doing business in Eswatini (previously Swaziland)

country profile international treaties and memberships government  Executive: The king is the chief of state and the prime minister is the international and  African Development Bank Group structure head of government. The monarchy is hereditary. The prime minister regional  African Continental Free Trade Area Agreement is appointed by the monarch from among members of the house of organisations and  African Union assembly. Cabinet is recommended by the prime minister and customs unions  Common Monetary Area (“CMA”) confirmed by the monarch.  Common Market for Eastern and Southern Africa (“COMESA”)  Legislative: Eswatini has a bicameral parliament.  Commonwealth of Nations  Judicial: The highest courts are the Supreme Court and the High  Group of 77 Court. The subordinate courts are the magistrates' courts and the  International Monetary Fund National Swazi Courts for administering customary / traditional laws  Organisation of African, Caribbean and Pacific States (jurisdiction restricted to customary law for Swati citizens).  Southern African Customs Union  Next Parliamentary elections: September 2023.  Southern African Development Community economic data  Nominal GDP (USD billions): 3.85  United Nations  GDP per capita (USD): 3 414.81  World Bank Group  Inflation rate (% change): 4.12  World Customs Organization  Government revenue (% of GDP): 27.24  Eswatini receives preferential treatment under the following agreements:  Government gross debt (% of GDP): 47.93 http://ptadb.wto.org/Country.aspx?code=748 bilateral  Eswatini has investment treaties in force with Germany and the United *Source: IMF (December 2020) investment treaties Kingdom.

 Treaties have been signed with Egypt, Kuwait, Mauritius and Taiwan  Eswatini's national development strategy, which expires in 2022, Province of China but these have not yet entered into force. prioritises increases in infrastructure, agriculture production and economic diversification. investment-related  African Growth and Opportunity Act  Eswatini’s main industries include soft drink concentrates, coal, agreements /  Cotonou Agreement forestry, sugar processing, textiles and apparel. institutions  Multilateral Investment Guarantee Agency  Eswatini’s main export partner is South Africa. The main export  World Trade Organization commodities include soft drink concentrates, sugar, timber, cotton yarn, refrigerators, citrus and canned fruit. dispute resolution  Convention on the Settlement of Investment Disputes (ICSID Convention)  Eswatini’s main import partners are South Africa and China. The main  Permanent Court of Arbitration import commodities include motor vehicles, machinery, transport equipment, foodstuffs, petroleum products and chemicals. intellectual  A comprehensive list of IP-related treaties signed by Eswatini is available property (“IP”) at: http://www.wipo.int/wipolex/en/profile.jsp?code=sz risk ratings  World Economic Forum global competitiveness index (2019): 121/141 treaties  Please see further detail under the trade marks section below.  World Bank ease of doing business (2020): 121/190  Corruption perception index (2019): 113/180

1 doing business in Eswatini (previously Swaziland)

legal regime fine not exceeding SZL250 000, or imprisonment for a term not exceeding five years, or both. Further, a penalty of up to 10% of the total turnover of applicable legal  Eswatini’s legal system is based on Roman-Dutch-based common law and the merging parties may be imposed by the Eswatini Competition regime customary law. Commission. dispute resolution  While official government intervention or arbitration is available on request,  Eswatini is a member of the regional competition body, COMESA. most disputes are settled through the Industrial Court. COMESA regulates merger control. Merger activities in Eswatini should be  The government accepts binding international arbitration of investment conducted with COMESA in mind. disputes between foreign investors and the state. prohibited practices  The Competition Act prohibits any category of agreements, decisions or  Eswatini is a member of the International Centre for Settlement of concerted practices which have, as their object or effect, the prevention, Investment Disputes (ICSID), although there is no specific legislation restriction or distortion of competition to an appreciable extent in the providing for the enforcement of ICSID awards. country or in any substantial part. land acquisition,  About 60% of land is Swazi National Land, held by the monarchy in trust  There is currently a Competition (Amendment) Bill which is in the process planning and use for the people of Eswatini. Control of the use of this land is generally of being assessed by Eswatini lawmakers. No date for the enactment of delegated to local chiefs. the Bill has been announced and it may be subject to substantial further  In terms of to the Constitution, the Land Management Board is responsible changes. for vetting and approving applications by non-citizens to acquire land in  Cartel conduct (such as price fixing, market division and collusive Eswatini. tendering) and minimum resale price maintenance are prohibited by the  The new Constitution bars the vesting of land ownership by foreign-owned Competition Act. companies or foreigners, unless ownership was attained before the  The Competition Act prohibits abuses of dominance. promulgation of the Constitution on 8 February 2006.  The Eswatini Competition Commission operates a corporate leniency programme for a firm that voluntarily discloses the existence of any

