for Botswana’s VAT changes?

Companies should track legislative updates, assess VAT registration obligations, identify a local tax representative, and prepare for compliance requirements.

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