SCOPE OF BUSINESS

INCOME (S28) - GENERAL

Chargeability to tax is principally, on GROSS

INCOME (BUILDING BLOCK) (S27) from
sources situated or deemed to be situated
in Botswana (Ss 8 – 11)

S28 Business, General

S29 Business, Farming
S30 Farming, Optional Liability
S31 Mines and Minerals
S33 Interest, Royalties, etc
S34 Rents, Premiums, etc
S35 Capital Gains
S36 Anti-avoidance provision –
fictitious scheme, transaction or
operation

S28 VALUE OF STOCK HELD AT END OF

TAX YEAR = acquisition cost +
additional incidental expenses
incurred – value of damage,
deterioration, obsolescence, etc

NON-ARM’S LENGTH TRANSACTIONS OR

STOCK THAT CANNOT BE VALUED –
Commissioner’s current market price at
date of acquisition
CONCEPT OF ‘HELD AND NOT DISPOSED
OF’

 GOODS SOLD BUT NOT DELIVERED are

deemed to be part of closing stock;
accounted for at cost

 GOODS PURCHASED BUT NOT

RECEIVED are not held & therefore cannot
be part of closing stock
VALUATION OF STOCK AT YEAR
END

1. Acquired by purchase (in case of

livestock), value shall be:
 Purchase price of livestock
 Current market price
 RSV (amount between 75 & 125% of
SV

2. Acquired otherwise than by purchase

(donation, inheritance, etc)
 Current market price
 RSV
DETERMINATION OF FARMING
CHARGEABLE INCOME

Gross income:
 Proceeds from sale of livestock and
produce
 Proceeds from sale of working animals
 MV of livestock or produce donated
during the year
 MV of livestock or produce consumed
by owner
 BC on disposal of assets previously
subject to CA
 Proceeds from disposal of assets
previously entitled to 100% CA
 Expenditure incurred wholly, exclusively
and necessarily:

 Purchases of livestock and produce

 Cost of farming inputs used in
operations
 BA on disposal of assets
 CA on P & M
 AA on commercial buildings used in
farming operations
 Farming capital expenditure allowed at
100%
Example: valuation of stock and
computation of chargeable income

Farmer prepares accounts to 31st March

annually. Following is relevant for y/e 31st
March 2012:

Stocks at 1st April 2011:

 Fully grown cattle 310
 Tollies and heifers 208 (160 < 2
years and 48 > 2 years)
 Calves 80

During year, the following happened:

 Farmer consumed 4 fully grown cattle
 5 fully grown cattle were donated to a
nephew at his wedding
 10 mules were purchased, MV P300 @
  35 calves were born and 4 died
 Sold 55 fully grown cattle @ P1000
 Animal feed purchased P4000
 The market value of each cow is
assumed to be P800 during the year
 Farmer uses RSV to value his stocks

Required:
Compute the opening and closing stocks
and chargeable income for the y/e 31st
March 2012
Determination of closing stock:
Cattle
FG T&H Calves
Bal b/f 310 208 80
Births (35 – 4) 31
Sales (55)
Own consumption (4)
Donations (5)
Transfers:
T&H 48 (48)
 Calves 80 (80)
Bal c/f 294 240 31
Valuation of stocks (all)
Opening stocks:
Qty RSV P
Cattle: FG 310 430 133300
T&H 208 230 47840
Calves 80 90 7200
188340

Closing stocks:
Cattle: FG 294 430 126420
T&H 240 230 55200
Calves 31 90 2790
184410
Computation of farming CI
Pula
Sales (55 x P1000) 55000
Own consumption (4 x P800) 3200
Donations (5 x P800) 4000

Less OS (188340)
Add closing stock 184410

Purchase of mules (10 x P300) (3000)

Animal feed (4000)

Farming CI 51270
SPECIAL POINT - FARMING,
OPTIONAL LIABILITY S30

S30 (1) Farming operations by resident

individual

(a) Livestock farming – total number in tax

year was less than 300 cattle; 6
sheep/goats = 1 cow; or

(b) Dry-land farming – land for farming

operations is less than 100 hectares during
tax year

Not to be included in gross income

No opportunity to make any election

S30 (2) deleted

SPECIAL POINT - Average
Chargeable Income
S42 (1)

 provision excludes companies

 person must be carrying on the

business of farming

 may notify the CG in writing, within

six months after the end of a tax year

 that he elects to substitute his

current year’s and two preceding year’s
chargeable income (from the business
of farming ONLY!) with annual
average of the three years
e.g. Farmer 404 has the following
chargeable income from his business of
farming:
Pula
07/08 55 000 53000 850 100
08/09 21 500 53000 850 -850
09/10 82 500 53000 850 2262.5
Total CI 159 000 159000 25501512.5

If farmer makes his election by 31st

December 2010, then each year’s
ASSESSMENT would be:

P159 000/3 = P53 000

Tax liability first P36000 0
Excess over 36000 @ 5% 850
850
 Tax Payable for each of three years
is therefore:
First P nil
Excess P
Total Tax Payable

Or P in total

If election had not been made, the total tax

liability would be calculated as follows:

07/08 P55 000

Tax Payable thereon:

First P 36000 nil
Excess P @ 5% 950
Total tax payable 950
08/09 P21 500 (tax P0)

09/10 P82 500

Tax Payable Thereon:

First P 72000 1800
Excess P @ 12.5% 1312.50
Total tax payable 3112.50

Total tax liability for three years calculated

separately is P4062.50

If election is made, saving is P4062.50 –

2550 = 1512.50
S42 (2) Once an election has been made
for any three years, none of the three years
would be allowed for any further averaging
in subsequent elections

e.g. If farmer makes an election in respect

of election cycle 07/08, 08/09, 09/10; he can
make a further election cycle in respect of
tax years 10/11, 11/12, 12/13, as one
averaging period, excluding the first election
cycle made for three tax years ending 09/10

An amount of zero (0) is substituted for any

tax year in which a loss is made.
S42 (3) Despite finality of assessments,
CG may make appropriate
amendments/assessments to give effect to
election made.