competition agreement or practice which is prohibited by the Competition Act and merger control  The Competition Act, 2007 (the “Competition Act”) regulates merger cooperates with the Eswatini Competition Commission in its investigations. control in Eswatini.  Any conduct that is in contravention of the Competition Act attracts  The Eswatini Competition Commission published a new Competition criminal and penal liability, being a fine of SZL250 000 or imprisonment (Amendment) Bill in August 2020 which is in the process of being not exceeding five years, or both. Further, a penalty of up to 10% of the assessed by Eswatini lawmakers. No date for the enactment of the Bill has total turnover of enterprises or persons that contravene the Act may be been announced and it may be subject to substantial further changes. imposed by the Eswatini Competition Commission.  The Competition Act defines a merger as the acquisition of a controlling  COMESA regulates prohibited practices in the COMESA Common Market. interest in any trade involved in the production or distribution of any goods Activities in Eswatini should be conducted with this regional competition or services; or any asset which is or may be utilised for or in connection body in mind. with the production or distribution of any commodity. employment  There are no merger thresholds in Eswatini.  The merger filing fee charged is 0.1% of the combined annual turnover or immigration  Expatriates working in Eswatini must hold a valid work permit. assets, whichever is greater. The amount charged for notification of a  In terms of Eswatini’s localisation policy, when applying for a work permit, merger shall not exceed SZL600 000 for any single merger notified. an employer must demonstrate that there is no Swati with adequate Mergers where the combined global turnover or assets of the merging qualifications and experience to fill the position, and that the employer has parties is SZL8-miilion or less (small mergers) are exempt from payment instituted a training plan in terms of which the particular position would of filing fees. eventually be localised.  The Eswatini Competition Commission will take public interest local employment vs  In terms of Eswatini’s employment legislation, an employee may be considerations into account in making a determination on a merger. secondment seconded to Eswatini, as it is not a legal requirement for either local or  Eswatini is a pre-implementation regime, therefore approval must be foreign employees to be employed by a local entity in Eswatini to work in sought from the Eswatini Competition Commission prior to implementation Eswatini, provided that their contracts of employment comply with local of the proposed transaction. laws.  Any person who implements a merger in contravention of the Competition  Employees may be seconded for a specific period of time and the Act commits an offence which attracts penal and criminal sanctions of a secondment cannot be indefinite.

2 doing business in Eswatini (previously Swaziland)

 In terms of Eswatini’s immigration legislation, employment by a local entity  If an enterprise’s turnover exceeds the VAT registration threshold (see may be a prerequisite for applying for a work permit. ‘tax’ below), it should also specifically apply for VAT registration.

