1. Overview
- Incentives apply equally to domestic and foreign investors
- Incentives offered are aimed at employment creation; development of small to medium businesses; industrial development; exports and the upliftment of the standards of living Tax incentives are minimum.
- The Ministry of Enterprise and Employment, through its Agency, Swaziland Investment Promotion Agency (SIPA) administers the non-tax incentives. SIPA is a one-stop service for the facilitation of investment. The office works closely with government and enterprises in promoting the country as an ideal destination for investment.
2. Investment Policy
Swaziland's investment policy is driven by the need to promote and facilitate foreign direct investment as well as development of entrepreneurial skills by the locals. The Government recognises the important preconditions for investment to include cost effective and reliable infrastructure in telecommunications, pwer and transport, well trained labour force, adequate supply of finance and legal framework that facilitates investment.
3. General Incentives
Government offers a variety of incentives including:
- A well developed and robus telecommunications system that includes the mobile cellular GSM system
- A regionally-linked electricity supply network that provides a reliable and competitively priced service to all businesses irrespective of size
- Preferential access of exports to the SACU, COMESA, SADC, UK, Australia, New Zealand and USA markets
- Being a member of the EU-ACP Group, Swaziland's exports enter the European Union Member States Duty free subject to Rules of Origin
4. Free Trade Zones
There are free trade zones in Swaziland
5. Export Incentives
1. The Swaziland Government through the Trade Promotion Unit (a wing of the Ministry of Foreign Affairs and Trade) offers the following incentives to exporters:
- Hiring, construction and furnishing of pavilions and exhibitions at Trade Fairs
- Encourage exporters to participate in Trade Fairs. A schedule of Trade Fairs for the year is compiled by the Unit and then circulated to all exporters for them to participate
- Advertise exporters business abroad through overseas import houses and Foreign Missions. The Unit compiles a Directory of all exporters and sends it to Import Houses abroad and also to Foreign Missions. A Business
- Government also pays for the processing of Export documents (Certificates of origin) prepared by the exporters
EXPORT CREDIT GUARANTEE SCHEME
2. The Swaziland Government through the Central Bank of Swaziland operates an Export Credit Guarantee Scheme, which is aimed at promotion the country's export trade. The policy objective of the scheme is to facilitate Swaziland exporters to obtain loans from commercial banks at concessionary rates of interest and, without undue collateral that exporters cannot afford when applying for loans.
The Scheme:
- Gives the Swaziland based exporters a competitive edge so that they can penetrate and participate in international markets with greater confidence knowing they have the full backing of the Scheme to meet their working capital requirements.
- Facilitates exporters' applications for loans by providing commercial banks with guarantee bonds as risk cover even for those exporters whose collateral security would otherwise have been deemed inadequate for obtaining financial assistance
- Facilitates the promotion of small and medium size exporters operating in Swaziland in executing export orders with greater ease by enabling exporters to obtain finance from commercial banks at concessionary interest rates
The extent of financing under the scheme is as follows:
- Pre-shipment credit should not exceed 70% of the FOB value of goods to be exported or 70% of production whichever is lower. The guarantee bond under pre-shipment covers 75% of the loan afforded to exporters
- At post-shipment stage, the loan covers 85% of the value of export bills or shipping invoices outstanding at any time. Banks are free to issue credit to applying exporters of up to E50000.00 without applying for a credit guarantee from the Export Credit Guarantee Scheme.
- The Export Credit Guarantee Scheme guarantees exporters not just based on the level of collateral they can avail the lending institution. Exporters without collateral can benefit from the scheme through their integrity and ability to fulfil contractual obligations.
DUTY CREDIT CERTIFICATE SCHEME
Swaziland exporters of textile and clothing products benefit from the Duty Credit Certificate Scheme offered under th SACU Arrangement. Qualifying exporters can earn credits based on exports of textile and clothing during the 12 month period ending 31 March of each year. The objective of this Scheme is to influence and encourage textile and clothing manufacturers to compete internationally independent of government subsidies. The Scheme is expected to operate until March 2005.
