In Botswana, the Pay As You Earn (PAYE) system places a statutory obligation on employers to deduct income tax from employees’ remuneration and remit it to the Botswana Unified Revenue Service (BURS) within prescribed timeframes. Although PAYE is a routine compliance requirement, failure to pay it, and meet payment deadlines, can have serious financial, legal, and operational consequences.
This case study examines the broader implications of PAYE non-compliance in Botswana, focusing on interest, penalties, and the refusal by the BURS to provide taxpayers with a Tax Clearance Certificate until the full liability has been paid, irrespective of whether it is disputed or not.
Employers are effectively custodians of PAYE, collecting tax on behalf of the State. These amounts do not belong to the employer and must be treated as “trust monies.” Despite this, PAYE non-compliance often arises during periods of financial pressure, weak internal controls, or poor compliance oversight.
A common scenario involves employers continuing to deduct PAYE from employee salaries but delaying remittance due to cash-flow constraints. While this may appear to be a short-term solution, the long-term consequences are frequently underestimated.
PAYE non-compliance typically manifests in one or more of the following ways:
Once a PAYE balance remains outstanding, interest begins to accrue, and penaltiesmay be imposed in accordance with Botswana’s tax legislation.
Interest on unpaid PAYE is calculated from the due date until full settlement. In addition, penalties for late payment may be imposed. Over time, these charges substantially increase the original tax liability, placing further strain on already-constrained cash flows.
What begins as a manageable arrear can quickly escalate into a significant compliance exposure.
“PAYE is not an employer’s money. Once deducted, it must be treated as trust funds and remitted on time, or the consequences can be severe.”Speak to a Specialist
One of the most immediate and commercially damaging consequences of PAYE non-compliance is the inability to obtain a Tax Clearance Certificate (TCC). BURS will not issue a TCC where PAYE, including related interest and penalties, remains outstanding.
The absence of a valid TCC may result in:
In practice, the lack of tax clearance can halt business operations, particularly in sectors reliant on public-sector work.
Failure to remit PAYE that has already been deducted from employees’ remuneration raises serious legal concerns. Since PAYE represents tax collected on behalf of employees, non-payment may expose employers and responsible officers to enforcement action.
Persistent non-compliance may attract increased scrutiny from BURS, including audits and recovery proceedings.
Only once all PAYE obligations are fully met can an employer regain tax-compliant status and qualify for a Tax Clearance Certificate.
This case study highlights critical compliance lessons relevant to all employers in
Botswana:
It must be prioritised over operational expenditure.
Interest and penalties significantly increase financial exposure.
Non-compliance directly affects access to business opportunities.
Strong internal controls reduce the risk of inadvertent non-compliance.
Addressing PAYE issues promptly reduces enforcement risk and cost.
PAYE non-compliance in Botswana is a high-risk compliance failure with consequences that extend well beyond the tax system. Interest, penalties, and the denial of a Tax Clearance Certificate can undermine business sustainability and reputation. Employers who treat PAYE compliance as a strategic obligation rather than an administrative burden are far better positioned to protect their operations, maintain credibility, and ensure long-term viability.
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
