Eswatini

• The ITAB proposes under Section 3 of the Order to confer all powers of administration of the Order to the Commissioner General of the Eswatini Revenue Service.
• The introduction into domestic tax legislation of a definition of the concept of a Permanent Establishment, a “resident”, amongst others.

1. The introduction of the capital gains tax (“CGT”) regime. In Eswatini, CGT will be integrated with the income tax system by the inclusion of paragraph (r) under section 7 of the Order. Notably, the capital gains are those of business assets and exclude trading stock, gains derived from cancellation of business debt, whether such debt or asset is on capital or revenue account.
2. The introduction of a worldwide basis of taxation. The Eswatini income tax system is based on the source principle of taxation. All income which originated in Eswatini or is deemed from a source within Eswatini is taxable in terms of the Order. The definition of gross income in Section 7 of the Order is amended, and most references to income from a source within Eswatini are deleted. Residents, therefore, will become taxable on their worldwide income. Nonresidents will, however, still only be taxed in Eswatini on the income which is derived from a source in Eswatini.
3. A “residence minus’’ system will be adopted upon approval by parliament. Taxpayers will be taxed on their worldwide income, although certain categories of income and activities are undertaken outside the kingdom will be exempt from the Eswatini tax.
4. Elements of the proposed tax structure also entail relief from foreign taxes paid in respect of foreign income by residents being allowed as a credit against the Eswatini tax liability as a means of relieving double taxation of residents under Section 8bis. Section 68 quat also entails relief from Eswatini taxes in respect of Eswatini Source Income by nonresidents being allowed as a credit against foreign taxes to relieve double taxation of Non-residents in their respective jurisdictions.
5. inclusion in the taxable income of any amount paid to a Director or Shareholder by way of loan and with conditions that would not normally be created between persons acting at an arm’s length
6. The exemption from normal tax of reimbursement or medical expenses provided for or paid to an employee by an employer if such expenses are provided on equal terms.
7. Reduction of the income tax exemption of the total payment to employees on termination of employment to one-third (1/3) in respect of an annuity payable from a pension fund or pension preservation fund.
8. The exemption of amounts paid to employees on termination of employment from an unemployment insurance fund, in addition to provident fund and benefit fund payouts.
9. The removal of the annual SZL 20 000 interest exemption to natural persons and replacement with the exemption of the full amount of interest received or accrued to natural persons in specified transactions. Notably, these changes introduce a new Section 32C which seeks to apply a withholding tax on a person (residents) who derives interest or dividends from society shares, financial institutions, unit trusts or mutual loans.
10. deduction interest owed by a taxpayer who is a member of a group (except financial institutions and insurance companies) is capped at 30% of tax earnings before interest, tax, depreciation and amortization (EBITDA), with excess interest allowed for carry-forward for up to 3 years.
11. Reduction of the corporate income tax rate from 27.5% to 25%.
12. As a normal deduction a loss incurred on the disposal of business assets other than (trading stock) or on the satisfaction of business debt, notwithstanding that such debt was held on capital or revenue account.
13. Reduction of initial allowance on machinery, and infrastructure, from 50% to 30%.
14. Introduction of a minimum threshold of SZL 5M on assets qualifying for initial allowance per s14(1)(e)
15. Increasing the amount allowed as a deduction from an employee contribution to a pension fund from 10% to 15% of the employee’s pensionable salary.
16. Introduction of Section 20ter for determination of taxable income and deductions from long-term contracts. This section extends to the tax treatment of losses, including loss carryback, where it is determined that the contract has made a final year loss.
17. The introduction of Section 14quin, which are new rules to restrict the use of assessed losses by businesses, property, manufacturing, and farming (general and plantations).
18. Increasing withholding tax on interest payments to nonresidents from 10% to 15%.
19. a proposal to change the date to remit rental payments withheld in terms of Section 32F and payments to beneficiaries of trusts withheld in terms of Section 32G to the 15^th of the next month following the month of payment.
20. The raising of estimated assessments where employers fail to deduct and pay over employment taxes.
21. The imposition of penalties where employers fail to deliver on monthly (employees) and annual income tax declarations. Notably, changes include increasing the daily penalty for submission of income tax returns from SZL 20/day in a loss situation to SZL 150 and SZL 250 for natural persons and “other’ persons, respectively.
22. The introduction of section 50bis outlines the legislative provisions governing closing businesses in distress to recover tax debts.
23. The introduction of Section 50bis allows for delegation of public officer responsibilities through a Power of Attorney.
24. Amendment of Section 54 of the Order. A taxpayer who is aggrieved by any decision of the Commissioner General of the ERS after objecting in terms of Section 52 will appeal to the Revenue Tribunal in terms of the Revenue Tribunal Act, 2019.
25. A requirement for payment of tax pending an objection. Previously in terms of the legislation, only an appeal to the Commissioner General or Court proceedings required that the taxes under dispute are paid in full pending such appeal or court proceedings.
26. Amendment of Section 65 of the Order to incorporate a detailed section on transfer pricing and the arm’s length principle.
27. Increasing the deductions allowable under the 1^st schedule (Farming operations) in respect of erection of buildings used for domestic purposes of any farmer's employees from SZL 60 000 TO SZL 100 000.

The introduction of new tax incentives for manufacturing, mining, energy and power, and tourism businesses. The proposal introduces a tax concession using a development enterprise which shall be subject to a reduced tax rate of 10% for