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Let me clarify that. I do not regard your home or holiday home an investment. These are in fact liabilities. Your bank, and other creditors, would regard them as assets because they can seize your home if you cannot meet your commitments. But to you it's a home or a holiday home for your use and enjoyment. And thus a liability.
An investment is something that generates passive income. It could be a leveraged investment where the mortgage is repaid by the income generated from rentals. For an example of such an investment please click here.
In my articles I discuss several jurisdictions of choice regarding personal income tax. I found another jurisdiction of choice. And this one, surprisingly, is in Africa! Botswana.
Moody's Investors Services recently, in its annual report on Botswana, gave credit to Botswana's authorities for their firm commitment to prudent fiscal and monetary policies. Botswana's investment-grade ratings are the highest by far of any country on the African continent, according to Moody's, reflecting unusually low public debt and very strong liquidity even by the standards of other countries rated at the same level.
GDP growth rates have averaged 7% per annum and per capita incomes have posted some of the highest rates of growth in the world. Better than Europe or the US. Hallo! This is in Africa!
The rating agency points out that, after registering deficits for two years in 2001/02 and 2002/03, the authorities were newly determined to return to a balanced budget last year. Moody's expects that this stance will be sustained over the medium term, although serious spending pressures are being exerted by health costs, especially those related to HIV/Aids care and treatment. Botswana, in contrast to other African countries, is serious in fighting HIV/Aids.
I suppose South Africans are knocked so punch drunk while trying to survive the punitive taxes of South Africa that we never expected a jurisdiction of choice right across the border! However, when you take a closer look at the very simple and straight-forward tax policies of Botswana, you realise that here might be an investment opportunity that we all missed.
Similar to jurisdictions of choice like Switzerland, Singapore, and Ireland, Botswana has no exchange control and an aggressive tax structure to attract investments. You can bring your funds in and take them out without restriction. The highest income tax rate for resident and non-resident individuals is the same at 25%pa. A non-resident company will also pay 25% on net profits before tax, while resident companies do even better. An approved manufacturing company would pay only 5% and other resident companies 15%. There is a withholding tax on dividends of 15%. This is all highly competitive and actually beats, in terms of saving on tax, my recommendation to incorporate in the canton of Fribourg in Switzerland. OK, OK, in the end I’ll probably still advise you to take the safer route and rather incorporate in Switzerland. But it could be worth your while to investigate this opportunity.
During 2003 we undertook an extended safari into Botswana. In my report I commented on the noticeable difference in the attitude and industry of people in Botswana compared to their neighbours across the border in South Africa and Namibia. You can read more by clicking here.
We recently made an investment in Botswana. Only 3% of the land in Botswana has private ownership. The rest is community property in the African tradition. The investment is in a Nature Reserve of 32,450ha along the Limpopo River. We visited the Reserve during the first weekend of October 2005. It is prime African wilderness. It was very dry at the time of our visit. At the time they did not have any rain for 18 months and the river was almost dry, but under normal conditions this is Africa at its best. The project has been released to the public on 1 October 2005. You can learn more at www.limpopo-lipadi.com. This is an investment that you might want to recommend to your clients and friends. I believe the value of the share will at least double in 5 years' time. My estimate is based on what happened to similar investments in South Africa over the past 5 years. In the mean time you would be able to visit and enjoy this pristine part of Africa as much as you like!
Kind regards.
Philip de Bruin
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