Letshego Holdings’ after-tax profits for the year ended December 31, 2017 have been adjusted downwards by 8.6% after the pan-African microlender incurred a P118.3 million tax bill dating back to 2014.
Letshego had cautioned investors about the possible tax bill when it initially published its year-end results on March 5. This week, the microlender revealed that year-end profits were now P681.3 million from the initially stated P745.4 million, after finalisation of the tax liability.
Letshego also adjusted its net asset value down 4.1% due to the tax bill.
“Letshego Holdings suffers withholding taxes in various tax jurisdictions from where it earns interest, management fees and other income,” directors explained in a statement this week.
The statement further states that the Botswana Income Tax Act allows Letshego to claim these withholding tax as credits against income tax payable in Botswana arising from such foreign income.
“Letshego has claimed these withholding tax as credits in its income tax returns in Botswana for each of the financial years up to the year ended December 31, 2016. “The Botswana Unified Revenue Service paid refunds to Letshego in respect of such credits amounting to P15.5 million, P43.1 million and P59.7 million
“A recent review of Letshego’s tax position found these withholding tax claims to be inconsistent with the Act.
“As a consequence, Letshego has adjusted its financial statements.”
Letshego and other pan-African financial services entities are expected to receive further bad news on the tax front soon, as the Finance Ministry is planning to revise a long-standing incentives scheme.
Under the International Financial Services Centre (IFSC) incentives package, qualifying firms enjoy a 15% corporate tax rate (as opposed to 22%) and conditional exemptions on Capital Gains Tax, Withholding Tax and other rates.
The package, initially designed to help economic diversification by encouraging the growth of the financial services sector, was broadened over the years to include areas such as business process outsourcing and taxes on foreign incomes by a wide range of sectors.
Finance Minister, Kenneth Matambo said the IFSC framework is being reviewed as part of “complying with international standards” and the need to “remove any perception that Botswana is a tax haven”.