Listed entities need a second transfer duty exemption

Jonathan Hore
Jonathan Hore

We now have a new Transfer Duty Act (hereinafter, the Act) with new provisions which were enacted on August 28, 2019.

The new amendments bring about a lot of improvements to the Transfer Duty Act but there are some implementation issues that need consideration.

One of the issues which will prove to be a challenge is whether Botswana Stock Exchange (BSE)-listed entities are citizens for the purposes of the new Act, especially when they need to acquire immovable property or shares in a company holding immovable property.

For the record, as at the date of publication of this article, the above stated amendments had not yet commenced.

What this means is that the stated amendments to the Act are now law which will take effect when the Minister of Finance & Economic Development publishes the commencement date. Usually, such commencement notices are published shortly after the laws are enacted.

For the record, transfer duty is a tax payable by the acquirer of an immovable property and the law has expanded the tax to transfers of shares in a company which owns immovable property, regardless of the value of such immovable property.

What this means is that transfer duty will on commencement of the law, be charged on the transfer of both immovable property and shares in any property holding company.

Citizens and the tax

The amended Act prescribes different rates of taxes, being five percent for citizens, 30% for non-citizens and five percent for any other person other than a natural person or a company.

It is critical to state that a citizen refers to a Motswana (an individual who holds an Omang) as well as a company which is controlled by citizens, i.e.

Batswana should hold more than 50% of the shares. It is important to state that the issue of whether a company is citizen or not is of paramount importance as it determines the transfer tax rate i.e. whether five percent or 30%. This is so critical for BSE-listed entities whose shareholding changes almost daily.

BSE entities’ issues

The transfer duty issues that directly affect BSE-listed entities can briefly be categorised as those arising when they sell shares and those that crop up when they purchase immovable property or shares in a company holding immovable property.

The challenge is not with the sale of shares by such entities but when they acquire immovable property or shares in a property-owning company. These two scenarios are analysed in more detail below:

Disposal of shares

One of the new amendments to the Act is that it exempts buyers of shares in BSE-listed entities which hold immovable property from transfer duty. This exemption was put in place to ease trading on the bourse as imposing transfer duty would certainly stifle share dealings.

Given that the disposal of shares by a BSE-listed entity is exempt, the main contentious issue is whether BSE listed entities should pay transfer duty at five percent or 30% on acquisition of taxable property.


It is common knowledge that BSE-listed entities trade their shares almost daily and this means that their shareholding is always changing.

This is different from most privately-owned companies whose shareholding rarely changes. For listed entities, the constant changes in shareholding means that for some of them, the companies switch from being citizen and non-citizen on a regular basis, depending on share dealings.

Assuming that on October 10, 2019, a BSE-listed entity acquires an immovable property worth P10m when citizens held 49% of its shareholding, that would make it subject to the tax at 30%.

On the other hand, if the shareholding as at say October 20, 2019 shifts the citizen shareholding to 55%, such BSE-listed entity will pay transfer duty at five percent.

Whilst listed entities may be required to report changes in ultimate shareholding, the accuracy of that data depends on the entities notifying the BSE of such changes in time.

Further, ultimate shareholders may change their citizenship or place of incorporation, which then requires prompt updates to the bourse, for accurate data on the shareholding structures.

Therefore, the complication with most BSE-listed entities is that they cannot predict the rate of transfer duty applicable on future transactions as that is affected by their shareholding, which changes almost daily.

The most affected entities are those whose main business is the investment in immovable property as they will find it very difficult to plan for taxes that they will pay in any financial year due to shareholding shifts. Sometimes the tax rate will be 30% whilst five percent may apply in other circumstances.

Second exemption ideal

It would be ideal, in the same manner that the acquisition of shares in a BSE-listed entity is exempt from transfer duty, that BSE-listed entities be exempted from transfer duty when they acquire immovable property.

This will not only assist them in their financial forecasts but it will also make their property acquisition smoother and less complex. Such an exemption for BSE-listed entities will go a long way in easing the operations of this critical capital raising board.

*Hore is a Managing Consultant (Tax) at Auprecon Tax Specialists in Gaborone

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