6. Financial Assistance
The Swaziland Government operates two schemes to provide financial assistance for local entrepreneurs. These schemes are:
1. The Small Scale Enterprise Loan Guarantee Scheme and the Export Credit Scheme.
The objective of this scheme is to :
- Encourage local development finance institutions as well as commercial banks to increase lending to small-scale enterprises in Swaziland by reducing the financial risk to be taken by these institutions.
- Make better use of surplus liquidity available at banks for specific development purposes i.e. actively support local entrepreneurs (many of whom have no access to commercial credit due to lack of collateral) to develop their businesses into viable private enterprises.
- Promote increased participation of Swazi Nationals in the economic growth of the country, in particular in sectors of industry suitable for small-scale operations and to improve their competitive position.
- To stimulate efficient localisation of small-scale business especially in small-scale industry, commerce and services by providing adequate capital to take over existing shops and workshops or to establish new ones.
- The Central Bank of Swaziland extends guarantees for eligible projects undertaken by small-scale businesses. The Guarantee is designed to cover shortage or lack of other acceptable collateral for credit to SSE. The amount of guarantee extended does not exceed 75% of the amount of the credit and such guarantee remains in force until the credit is entirely repaid unless the Financial Institution and the Central Bank agree otherwise. The maximum credit per loan application does not exceed E150,000 and the lending rate should not exceed 3% above the prime-lending rate. The repayment period including a grace period should not exceed 10 years.
- The guarantee fees are 1% per annum of the outstanding guarantee and the fee is borne by the borrower.
2. Export Credit Guarantee Scheme (Details of this scheme are discussed in 5)
3. Duty Credit Certificate Scheme
Under this scheme qualifying exporters of clothing and textile get duty credits based on exports of products during a 12 month period ending in March. The credit can use the credit to offset duties payable by exporters on the importation of certain prescribed textile and clothing products.
7. Regional Incentives
Swaziland has attached itself to the exciting concept of development corridors which play a significant role in investment promotion. Swaziland in collaboration with the governments of Mozambique and South Africa participates in the Lubombo Spatial Development Initiative which is aimed at ensuring that new investment occurs rapidly thus converting the designated are into an internationally competitive zone of economic activity and growth.
8. Industrial Financing
The Swaziland Government through the Ministry of Enterprise and Employment provides advance built factory buildings at highly subsidized rates. Emphasis is to promote indutrial development in rural areas.
9. Development Programmes And Incentives For Specific Industries
Development enterprises
Where the Minister of Finance is satisfied that a new business is beneficial to the development of the economy, he may, with he prior consent of Cabinet, nominate such a business as a development enterprise and may grant additional tax concessions to such enterprise.
A tax concession granted by means of a development approval order shall be granted for –
(i) a period of ten (10) years; and
(ii) a tax concession on corporate tax at the maximum rate of 10%; and
(iii) an exemption from withholding tax on dividends during the ten (10) year period specified under subparagraph (i);
the grant of a development approval order is only applicable to approved new investments, business or development enterprises in the manufacturing, mining, international services and tourism sectors and the grant is available to both local and foreign direct investment, provided-
(i) the investment entity must be a company registered and incorporated in Swaziland under the applicable law; and
(ii) company must be promoted by reputable promoters with demonstrable successful track record.
10. Tax
10.1. Rates
10.2. Deferral Period
10.3. Tax Holiday
A tax holiday is available subject to the approval of the Minister of Finance for new businesses engaged in manufacturing industries
(a) not already in existence in Swaziland and
(b) which predominantly export goods from Swaziland. The tax holiday is for five years of assessment from the date of commencement of commercial production and taxable income is calculated using the following formula:
Cumulative taxable income, as normally calculated, shall be reduced by:
1) the cumulative amount of remuneration paid to employees who are Swazi Citizens;
2) 150% of the tax written down value of fixed assets at the year end owned and employed by such business;
subject to the condition that any taxable income so calculated will be restricted to the taxable income calculated in the normal manner.
The date of commencement of a tax holiday will be the date on which the factory and its plant are commissioned i.e. the date on which commercial production commences.
