Botswana’s Income Tax Bill, 2025 abolishes the exempt persons schedule and replaces it with a new system based on “exempt income” under Schedule 2. Under the current Income Tax Act, trade unions and employees associations registered under the Trade Unions and Employers Organisations Act are exempt persons under paragraph (viii) of the exempt persons schedule, while associations of employers are exempt under paragraph (ix).
Those provisions do not appear in the Bill. More significantly, the income of these entities has not been carried into Schedule 2 as exempt income. Once the Bill comes into force, the statutory basis upon which these entities have historically enjoyed exemption from income tax will disappear.
The result is potentially significant. Trade unions, employees associations and employers associations may, for the first time, become fully subject to Botswana income tax.
The Position Under the Current Act
The current Income Tax Act adopts a status-based exemption system. Certain entities are listed as exempt persons and are therefore removed from the ordinary charge to tax.
Paragraph (viii) of the exempt persons schedule exempts trade unions and employees associations registered under the Trade Unions and Employers Organisations Act. Paragraph (ix) separately exempts associations of employers.
The consequence of exempt person status is broad. Once an entity falls within the exempt category, its receipts are not subjected to ordinary income tax. Membership subscriptions, investment income, rental receipts, and other income earned by these entities have historically fallen outside the income tax net. That exemption has formed part of the legal and financial framework within which these organisations have operated for decades.
The Position Under the Bill
The Bill fundamentally restructures the exemption framework. Instead of exempt persons, the Bill recognises exempt income. Section 14(4)(a) provides that exempt income shall not be included in gross income. The critical question therefore becomes whether a particular category of income is protected under Schedule 2.
Trade unions, employees associations and employers associations do not appear in Schedule 2. The omission is notable because a number of entities previously protected under the exempt persons schedule have been carried across into the new exempt income framework. Trade unions and employers associations were not.
The Bill also contains no transitional provision preserving their existing exemption and no saving clause continuing the protection previously afforded under paragraphs (viii) and (ix) of the exempt persons schedule. At the same time, the Tax Administration Bill defines “company” broadly to include incorporated and unincorporated entities, whether established for profit or non-profit purposes. Trade unions and employers associations therefore remain capable of falling within the ordinary income tax framework unless specifically exempted.
The combined effect of these provisions is that the statutory protection previously enjoyed by these entities falls away on commencement of the Bill.
What This Means in Practice
If enacted in its current form, trade unions, employees associations and employers associations will be required to register as taxpayers with the Botswana Unified Revenue Service, file annual tax returns and account for income tax in the same manner as other taxable entities.
Income streams that have historically existed outside the tax net may now attract tax consequences. Investment returns, rental income and income derived from commercial activities will require careful review under the new legislation.
The change may also have broader financial implications for organisations that hold significant reserves or investment assets, particularly where future disposals or investment activities generate taxable amounts under the Bill. For many of these entities, this would represent a substantial shift from the longstanding position under the current Act.
Conclusion
The omission of trade unions, employees associations and employers associations from Schedule 2 is unlikely to go unnoticed. Under the structure of the Bill, the exempt persons schedule disappears, while exemption now depends on whether income is specifically protected as exempt income.
Paragraphs (viii) and (ix) of the current exempt persons schedule are not preserved in the Bill, and no equivalent exemption has been introduced in Schedule 2. Unless Parliament amends the Bill before enactment, these entities may move from complete exemption into the ordinary income tax system for the first time.
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.
