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You pay tax on all business income

Publishing Date : 05 August, 2019

Many of us earn income from businesses that we run either on a part-time or full-time basis. As a result, we therefore earn profits from such endeavours. The profits earned from the business ventures are taxed in the hands of the respective person earning such income.

I will analyse the tax that is payable on such profits, commonly known as income tax. Basically, I want to show you that you pay tax on all income you earn from a business, save if you invest in certain farming activities. In this article, words importing the masculine shall be deemed to include the feminine.


Income arising from a business falls under a category of tax called income tax. Income tax is broad and it can take the form of personal tax if the business is run in the name of an individual. It is worth noting that an individual can run the business in his name or through a name he obtains from CIPA, which we call a trade name. In any case, the trade name is just a business name but the legal person who is taxable is the individual. For your information, most audit firms are run as trade names but they basically are individuals who come together to run a business in their individual capacities without a legal entity.

The tax under discussion could alternatively be called corporate tax if the business is run in the name of a company. When a business is run as a company, it is the company which is taxable as it is a separate legal entity. It is critical to note that businesses are taxable only on their profits, being the difference between revenue and operational expenses. Where a taxpayer is in a tax loss situation, then there can’t be income tax to talk about. I must also hasten to state that for a person to be taxable in his individual capacity, he must have earned more than P36 000 in a tax year. Companies are taxed on the first thebe of profits that they make.


Below are some of the common types of businesses that trigger income tax:

Rental income: You pay tax on the rental income you earn from all rented property, less expenses such as mortgage interest, repairs and salaries. Expenses for improvements such as extensions are not tax deductible. Whilst other businesses are eligible for tax depreciation or capital allowances, rental premises on land you own are not eligible for tax depreciation. This means that if you have property on freehold land, no capital allowances are claimable.

However, you can claim capital allowances on developments you make on leased land such as those obtained from government. Most of us think that it is only the rental of immovable property that is taxable but the rental of other property such as generators, musical equipment, tents, vehicles etc are also taxable. Transportation services: Profits from the operation of transportation services provided via buses, trucks, combis and taxis are also taxable just like any other business.

Catering: If you have noticed, there is now a lot of people who are engaged in catering services and these are also taxable businesses, whether big or small. Remember that businesses are taxable on the first thebe they make as profits. Buying & selling: Profits from the buying and selling of various goods such as household goods, clothing, health products etc are also taxable.

Services: Profits earned from service industries such as accounting, company secretarial, training, supply of goods through tenders and salons are just a few of some of the taxable service businesses. Farming: Whilst any farming business is taxable, the rearing of livestock for slaughter is not taxed provided that the farmer rears not more than 300 cattle or 1800 goats or sheep.

For the exemption to apply, the business must be conducted in the name of the individual, who must ordinarily be resident in Botswana. If the business is conducted through a company, the exemption falls away. The other farmers who are not taxed are those who conduct dryland farming (without irrigation or boreholes) on land not exceeding 100 hectares. You will agree with me that it is not possible to list all the businesses that can be conducted but the above are some of the most common businesses being conducted in the country.


The moment you run a taxable business, you must get an accountant to keep your books of accounts, being the record of how much income and expenses your business is making. The books of accounts also show you how much you owe and how much you are owed. The accounts must be prepared whether or not the business is run in the name of an individual.

Well, I am aware that individuals in business and small companies rarely keep books of accounts but the taxman can pounce on them, especially if they make big bucks. So, you better get an accountant today buddy and don’t forget to file your income tax return. Companies also file their income tax returns so that BURS can get a piece of their cake.

Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to him. If you want to join our Tax Whatsapp group, send me a text on the cell number below. Jonathan Hore is the Managing Tax Consultant of Aupracon Tax Specialists and feedback can be relayed to jhore@aupracontax.co.bw or 7181 5836. This article is of a general nature and is not meant to address particular matters of any person.



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