Any losses incurred during the tax holiday will be set off against any profits earned during the tax holiday.
10.4. Depreciation
- Industrial buildings (s 14(1)(d))
Annual allowance
An annual allowance of 4% of the cost of building or improvements in which manufacturing is carried on is deducted from taxable income.
Initial allowance (s 14(1)(e)(iii))
In addition to the annual allowance of 4%, an initial allowance of 50% of the cost of buildings or improvements in which manufacturing is carried on may be deducted at the taxpayer’s discretion. The initial allowance is a onetime deduction in the year in which the building is first brought into use or the improvements are completed. This allowance is subject to the condition that he building must be used to house machinery or plant which at the time of installation is new or unused or, if the machinery or plant is not new, has not previously been used in Swaziland and which does not replace other machinery or plant.
This initial allowance is also available to taxpayers who lease an industrial building to a lessee who uses it in his business.
- Machinery and plant (manufacturing sector) (s 14(1)(e)(i))
Initial allowance
In addition to the wear and tear allowance an initial allowance of 50% of the cost of machinery or plant, which is used directly in the process of manufacture may be deducted at the taxpayers discretion. The initial allowance is a one-time deduction in the year in which the machinery or plant is first brought into use. This applies to machinery or plant, which at the time of installation is new or unused. It applies to machinery or plant which is not new or unused at the time of installation only if it is installed in an industrial building, does not replace other machinery or plant and has not previously used machinery or plant will be based on its depreciated value.
This initial allowance is also available to taxpayers who lease machinery or plant, which is brought into use by the lessee thereof and is used directly in the process of manufacture.
- Infrastructural initial allowance (s 14(1)(e)(ii))
In addition to wear and tear allowance an initial allowance of 50% of the cost incurred by the taxpayer on infrastructural machinery, plant or facilities, including transmission equipment, lines and pipes used in the provision of infrastructural services on or after 1 July 2000. The initial allowance is a one-time deduction in the year in which the infrastructural machinery, plant or transmission equipment is first brought into use.
- Hotels (s 14(1)(h))
Annual allowance
An annual allowance of 4% of any capital expenditure in connection with the erection of a new hotel or the effecting of any beneficial improvements to the amenities of an existing hotel is deducted from taxable income.
Initial allowance
In addition to the annual allowance of 4% an initial allowance of 50% of any capital expenditure in connection with the erection of a new hotel or the effecting of any beneficial improvements to the amenities of an existing hotel will be deducted from taxable income. The initial allowance is a one-time deduction in the year in which the new hotel or the beneficial improvements are first used.
Hotel machinery and plant initial allowances
In addition to wear and tear allowances an initial allowance of 50% of the cost of machinery or plant brought to use in the hotel industry will be deducted from taxable income. The initial allowance is a one-time deduction in the year in which the machinery or plant is first brought into use.
- Employee housing allowance (s 14(1)(g))
For the erection of dwelling for employees an allowance of 20% may be claimed for the first year and 10% for each of the succeeding eight years. The same concessions are given to farmers in respect of any erections of any buildings used for the domestic purposes of any of his employees.
- Approved export promotion (s 14(1)(y))
Handicraft and cottage industry and those engaged in the export of products of such companies can deduct 133%, and 150% respectively of expenditure incurred for the expansion of exports. The allowance is subject to the approval of the Commissioner of Taxes and the Ministry of Enterprise and Labour.
- Training allowance (s 18)
Expenses incurred for the purposes of training employees are, subject to the approval of the Commissioner, are deductible twice: firstly, as normal expenses, and secondly, as training expenses. The allowance is applicable to any industry so designated by the Minister for Finance by written notice in the government gazette. The approval of the Commissioner is required for all training schemes.
- Exemption from non-resident shareholders tax and non-resident tax on interest
There is provision in the Order, to exempt a non-resident person from non-resident’s shareholders tax and from non-resident tax on interest in respect of dividends income and interest income he receives from Swaziland, in cases where the Government has given an undertaking to grant such exemptions.
