For a start, all trust meetings take place right here, in Gaborone, because it’s so close to South Africa. Professional trustees operate here and attend to all administrative matters.The daily effective management of the trust therefore takes place in Botswana and the result of the setup as well as the efficient operation of the trust cause the trust to be wholly taxable in Botswana, which is the lowest tax jurisdiction in Africa.
The history of trusts in Botswana has to be appreciated, however, for the full extent of the advantages of the Botswana trust to be realised.This history goes back to the earliest trust case to be heard in the Cape Province, that of Twentyman v Hewitt, (1833 1 Menz 156).
The development of trusts under the common law in South Africa and especially the Cape Province became part and parcel of the common law of Botswana when it became an independent country in 1966.By virtue of Section 2 of the Botswana Independence Act of 1966, the Common Law of the Cape remained the Common Law of Botswana and this is still the case.
Some fairly interesting trust cases were heard within the new Republic of Botswana, and the judges took the Botswana trusts, set up at that point, in their stride.In fact, in the Ex Parte Lemke case (BLR1970, page 356), heard four years after independence, the Chief Justice applied the Cy-Pres Doctrine, a common law doctrine that allows a court to alter the object of a trust in cases where the original object is no longer attainable.Trusts are not registered under any statute in Botswana at present.They are set up under the Roman Dutch Common Law.The common law provides adequate protection for beneficiaries and also provides clear guidelines to trustees.
Because trusts are established under the common law in Botswana, it is advisable for evidentiary purposes to notarise trust deeds.The position regarding trusts in Botswana is therefore very similar to that of South Africa before the passing of the statutes such as the Trust Property Control Act.
Trustees will be in office once the deed is signed by all the trustees and the founder.The common law necessity for the provision of security is normally waived in terms of the trust deed; but if a vacancy occurs and is filled by the court, as it has inherent jurisdiction, the court may impose any conditions that it thinks fit under the circumstances.Thus it can be seen that the interests of beneficiaries are well catered for.Clients from other jurisdictions may be appointed as trustees.Families therefore have a say in the administration of trusts set up for them.
It is unnecessary to outline the advantages of having no exchange controls in place in Botswana.South African clients who have funds offshore are able, through this neighboring jurisdiction, to administer their international affairs and undertake international estate planning very close to home.Being in Africa is a factor to consider.However, Botswana has been a stable democracy and has enjoyed excellent financial ratings since its independence.Even the recent credit crunch which gave rise to a budget deficit has been overcome, as the deficit has been made good much earlier than expected.
In the event of a regime change for the worse, the trust deeds that are set up by our office have a Cuba Clause which allows for a change of jurisdiction at short notice.The bottom line is that Botswana is safe, secure, close to South Africa, in the same time zone, English, has a very similar currency value and is a pleasure to visit and do business in. In my view, the Botswana trust jurisdiction is world class.
Source: By Adv Peter O’Halloran (TaxTALK)