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Africa Tax Landscape

Eswatini

30 Dec 2022

Eswatini's tax landscape overview highlights the country's tax landscape together with other regulatory considerations of setting up an entity in Eswatini.

Doing business in country

Overview of tax system (residence versus source)

Eswatini uses a source-based tax system of taxation. However, certain foreign income can be deemed to be earned in Eswatini.

Please note that Eswatini will be transitioning to a residence-minus system of taxation. As of the date of this questionnaire, it is not clear when these changes will be gazetted.

Type of companies that can be set up (e.g., Close corporation, Partnership etc.,)

Foreign companies, Private companies, Limited liability companies, Government owned companies (parastatals), Not for Profit companies. Partnerships and trusts are also permissible.

Requirements for locals to own shares/stake in the company

Generally, no requirements for locals to own shares except in mining operations where 50% must be held by the government.

Implications of physical presence versus online presence

For Eswatini being a sourced-based jurisdiction, liability for tax ( corporate and Individual) is created by physical presence.

In a lot of cases for both corporates and natural persons, physical presence creates a permanent establishment thereby creating a liability for income tax whilst online presence will most likely create a liability for withholding taxes in our context.

Process of opening a bank account

A Company can open a bank account by submitting its incorporation documents to a bank of its choice and can use the services in an instant.

Corporate income tax

Viable option from a tax perspective (branch versus subsidiary)

Eswatini requires company registration for either a branch or a subsidiary. However, for the repatriation of profits, a subsidiary has a lower withholding tax rate of 10%.

Process of registering and setting up a branch or subsidiary

The registration process involves reporting to the registrar of companies and submitting the following documentation:

  • Lease agreement
  • Health report
  • Bank account confirmation
  • Temporary resident permit
  • ID or passport copies of the Directors
  • Memorandum and articles of association
  • Form J showing directors and addresses
  • Form C showing shareholders and addresses
Lodging of tax returns with the local Revenue Authority

Within four months from the end of the financial year.

Corporate tax rate for branches and subsidiaries

The normal corporate tax rates for both are 30% (2022). Rates vary depending on the industry a company is operating and if they have tax incentives.

Tax rules on repatriation of after-tax profits for branch and subsidiary

There are two fields of application in this regard:

  1. There is a charge of branch profit tax at a rate of 15% in addition to normal tax. The provision applies to a branch of a non-resident company carrying on business in Eswatini.
  2.  If the company is incorporated in a neighbouring country and it is not a subsidiary or branch of a company incorporated outside a neighbouring country (Botswana, Lesotho, Mozambique, Namibia, South Africa), the branch tax payable is reduced to a rate of 12.5%.
Withholding taxes applicable

Yes, the rate for non-residents is 15 %. However, should there be a Double Taxation Agreement the reduced DTA rate will be applicable.

Capital gains tax implications

Currently, there is no Capital Gains Tax Legislation in Eswatini, However, a bill has been submitted for approval by Parliament.

Value-Added Tax (VAT)

VAT rate applied

Standard VAT rate at 15%

Imposition of VAT

Tax levied on the consumption of goods and services at each stage of production. There is a limited scope of exempt and zero-rated goods and services

System of submitting VAT returns (manual versus automated)

Automated.

What are the export requirements that must be adhered to?

For direct export, the supplier delivers goods to the export country and is in total control of all aspects of exportation and the exporter is required to keep all required documentation. The rate applicable for VAT is 0%.

For Indirect export, the purchaser arranges for the collection of goods and pays VAT to the local supplier. Upon submission of proof of exportation, the ERS processes the refund.

VAT registration requirements

VAT vendors must have a fixed place of doing business in Eswatini, Keep proper accounting records, and be capable of submitting regular and reliable returns.


The compulsory registration threshold is an annual taxable turnover of SZL 500K.

VAT on electronic services

There is no VAT on electronic services provided from outside Ethiopia.

VAT registration requirements for the registration of a Group/Branch

A Group can elect to register as one or register each branch separately for as long as they are able to keep and maintain separate books of accounts

To register, one is required to complete and submit an application form to the tax authority with the following documents; Lease agreement, bank account confirmation letter, identity document passport for director(s), trading licence, certificate of incorporation, form J

VAT refunds for non-residents

We are not aware of any refund mechanism for foreigners who acquire and/or consume goods whilst in the country.

Recordkeeping requirements

Taxpayers are required to maintain records for up to a period of 5 years in terms of the VAT legislation.

Employees Tax

Tax year for Individuals

1 July to 30 June of each year.

Is employees’ tax is collected from employers via payroll?

Yes via Final Deduction System (FDS).

Collection of Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL)

Even though these funds are not available in Ethiopia, the tax authority acts as a collecting agent for pension fund.

Should employers register and file returns with both the Revenue Authorities?

Yes.

When is the monthly submission and payment of the EMP201 tax return due for each month following the collection?

Not later than 14th day of each month following collection.

Submission of the employee's tax reconciliation return?

Not applicable.

Method of calculating individuals tax

Yes, the top marginal income tax rate for individuals is 33%.

Labour law registration requirements for employers

Yes. Upon company registration processes.

Is the system manual or automated?

Automated.

Transfer pricing

Transfer pricing documentation guidelines or regulations

Eswatini tax legislation contains General Anti Avoidance rules however a bill has been submitted to Parliament that contains detailed transfer pricing rules.

Transfer pricing documentation materiality limits or thresholds in relation to transactions or revenue

No.

Statutory deadline for submitting transfer pricing documentation

No, as there are no TP reporting requirements yet.

Penalties imposed for non-submission and/or incomplete documentation.

No, currently there is no guiding documentation or legislation with regard to this matter.

International tax

Tax nexus (Permanent Establishment)

Yes, there is a PE risk for non-residents that conducts business activities in Eswatini within a certain degree of permanence. However, our tax legislation does not have a definition of a PE, Eswatini place reliance on international tax principles such as the UN Model Tax Convention or OECD.

Effective Management

No, as Eswatini applies the source-based tax system.

Controlled Foreign Company

No, Eswatini runs a source-based tax system.

Exchange control

For Common Monetary Area payments, there are no exchange control risks. However, commercial banks generally require withholding tax certificates as proof that local tax has been paid.

Payments outside CMA are subject to closer scrutiny and there are limits on how much individuals may transfer in a year (SZL 4M).

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