10.5. Other
1. Overview
- Incentives apply equally to domestic and foreign investors
- Incentives offered are aimed at employment creation; development of small to medium businesses; industrial development; exports and the upliftment of the standards of living Tax incentives are minimum.
- The Ministry of Enterprise and Employment, through its Agency, Swaziland Investment Promotion Agency (SIPA) administers the non-tax incentives. SIPA is a one-stop service for the facilitation of investment. The office works closely with government and enterprises in promoting the country as an ideal destination for investment.
2. Investment Policy
Swaziland's investment policy is driven by the need to promote and facilitate foreign direct investment as well as development of entrepreneurial skills by the locals. The Government recognises the important preconditions for investment to include cost effective and reliable infrastructure in telecommunications, pwer and transport, well trained labour force, adequate supply of finance and legal framework that facilitates investment.
3. General Incentives
Government offers a variety of incentives including:
- A well developed and robus telecommunications system that includes the mobile cellular GSM system
- A regionally-linked electricity supply network that provides a reliable and competitively priced service to all businesses irrespective of size
- Preferential access of exports to the SACU, COMESA, SADC, UK, Australia, New Zealand and USA markets
- Being a member of the EU-ACP Group, Swaziland's exports enter the European Union Member States Duty free subject to Rules of Origin
4. Free Trade Zones
There are free trade zones in Swaziland
5. Export Incentives
1. The Swaziland Government through the Trade Promotion Unit (a wing of the Ministry of Foreign Affairs and Trade) offers the following incentives to exporters:
- Hiring, construction and furnishing of pavilions and exhibitions at Trade Fairs
- Encourage exporters to participate in Trade Fairs. A schedule of Trade Fairs for the year is compiled by the Unit and then circulated to all exporters for them to participate
- Advertise exporters business abroad through overseas import houses and Foreign Missions. The Unit compiles a Directory of all exporters and sends it to Import Houses abroad and also to Foreign Missions. A Business
- Government also pays for the processing of Export documents (Certificates of origin) prepared by the exporters
EXPORT CREDIT GUARANTEE SCHEME
2. The Swaziland Government through the Central Bank of Swaziland operates an Export Credit Guarantee Scheme, which is aimed at promotion the country's export trade. The policy objective of the scheme is to facilitate Swaziland exporters to obtain loans from commercial banks at concessionary rates of interest and, without undue collateral that exporters cannot afford when applying for loans.
The Scheme:
- Gives the Swaziland based exporters a competitive edge so that they can penetrate and participate in international markets with greater confidence knowing they have the full backing of the Scheme to meet their working capital requirements.
- Facilitates exporters' applications for loans by providing commercial banks with guarantee bonds as risk cover even for those exporters whose collateral security would otherwise have been deemed inadequate for obtaining financial assistance
- Facilitates the promotion of small and medium size exporters operating in Swaziland in executing export orders with greater ease by enabling exporters to obtain finance from commercial banks at concessionary interest rates
The extent of financing under the scheme is as follows:
- Pre-shipment credit should not exceed 70% of the FOB value of goods to be exported or 70% of production whichever is lower. The guarantee bond under pre-shipment covers 75% of the loan afforded to exporters
- At post-shipment stage, the loan covers 85% of the value of export bills or shipping invoices outstanding at any time. Banks are free to issue credit to applying exporters of up to E50000.00 without applying for a credit guarantee from the Export Credit Guarantee Scheme.
- The Export Credit Guarantee Scheme guarantees exporters not just based on the level of collateral they can avail the lending institution. Exporters without collateral can benefit from the scheme through their integrity and ability to fulfil contractual obligations.
DUTY CREDIT CERTIFICATE SCHEME
Swaziland exporters of textile and clothing products benefit from the Duty Credit Certificate Scheme offered under th SACU Arrangement. Qualifying exporters can earn credits based on exports of textile and clothing during the 12 month period ending 31 March of each year. The objective of this Scheme is to influence and encourage textile and clothing manufacturers to compete internationally independent of government subsidies. The Scheme is expected to operate until March 2005.
