New Attribution Rules for the Taxation of Trusts Under Botswana’s Income Tax Bill 2025
Botswana’s proposed Income Tax Bill 2025 introduces a substantially revised framework for the taxation of trust income. The Bill replaces the historically fragmented approach to trust taxation with clearer attribution and conduit rules, distinguishing between settlor trusts, absolute beneficiary trusts, and other discretionary trust arrangements. These provisions remain in draft form but are expected to be tabled before Parliament in February 2026. Trustees and beneficiaries should take note, as the new rules alter how trust income is attributed, taxed, and reported.
Attribution of Trust Income
Under Subdivision II -Trusts, the Bill introduces express attribution principles for trust income. In broad terms, income derived by a trust may now be taxed to:
depending on the nature of the trust and the rights conferred under the trust deed.
This represents a move away from treating trusts as opaque entities and toward a more transparent conduit or attribution-based regime, aligning Botswana’s approach with modern international trust taxation principles.
Settlor Trusts
Where a trust qualifies as a settlor trust, the Bill provides that the trust is not treated as an entity separate from the settlor. Amounts derived and expenditures incurred by the trustee are treated as derived or incurred directly by the settlor. Trust assets are treated as owned by the settlor, and dealings in trust assets by the trustee are treated as dealings by the settlor.
In practical terms, the settlor remains taxable on trust income, regardless of whether distributions are made. Trust deeds that retain extensive powers or reversionary interests in the settlor may therefore trigger continued attribution of income to the settlor.
Absolute Beneficiary Trusts and Vesting
The Bill further introduces a defined category of absolute beneficiary trusts. In such trusts, where a beneficiary has an absolute entitlement to the assets of the trust as against the trustee, the trust is again treated as transparent. Amounts derived by the trustee are treated as derived by the beneficiary, and trust assets are treated as owned by the beneficiary.
This codifies the principle that where a beneficiary holds a vested interest, trust income is attributed directly to the beneficiary under a conduit approach.
The distinction between vested rights and discretionary rights is therefore central. Trust deeds that confer immediate and enforceable entitlement to income or capital will attract beneficiary-level taxation. Trusts where beneficiaries hold only discretionary interests will continue to be taxed at the trustee level.
Discretionary Trusts
Where no beneficiary has a vested right to trust income, the trustee remains liable for tax on the taxable income of the trust. The Bill now expressly provides that:
These provisions codify trustee-level taxation for discretionary trusts while preserving the non-double-taxation principle.
Why This Matters
These attribution and conduit rules mean that the wording of your trust deed now directly determines who is taxed. Settlor control clauses, vesting provisions, discretionary distribution powers, and beneficiary entitlements will all affect:
Many existing trusts have not been drafted with these attribution consequences in mind. Under the new Bill, this may lead to unexpected tax exposure, reporting failures, or trustee personal liability.
Time to Review Trust Structures
If you operate, manage or serve as a trustee of a trust set up in Botswana, now is the time to review your trust documentation and governance arrangements. Kwape Legal Practice advises trustees, settlors and beneficiaries on trust structuring, deed review and tax compliance alignment under Botswana’s proposed Income Tax Bill. We invite you to arrange a consultation to ensure your trust remains compliant under the forthcoming trust attribution regime.