Botswana Introduces New Transfer Pricing Regulations

Botswana's Income Tax (Transfer Pricing) Regulations, 2026 came into effect on 1 July 2026, introducing a more detailed framework for the pricing and documentation of transactions between associated parties. 

The Regulations apply primarily to international transactions but can also extend to certain domestic arrangements. These include transactions involving a foreign permanent establishment of one or more Botswana residents and arrangements where an associate benefits from a concessionary tax regime in Botswana. 

For businesses with cross-border related-party transactions, the new Regulations require closer attention to how pricing methods are selected, the comparables used to support them and the documentation maintained. 

Choosing the appropriate transfer pricing method 

The Regulations introduce a hierarchy for the application of transfer pricing methods. 

Where the Comparable Uncontrolled Price (CUP) method can be applied, it should be used. Where both traditional transaction methods and transactional profit methods are applicable, preference is given to the traditional methods. 

The profit split method has a more limited role. Where all methods are applicable, it should only be used to determine residual profits rather than as the primary method. 

Businesses will therefore need to be able to demonstrate not only that their pricing is at arm's length, but also why the method selected is appropriate under the Regulations. 

Applying the arm's length range 

The Regulations provide that no adjustment should be made where remuneration falls within the arm's length range. 

Importantly, the range is not confined to the interquartile range. Where an adjustment is required, it should be made to the median as defined in the Regulations. 

This makes the underlying benchmarking exercise and the quality of the data used to establish the arm's length range particularly important. 

Comparables require careful consideration 

Both internal and external comparable transactions may be used. 

The Regulations place restrictions on the information available to both BURS and the taxpayer. The Commissioner General may not use information that was unavailable to the taxpayer when making an adjustment, while taxpayers may not rely on information unavailable to the Commissioner General for documentation purposes. 

This raises an important practical question around the databases used by taxpayers and BURS and whether greater alignment may be required when selecting comparable information. 

Geography also matters. Where comparables are drawn from markets outside the market in which the transaction takes place, their use must be justified and will be considered on a case-by-case basis. 

Businesses undertaking benchmarking studies should therefore consider the markets selected and be able to support the relevance of the comparables used. 

Intragroup services 

The Regulations contain specific provisions affecting services between related parties. 

Shareholder costs may not be recharged, and the 5% simplified approach for low-value-adding services does not apply. 

This puts greater emphasis on identifying the nature of intragroup services, determining whether a benefit has been received and supporting the basis on which costs are allocated and charged. 

The treatment of costs associated with areas such as ESG also warrants consideration, particularly where these costs are incurred centrally and allocated across a multinational group. 

Intellectual property 

There is no specific reference to the DEMPE framework covering the development, enhancement, maintenance, protection and exploitation of intangibles, nor is there specific guidance on hard-to-value intangibles.  

Multinational groups with intellectual property arrangements involving Botswana will need to consider how their existing policies and supporting documentation sit alongside the new Regulations. 

Corresponding adjustments and double taxation 

The Regulations provide a specific process for corresponding adjustments where a transfer pricing adjustment could otherwise result in double taxation. 

A Botswana resident must apply for the corresponding adjustment. The Regulations do not provide an alternative remedy for mitigating the potential double tax, making it important that the prescribed process is followed.  

Documentation takes on greater importance 

Contemporaneous transfer pricing documentation must be in place by the prescribed date for filing the relevant tax return.  

The required information broadly aligns with the type of information contained in local and master files. Transactions not exceeding P5 million are exempt from the documentation requirement.  

The timing requirement means transfer pricing documentation can no longer be treated as something prepared only once BURS begins an enquiry. Businesses within scope will need processes to identify related-party transactions, assess their pricing and prepare the supporting documentation within the prescribed timeframe. 

Reviewing existing transfer pricing arrangements 

The new Regulations provide a good point at which to reassess existing transfer pricing policies and supporting documentation. 

Attention should be given to the methods used, the selection and availability of comparables, intragroup service charges, intellectual property arrangements and the processes used to prepare contemporaneous documentation. 

Businesses with established group transfer pricing policies should also consider whether those policies can be applied in Botswana without modification or whether the specific requirements of the Regulations call for a different approach. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.