6. Financial Assistance
The Swaziland Government operates two schemes to provide financial assistance for local entrepreneurs. These schemes are:
1. The Small Scale Enterprise Loan Guarantee Scheme and the Export Credit Scheme.
The objective of this scheme is to :
- Encourage local development finance institutions as well as commercial banks to increase lending to small-scale enterprises in Swaziland by reducing the financial risk to be taken by these institutions.
- Make better use of surplus liquidity available at banks for specific development purposes i.e. actively support local entrepreneurs (many of whom have no access to commercial credit due to lack of collateral) to develop their businesses into viable private enterprises.
- Promote increased participation of Swazi Nationals in the economic growth of the country, in particular in sectors of industry suitable for small-scale operations and to improve their competitive position.
- To stimulate efficient localisation of small-scale business especially in small-scale industry, commerce and services by providing adequate capital to take over existing shops and workshops or to establish new ones.
- The Central Bank of Swaziland extends guarantees for eligible projects undertaken by small-scale businesses. The Guarantee is designed to cover shortage or lack of other acceptable collateral for credit to SSE. The amount of guarantee extended does not exceed 75% of the amount of the credit and such guarantee remains in force until the credit is entirely repaid unless the Financial Institution and the Central Bank agree otherwise. The maximum credit per loan application does not exceed E150,000 and the lending rate should not exceed 3% above the prime-lending rate. The repayment period including a grace period should not exceed 10 years.
- The guarantee fees are 1% per annum of the outstanding guarantee and the fee is borne by the borrower.
2. Export Credit Guarantee Scheme (Details of this scheme are discussed in 5)
3. Duty Credit Certificate Scheme
Under this scheme qualifying exporters of clothing and textile get duty credits based on exports of products during a 12 month period ending in March. The credit can use the credit to offset duties payable by exporters on the importation of certain prescribed textile and clothing products.
7. Regional Incentives
Swaziland has attached itself to the exciting concept of development corridors which play a significant role in investment promotion. Swaziland in collaboration with the governments of Mozambique and South Africa participates in the Lubombo Spatial Development Initiative which is aimed at ensuring that new investment occurs rapidly thus converting the designated are into an internationally competitive zone of economic activity and growth.
8. Industrial Financing
The Swaziland Government through the Ministry of Enterprise and Employment provides advance built factory buildings at highly subsidized rates. Emphasis is to promote indutrial development in rural areas.
9. Development Programmes And Incentives For Specific Industries
Development enterprises
Where the Minister of Finance is satisfied that a new business is beneficial to the development of the economy, he may, with he prior consent of Cabinet, nominate such a business as a development enterprise and may grant additional tax concessions to such enterprise.
A tax concession granted by means of a development approval order shall be granted for –
(i) a period of ten (10) years; and
(ii) a tax concession on corporate tax at the maximum rate of 10%; and
(iii) an exemption from withholding tax on dividends during the ten (10) year period specified under subparagraph (i);
the grant of a development approval order is only applicable to approved new investments, business or development enterprises in the manufacturing, mining, international services and tourism sectors and the grant is available to both local and foreign direct investment, provided-
(i) the investment entity must be a company registered and incorporated in Swaziland under the applicable law; and
(ii) company must be promoted by reputable promoters with demonstrable successful track record.
10. Tax
10.1. Rates
10.2. Deferral Period
10.3. Tax Holiday
A tax holiday is available subject to the approval of the Minister of Finance for new businesses engaged in manufacturing industries
(a) not already in existence in Swaziland and
(b) which predominantly export goods from Swaziland. The tax holiday is for five years of assessment from the date of commencement of commercial production and taxable income is calculated using the following formula:
Cumulative taxable income, as normally calculated, shall be reduced by:
1) the cumulative amount of remuneration paid to employees who are Swazi Citizens;
2) 150% of the tax written down value of fixed assets at the year end owned and employed by such business;
subject to the condition that any taxable income so calculated will be restricted to the taxable income calculated in the normal manner.
The date of commencement of a tax holiday will be the date on which the factory and its plant are commissioned i.e. the date on which commercial production commences.
