Explanatory note

Under the Agreement with Botswana scheduled to this Order (which is to replace the Arrangement made with the Bechuanaland Protectorate in 1949 as amended by the Agreement made with Botswana in 1970) shipping and air transport profits, certain trading profits not arising through a permanent establishment, pensions (other than Government pensions) and the earnings of temporary business visitors are, subject to certain conditions, to be taxed only in the country of the taxpayer's residence. Where an enterprise resident in one country carries on business through a permanent establishment in the other, the profits of the enterprise which are attributable to that permanent establishment may be taxed in that other country. Government salaries and pensions are normally to be taxed by the paying Government only. Certain payments made to visiting students and business apprentices are, subject to certain conditions, to be exempt in the country visited. Income from immovable property may be taxed in the country in which the property is situated and income derived by public entertainers from their personal activities may be taxed in the country in which those activities are exercised.

Where income continues to be taxable in both countries, relief from double taxation is to be given by the country of the taxpayer's residence. The credit to be given in the United Kingdom for tax payable in Botswana is to include credit for tax spared under certain provisions of Botswana law.

The treatment of dividends takes account of the introduction of the imputation system of company taxation in the United Kingdom. Where a United Kingdom company pays a dividend to a resident of Botswana (other than to a company which controls 10 per cent or more of the voting power in the paying company), the beneficial owner will, subject to certain conditions, receive the tax credit to which an individual resident in the United Kingdom and in receipt of such a dividend would be entitled, less a deduction at a rate not exceeding 15 per cent on the aggregate of the dividend and the tax credit.

Dividends paid by Botswana companies to residents of the United Kingdom will, in general, be subject to tax in Botswana at a rate not exceeding 15 per cent.

The maximum rate of tax to be imposed by the country of source upon interest and royalties paid to a resident of the other country is, in general, not to exceed 15 per cent. Interest received by the Government (or a governmental body) will be exempt from tax in the country of source.

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country and for the exchange of information and consultation between the taxation authorities of the two countries.

The Agreement is to take effect in the United Kingdom as respects income tax for the tax year 1976/77 and subsequent years and as respects corporation tax for the financial year commencing on 1 April 1976 and subsequent years.