fixed-term contracts  Fixed-term contracts are allowed in terms of the Employment Act and no Eswatini National  Every employer must register with the ENPF for purposes of making social and temporary special rules apply to such fixed term contracts. Provident Fund security contributions. employment  Although labour broking is currently allowed, it has become very unpopular (“ENPF”)  Although no specific registration is required per employee, the employer is services and is being discouraged due to significant pressure from unions seeking obliged to submit the name of all employees and their remuneration on a to protect their members. However, the draft bill which seeks to prohibit monthly basis. labour broking has not been enacted yet.  A bill seeking to convert the ENPF to a pension fund was tabled in July 2018, but has not been passed into law yet. payment in local  Remuneration must generally be paid in local currency. currency  Where an employee is seconded, his/her remuneration may be paid where Eswatini Royal  All employers must register their employees for workman’s compensation he/she is employed in that currency, but subsistence and/or out-of-country Insurance insurance at the Eswatini Royal Insurance Corporation. allowances must be paid in local currency. Corporation (“ESRIC”) restraint of trade  Restraint of trade agreements are generally valid and enforceable in industry-specific agreements Eswatini, provided that the prohibition is not contrary to public policy and  Industry-specific licences may also be required. licences that the restraint is reasonable in its application in terms of the area of operation and the time of restraint. incentives  Incentives include: foreign investment regime  special initial allowances in respect of expenditure incurred on the construction of buildings and machinery used for manufacturing, as investment regime  The Swaziland Investment Promotion Act, 1998 governs foreign well as infrastructural assets such as transmission equipment, investment in Eswatini. pipelines and hotels;  The Eswatini Investment Promotion Authority (“EIPA”), has been  a reduced corporate income tax rate up to a maximum of 10% and established to attract and promote local and foreign direct investment; as a exemption from dividend withholding tax available to businesses one-stop information and support service and to facilitate company qualifying for a Development Approval Order for a period of 10 registration for local and foreign direct investors. years;  a special allowance for the cost of construction of employee housing registration /  Registration with the EIPA is not compulsory and there is no fee for in the manufacturing sector; and licensing registering. However, the benefit of registering with the EIPA is that the requirements authority can assist with facilitating meetings with relevant ministries.  special tax regimes applicable to the mining industry and farming activities.  An investor who wishes to establish a company in Eswatini must register the company and obtain a certificate of incorporation from the Registrar of exchange control  Exchange control regulations do not apply to transactions with member Companies. regulation states of the CMA, i.e. South Africa, Namibia and Lesotho, provided that the flows are strictly in local currency. non-industry  The following general non-industry specific registrations / licences may be specific required:  Exchange control is administered by the Central Bank of Eswatini in registrations / conjunction with the South African Reserve Bank. licences  Transactions which involve the transfer of funds to countries outside the CMA are subject to Central Bank of Eswatini approval. Ministry of  Each activity which a business conducts and/or each premises (e.g. store)  Both South African Rand (ZAR) and Swazi Lilangeni (SZL) are accepted Commerce, Industry from where a business operates must hold a business licence from the as legal tender on the basis an exchange rate of 1:1. and Trade municipality of the relevant region (Eswatini has four regions / provinces).  A Health Clearance Certificate issued by the city council or health types of entities  Private limited liability company; department following an inspection of the business location, is a available for  public limited liability company; prerequisite for obtaining the business licence. foreign investment  company limited by guarantee;  registered branch of a foreign company; and Eswatini Revenue  All taxpayers must register with the SRA and obtain a tax identification  partnership. Authority (“SRA”) number, which is used for all types of taxes in Eswatini.

3 doing business in Eswatini (previously Swaziland)

private limited liability company tax minimum number  A minimum of one shareholder is required. tax system  Eswatini has a source-based tax system, in terms of which both residents of shareholders  There is generally no requirement for local shareholding. and non-residents are taxed on income from a source in Eswatini.  A proposal to amend the tax system to a residence-based system has minimum share  The minimum statutory share capital for a private company is SZL100. been made but this is not in effect yet. capital corporate  The Eswatini Income Tax Order does not provide a definition of the directors  A private company must have a minimum of one director, who must be a residence concept of residence, but defines the term “company” as: natural person or a sole proprietorship.  any association incorporated by or under any law in force in Eswatini;  There is no requirement to have a resident director.  any association which, though incorporated outside Eswatini, carries company secretary  Every company must appoint a company secretary. on business or has an office or place of business in Eswatini; or  It is not a requirement for the company secretary to be a Swati citizen, but  any body incorporated by any law in force in Eswatini or in any country where the company secretary is not a citizen, such person must be in outside Eswatini that carries on business in Eswatini. possession of a valid work permit. corporate tax rate  Resident companies and permanent establishments of foreign companies auditor  A private company must appoint an auditor, unless: are subject to corporate income tax at the rate of 27.5%.  the number of shareholders in such company does not exceed five; capital gains tax  Eswatini does not tax capital gains. and (“CGT”)  However, income from the disposal of assets in the normal course of a  the equity share capital in the company does not exceed SZL50 000. business activity and income from the non-occasional disposal of assets are registered address  Every company must have a registered office in Eswatini to which all included in gross income. communication and notices may be addressed and which must constitute withholding tax WHT rate the address for services of legal proceedings on the company. (“WHT”) rates  A company may have its registered address at the offices of its payment to residents non-residents accountants or lawyers. branch profits N/A 15% shelf companies  Shelf companies are not available in Eswatini. 12.5% (for CMA head offices) registration  Companies are registered with the Registrar of Companies and it takes dividends N/A 15% process approximately three weeks to complete registration once all required documents have been submitted. 12.5% (for CMA shareholders) interest 10% 10% royalties N/A 15% management, N/A 15% consulting and technical service fees

double tax  DTAs are in force with Mauritius, South Africa, Seychelles, Taiwan and the agreements United Kingdom. (“DTAs”) losses  Losses may be carried forward indefinitely.

transfer pricing  Eswatini does not have specific transfer pricing rules. However, in terms of the general anti-avoidance rules, transactions must be entered into on an arm’s length basis. Transfer pricing rules are currently under discussion by the authorities.

