5% tax on Special Economic Zones operators effective
The Minister of Finance and Economic Development conferred a five percent corporate tax rate to investors or developers approved as Special Economic Zone area licensed businesses through the Income Tax ( Special Economic Zones Development Approval) Order 2021, published on October 22, 2021. The five percent corporate tax rate will be applicable to the approved businesses in their first 10 years of operation and shall thereafter increase to 10%.
The tax concession shall only apply to approved businesses situated in Special Economic Zones, being areas which are geographically demarcated as such under Section 29 of the Special Economic Zones Act. Additionally, the developers and investors must have been granted a tax relief certificate by the Minister of Finance and Economic Development.
Who is a developer or an investor?
According to the law, ‘an investor’ is a person who has been licensed by the relevant licensing authority to carry on business in a Special Economic Zone, or who exports the entire goods they produce or services they provide except where an exemption reducing the exports from 100% is granted by the Minister responsible for trade and industry. Additionally, an investor includes a person who under tax any development project or activity in a Special Economic Zone in terms of Paragraph 5 of the above-mentioned order (see Approved Businesses below).
The order defines a ‘developer’ as an investor who has been granted rights over land in a special economic zone for infrastructural development made through that developer’s own funds or from third parties. In addition, the term developer includes into its ambit an investor who lures other investors to obtain licences to conduct approved businesses in a Special Economic Zone area which is managed by that same developer. In all instances, for one to qualify as a developer, they must have been given a tax relief certificate by the Minister of Finance and Economic Development.
Approved businesses
A tax relief certificate can be granted to operators of the following businesses:
l Agrobusiness, manufacturing, warehousing, distribution or logistics services as well as internationally traded services.
l Exporters of 100% of goods or services or one who has an exemption from the 100% condition
l New businesses setup in the Special Economic Zone including one which relocates an already operating business from a customs territory to a Special Economic
Zone or one which relocates or expands from one Special Economic Zone to another, provided that no portion of the existing business is transferred to the Special Economic Zone or where the investment made in the Special Economic Zone is additional to the existing operations and will create new jobs. In both instances where a new business is setup or transferred from one Special Economic Zone to another, such relocation should not result in loss of employment.
Application
For an investor or developer to obtain a tax relief certificate they must apply in the prescribed form, being Form A. Attachments which should accompany form A include an assessment report and a recommendation letter from the Special Economic Zones Authority, an approved tax registration for new businesses, a tax clearance certificate for existing businesses, an investor or developer licence issued by the Special Economic Zones Authority and any other documentation that the Minister may require.
This article is of a general nature and is not meant to address particular matters of any person. Contact us on the details below for tax consulting services. Email: jhore@aupracontax.co.bw Cell: +267 7181 5836 Landline: + 267 393 9435