Tax audits by BURS are becoming more frequent and more data driven. A tax audit rarely starts the problem; it usually reveals problems that have been building quietly for years.
Many businesses believe they are compliant until BURS asks for supporting documents. That moment often exposes gaps that lead to penalties, interest, and unexpected tax charges. Understanding the most common audit findings can help businesses prepare before the audit letter arrives.
The following are some of the aspects to look out for in preparation:
1. Record Retention and Supporting Documentation
This remains the number one audit issue.
Botswana tax law requires taxpayers to keep proper accounting records and supporting documentation for at least 8 years. During an audit, BURS will request invoices, contracts, bank statements, payroll records, and reconciliations. If an expense cannot be supported, BURS can disallow the deduction even if the cost was genuinely incurred.
2. Private Expenditure Incorrectly Claimed as Deductible Business Costs
This is especially common in owner managed businesses and property companies.
Typical examples include:
• Personal fuel and travel claimed as business expenses
• School fees or groceries paid from the company account
• Personal loans recorded as business costs
3. Payroll and PAYE Compliance Weaknesses
Payroll compliance is a major audit focus area.
Frequent findings include:
• Allowances treated incorrectly
• Benefits not taxed such as fuel, housing, school fees, and loans
• PAYE not reconciled to payroll and financial statements
BURS regularly compares payroll filings to company expenses. Differences trigger queries quickly.
4. Withholding Tax Oversights
Withholding tax is one of the fastest growing audit adjustments.
Common gaps include:
• Payments to consultants without withholding tax
• Service fees paid to non residents without tax deduction
• Management fees and dividends not correctly reported
Many businesses only discover these rules during audits, which leads to retrospective tax, penalties, and interest.
5. Incorrect Input VAT Claims and VAT Reconciliation Gaps
VAT audits frequently focus on input tax claims.
Typical issues include:
• Claiming VAT without valid tax invoices
• Claiming VAT on non allowable expenses
• Claiming VAT on personal or exempt expenses
• VAT returns that do not match financial statements
BURS relies heavily on invoice validation. If an invoice does not meet VAT requirements, the input claim is denied. No valid tax invoice means no VAT claim, even if the expense is legitimate.
6. Thin Documentation for Loans and Related Party Transactions
Auditors pay close attention to shareholder loans and related party transactions.
Common problems include no loan agreements, no interest charged on shareholder loans, no repayment terms and informal or undocumented transactions
These situations can trigger interest adjustments, withholding tax, or thin capitalisation concerns. Related party transactions must reflect commercial reality ie at arms length.
7. Failure to Reconcile Tax Returns to Financial Statements
Many businesses file returns on time but do not reconcile them to financial statements. Unexplained differences create immediate audit risk. Every return submitted must reconcile back to the accounts
Auditors compare:
• Income tax returns versus financial statements
• VAT returns versus revenue and expenses
• PAYE filings versus payroll records
Tax audits are becoming more data driven and more frequent. Preparation can save penalties, interest, and unnecessary stress. If your business has not reviewed its tax compliance recently, this may be the right time to start the conversation.
If your business would benefit from a proactive tax health check or support during an audit, our team is ready to assist. Reach out to us for guidance and peace of mind.
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