Botswana’s Income Tax Bill, 2025 abolishes the exempt persons schedule and relocates the protection previously afforded to certain entities into Schedule 2 under the heading of “exempt income”. For the entities carried across from that schedule, the practical question is whether that relocation changed anything at all.
At first glance, the reform appears significant. It seemingly moves the tax system away from a status-based exemption, where relief follows the identity of the taxpayer, toward an income-based framework in which exemption attaches only to particular receipts.
On closer inspection, however, the reform may have altered far less than its structure suggests. The critical issue lies in the language Parliament chose to use. Rather than exempting specific categories of income, Schedule 2 frequently exempts the “income of” certain entities. Read according to its ordinary meaning, that phrase is broad enough to capture the entirety of an entity’s receipts regardless of source or character. The question is therefore whether Parliament genuinely recalibrated the tax base, or merely redesigned the architecture of exemption without materially changing its substantive reach.
From Status-Based Exemption to Exempt Income
Under the current Act, the exempt persons schedule operates as a status-based gateway. Once an entity falls within a listed category, it is generally removed from the ordinary charge to tax without any detailed inquiry into the nature of each receipt. The exemption attaches to the entity rather than to particular income streams.
The Bill replaces that mechanism with Schedule 2. The difficulty is that the drafting frequently does not identify specific income types. Instead, it exempts the “income of” particular entities. In ordinary legal usage, that formulation does not naturally distinguish business from non-business income. Without qualifying language, the provision risks operating in substance much like the exempt persons regime it purports to replace.
The Bill’s treatment of non-profit organisations is instructive here. Parliament does not rely on a bare “income of” formulation for NPOs. It expressly distinguishes between qualifying income and business income, and restricts exemption for the latter to circumstances where those receipts are applied exclusively toward qualifying public purposes within the prescribed period. That drafting demonstrates two things: Parliament was fully aware of the policy implications of exempting commercially active entities, and it knew how to draft a narrower and conditional exemption where that was its intention.
Against that background, the absence of comparable language for entities moved from the exempt persons schedule is difficult to dismiss as accidental.
Purpose, Context and Interpretation
One may argue that the abolition of the exempt persons schedule reflects a legislative intention to narrow exemptions and bring commercial income within the tax net, and that “income of” should therefore be read restrictively to give the reform its full intended effect. That argument sits uneasily with the modern approach to statutory interpretation.
In our law, interpretation is purposive and contextual. Purpose is not derived from assumptions about the extent of reform Parliament was expected to achieve. It is derived from the language of the statute as enacted and its internal structure. Courts are not ordinarily permitted to reconstruct legislation simply because drafting choices have produced less substantive change than anticipated.
Once the NPO regime is taken seriously as a comparator, the purposive argument weakens considerably. The statute itself demonstrates that Parliament knows how to confine exemption for business income where that is its intention. Its decision not to employ similar limiting language for previously exempt entities therefore appears deliberate. The absence of an NPO-style proviso is not a gap to be filled by implication. It is a structural choice visible on the face of the Act, and text and context both support giving “income of” its ordinary, unrestricted meaning.
Even if ambiguity were thought to remain, the contra fiscum principle would become relevant. Under that principle, genuine ambiguity in a fiscal provision is resolved in favour of the taxpayer rather than the revenue authority. It operates at the point where purposive analysis has been exhausted and reasonable doubt persists.
Here, the revenue authority would be asking the court to adopt a restrictive reading that finds no foothold in the enacted language and sits uneasily with the NPO drafting pattern. The taxpayer, by contrast, would rely on the ordinary sense of “income of”, reinforced by that comparator. The two interpretive tools do not pull in different directions. They converge on the same conclusion.
Conclusion
Botswana’s shift from exempt persons to exempt income appears, at least for the entities carried across from the exempt persons schedule, to have changed remarkably little in substance. Read according to its ordinary meaning and within the broader structure of the Bill, the phrase “income of” is capable of preserving exemption across the full range of an entity’s receipts, including commercial income. The treatment of non-profit organisations sharpens that conclusion: Parliament plainly knew how to draft narrower and conditional exemptions where it intended to restrict relief, yet deliberately chose not to employ similar language for entities migrated from the exempt persons schedule.
The form of exemption has changed. Its operative reach may not have. If the substantive tax position of those entities remains effectively untouched, the reform risks collapsing into a purely cosmetic exercise in legislative redesign, and that leaves a far more difficult question than interpretation itself: if nothing of substance was intended to change, why abolish the exempt persons schedule at all?
KLP Consulting and Services provides specialist tax law advisory and compliance services in Botswana. This commentary reflects the legal analysis of KLP Consulting and Services and does not constitute legal advice. Contact us to discuss how the Income Tax Bill, 2025 affects your organisation.