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limitations on  There are no thin capitalisation rules applicable in Eswatini.  Businesses whose turnover is below the threshold may voluntarily apply interest  Interest payable on loans is generally deductible if the loan was employed for registration, provided any other registration requirements are met. deductibility in the production of income or for the purposes of the trade of the reverse VAT on  To the extent that imported services will be utilised or consumed in taxpayer. However, the Commissioner may, if the rate of interest is imported services Eswatini other than for making taxable supplies, the recipient of such deemed excessive, limit the amount allowed as deduction to a reasonable services is required to declare and pay output VAT on the services in interest rate. terms of a reverse VAT mechanism. employee taxes  The income tax rates applicable to resident individuals are:  Such reverse VAT is not available as an input credit. trade marks annual chargeable income (SZL) tax rate international  African Regional Intellectual Property Organization (Banjul Protocol) (no up to 100 000 20% conventions, local enabling legislations) 100 001 – 150 000 SZL20 000 + 25% of the excess treaties and  Berne Union over SZL100 000 arrangements  Hague Convention 150 001 – 200 000 SZL32 500 + 30% of the excess  Madrid Agreement and Protocol (no local enacting legislations) over SZL150 000  Paris Convention for the Protection of Industrial Property  Trade-Related Aspects of Intellectual Property Rights Over 200 000 SZL 47 500 + 33% of the excess over SZL200 000  World Intellectual Property Organization

social security  Both employers and employees must make monthly social security classification  The International Classification of goods and services applies. A single contributions contributions to the ENPF. application may cover a number of classes.  Both the employer and employee contribution rates are SZL145 per categories of trade employee if the employee earns at least SZL2 900 per month and 5% of  Provision is made for: marks the monthly earnings of an employee earning less than SZL2 900 per  service marks; and month.  series marks.  Expatriates are not obliged to contribute to the ENPF. filing requirements  Full particulars of the applicant; payroll taxes  There is no payroll tax in Eswatini.  simply signed power of attorney;  10 prints of the mark except for word marks in ordinary type; and stamp duty  Stamp duty is levied on a number of instruments under the Stamp Duties  priority document (if applicable), with verified English translation. Act, 1970, including agreements and contracts, bills of exchange, bonds, leases, insurance policies, debentures and shares. procedure  Applications are examined as to formal requirements, inherent  Stamp duty at the rate of 2% is generally payable on the registration of registrability and conflict with prior existing registrations / transfer of marketable securities. applications. Once accepted, applications are advertised.  Transfer duty at a rate of between 2 and 8% is levied on the transfer of oppositions  Oppositions may be lodged within three months following the date of immovable property, depending on the value of the property, under the advertisement of the trade mark application. Transfer Duty Act, 1902.  Extensions are obtainable. value added tax duration and (“VAT”)  A trade mark registration is effective for an initial period of 10 years from renewal filing date, thereafter, renewable for further periods of 10 years. A taxable supplies  VAT is levied on the supply of goods and services in Eswatini and on the statement confirming use of the mark within the three years preceding the importation of goods and services. expiration of the registration, must be submitted. VAT rate  15%

registration  A person who supplies taxable goods or services in Eswatini and has an threshold annual taxable turnover exceeding SZL500 000 must register for VAT purposes.

5 doing business in Eswatini (previously Swaziland)

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This document contains general information and no information provided herein may in any way be construed as legal advice from ENSafrica, any of its personnel and/or its correspondent firms. Professional advice must be sought from ENSafrica before any action is taken based on the information provided herein. This document is the property of ENSafrica and consent must be obtained from ENSafrica before the information provided herein is reproduced and/or distributed in any way.

LAST UPDATED DECEMBER 2020

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