Any losses incurred during the tax holiday will be set off against any profits earned during the tax holiday.
10.4. Depreciation
- Industrial buildings (s 14(1)(d))
Annual allowance
An annual allowance of 4% of the cost of building or improvements in which manufacturing is carried on is deducted from taxable income.
Initial allowance (s 14(1)(e)(iii))
In addition to the annual allowance of 4%, an initial allowance of 50% of the cost of buildings or improvements in which manufacturing is carried on may be deducted at the taxpayer’s discretion. The initial allowance is a onetime deduction in the year in which the building is first brought into use or the improvements are completed. This allowance is subject to the condition that he building must be used to house machinery or plant which at the time of installation is new or unused or, if the machinery or plant is not new, has not previously been used in Swaziland and which does not replace other machinery or plant.
This initial allowance is also available to taxpayers who lease an industrial building to a lessee who uses it in his business.
- Machinery and plant (manufacturing sector) (s 14(1)(e)(i))
Initial allowance
In addition to the wear and tear allowance an initial allowance of 50% of the cost of machinery or plant, which is used directly in the process of manufacture may be deducted at the taxpayers discretion. The initial allowance is a one-time deduction in the year in which the machinery or plant is first brought into use. This applies to machinery or plant, which at the time of installation is new or unused. It applies to machinery or plant which is not new or unused at the time of installation only if it is installed in an industrial building, does not replace other machinery or plant and has not previously used machinery or plant will be based on its depreciated value.
This initial allowance is also available to taxpayers who lease machinery or plant, which is brought into use by the lessee thereof and is used directly in the process of manufacture.
- Infrastructural initial allowance (s 14(1)(e)(ii))
In addition to wear and tear allowance an initial allowance of 50% of the cost incurred by the taxpayer on infrastructural machinery, plant or facilities, including transmission equipment, lines and pipes used in the provision of infrastructural services on or after 1 July 2000. The initial allowance is a one-time deduction in the year in which the infrastructural machinery, plant or transmission equipment is first brought into use.
- Hotels (s 14(1)(h))
Annual allowance
An annual allowance of 4% of any capital expenditure in connection with the erection of a new hotel or the effecting of any beneficial improvements to the amenities of an existing hotel is deducted from taxable income.
Initial allowance
In addition to the annual allowance of 4% an initial allowance of 50% of any capital expenditure in connection with the erection of a new hotel or the effecting of any beneficial improvements to the amenities of an existing hotel will be deducted from taxable income. The initial allowance is a one-time deduction in the year in which the new hotel or the beneficial improvements are first used.
Hotel machinery and plant initial allowances
In addition to wear and tear allowances an initial allowance of 50% of the cost of machinery or plant brought to use in the hotel industry will be deducted from taxable income. The initial allowance is a one-time deduction in the year in which the machinery or plant is first brought into use.
- Employee housing allowance (s 14(1)(g))
For the erection of dwelling for employees an allowance of 20% may be claimed for the first year and 10% for each of the succeeding eight years. The same concessions are given to farmers in respect of any erections of any buildings used for the domestic purposes of any of his employees.
- Approved export promotion (s 14(1)(y))
Handicraft and cottage industry and those engaged in the export of products of such companies can deduct 133%, and 150% respectively of expenditure incurred for the expansion of exports. The allowance is subject to the approval of the Commissioner of Taxes and the Ministry of Enterprise and Labour.
- Training allowance (s 18)
Expenses incurred for the purposes of training employees are, subject to the approval of the Commissioner, are deductible twice: firstly, as normal expenses, and secondly, as training expenses. The allowance is applicable to any industry so designated by the Minister for Finance by written notice in the government gazette. The approval of the Commissioner is required for all training schemes.
- Exemption from non-resident shareholders tax and non-resident tax on interest
There is provision in the Order, to exempt a non-resident person from non-resident’s shareholders tax and from non-resident tax on interest in respect of dividends income and interest income he receives from Swaziland, in cases where the Government has given an undertaking to grant such exemptions.
10.5. Other