International tax summaries——SWAZILAND（1998）
International tax summaries——SWAZILAND（1998）
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In his budget speech presented to the Parliament of the Kingdom of Swaziland in March 1996, the Minister for Finance announced his intention to introduce significant income tax reforms. A new income tax act is currently being drafted, and it is anticipated that its provisions will be enacted to take effect from the income tax year commencing on July 1, 1998.
INCOME TAXES ON CORPORATIONS
Companies, other than mining companies, are subject to a flat rate of 37.5% of taxable income from a source within or deemed to be within Swaziland. For mining companies, the rate is 27% of taxable income up to E20,000 and 37.5% of taxable income in excess of E20,000. Dividends received by a company are exempt from income tax.
2. Local Income Taxes
3. Capital Gains Taxes
There are no capital gains taxes.
4. Branch Profits Taxes
A branch of a foreign company is taxed on the profits derived in Swaziland as though it were a resident company.
5. Foreign Tax Reliefs
As Swaziland income tax is levied only on taxable income derived or deemed to be derived in Swaziland, the question of foreign tax relief does not normally arise. Relief will only be granted if provided for in a tax treaty with a particular foreign country.
INCOME TAXES ON INDIVIDUALS
Income tax is payable at graduated rates, with a maximum rate of 39% which applies to taxable income in excess of E40,000 per annum. Tax rates are as follows:
Tax on Percentage
Over Not Over Lower Amount on Excess
E13,000 E16,000 E 0 12%
16,000 20,000 360 16
20,000 24,000 1,000 20
24,000 28,000 1,800 24
28,000 32,000 2,760 28
32,000 36,000 3,880 32
36,000 40,000 5,160 36
40,000 6,600 39
All benefits-in-kind must be included in taxable income:
Benefit Addition to Annual Taxable Income
Free housing E360 to E8,590 depending on size and location of house
Free use of a car E5,160 to E15,460 depending on cubic capacity of engine and determined value of the vehicle
Electricity and telephone E764 per service
Other utilities E382 per service
Domestic servants (cooks, maids, etc.) E960 per household servant
Tuition payments 80% of payments
10. Local Income Taxes
11. Capital Gains Taxes
There are no capital gains taxes.
12. Foreign Tax Reliefs
See item 5.
13. Tax Period
The tax year runs from July 1 to June 30.
14. Other Matters
Computation of Taxable Income. Taxable income includes basic wages, commissions, fees, annual value of benefits, bonuses, and dividend income in excess of E2,000 from a Swaziland source (except in the case of nonresidents not carrying on business in Swaziland). Dividend income in excess of E2,000 is taxable at 20% unless received from a company listed with the Swaziland Stock Exchange, in which case it is taxed at 10%. Any gratuity or bonus received by or accrued to an employee under the terms of a written agreement on bona fide termination of employment
is exempt from tax to the extent that it does not exceed 25% of the total of actual salary received for the period of employment provided the period of the contract of employment is not less than two years, or, if the period of the contract is less than two years, the employee does not enter into another contract of employment with the same employer.
In determining the taxable income of any person, the following deductions are allowed:
Current contributions to a pension fund: Funds established by law Actual contributions
Other pension funds approved by the Maximum of E1,750
Current contributions to any retirement The greatest of:
annuity fund approved by the Commissioner 5% of the taxable income in respect of a trade carried out, provided the maximum allowable deduction does not exceed E5,000; an amount of E3,500 less current contributions made to a pension fund; an amount of E1,750. Interest on property loans 00% of interest paid if gross income does not exceed E15,000 for the assessment year;
00% of interest paid if gross income exceeds E15,000 but does not exceed E60,000 for the assessment year;
? 0% of interest paid if gross income exceeds 60,000 for the assessment year.
The income of a married woman is taxed separately from that of her husband.
INCOME TAXES ON NONRESIDENTS
15. Liability to Tax
A nonresident corporation carrying on business in Swaziland is subject to normal tax in the same way as a resident company on income other than dividends from a source within or deemed to be within Swaziland.
Royalties and know-how payments to a nonresident licensor are subject to tax in Swaziland if the income is from a source within Swaziland.
Tax treaties with the United Kingdom and South Africa exempt such royalties from Swaziland tax.
17. Withholding Tax Rates
Dividends paid by Swaziland companies to a company which is nonresident and not carrying on business in Swaziland or to a nonresident individual are subject to a withholding tax of 15%. If the dividend is paid to a company registered in Botswana, Lesotho, or South Africa, and the company is not a subsidiary or branch of a corporation registered outside any of these countries, then the withholding tax is reduced to 12.5%.
Interest paid by a debtor in Swaziland to a company not registered in Swaziland or to a nonresident individual is subject to a withholding tax of 10%. If the interest is also from a source within Swaziland, it is included in taxable income and is subject to normal tax but credit is then given for the 10% already withheld.
Any person entering into an agreement relating to construction operations or professional services which are to be performed in Swaziland, under which payments will be made to a nonresident, may be required by the Commissioner of Taxes to withhold 10% from such payments on account of the liability to tax of the nonresident person with respect to the profits derived from such an agreement.
A nonresident individual (apart from entertainers or sportsmen) is taxed on income (other than dividends) derived from a source in Swaziland in the same way as a resident individual, and is entitled to the same rebates, but the minimum tax payable is 3% of taxable income consisting of a pension and 10% of other taxable income. Dividends from
Swaziland are subject to the withholding tax of 15% or 12.5%. The remuneration of nonresident public entertainers and sportsmen is subject to a nonresident tax of 15%.
19. Tax Treaties
General tax treaties exist between Swaziland and Mauritius, Portugal, South Africa, and the United Kingdom.
OTHER SIGNIFICANT TAXES
21. Sales (Value-Added) Taxes
A one-stage sales tax of 12% is imposed on goods at the point of importation or manufacture, local services, hotel accommodations, and restaurant meals. A sales tax of 25% applies to the sales of alcohol and tobacco.
22. Inheritance and Gift Taxes
23. Taxes on Payrolls (SoCIAl Security)
No formal soCIAl security taxes exist in Swaziland. Employers are, however, obliged to take out a worker compensation insurance policy to cover accidents or injuries suffered by employees during work hours.
Employers are required to contribute a minimum amount of E40.00 per month to the Swaziland National Provident Fund on behalf of each of their employees who are Swazi citizens. 50% of the contribution is recoverable from the employees concerned.
A payroll tax of E1.50 per employee is payable by employers but can be recovered from the employee by deduction from the employee remuneration.
24. Taxes on Natural Resources
An annual mineral rights tax is payable by the holder of any mineral right in Swaziland. The tax is payable in advance on July 1 of each year at the following rates:
For the first five tax years from the date on which E10 per heCTAre, or part thereof, over the holder has been granted a mineral right which the mineral right is held
Thereafter E50 per heCTAre or part
Any reasonable expenditure (excluding general administration and management expenditure) actually incurred by the holder in respect of bona fide mining operations or prospecting or development work carried out in the said area during the preceding tax year is allowed as a deduction from the amount of the mineral rights tax. No mineral rights tax is levied for the first tax year in which the mineral rights are
25. Other Taxes
Land and Property. Transfers of immovable property are subject to transfer duty at the rate of 2% on the first E40,000, 4% on he next E20,000, and 6% on the excess over E60,000 of the purchase consideration. The duty is payable by the transferee. Annual rates on property are payable to the Town Councils, based on the Council valuation of the property.
Capital Taxes. No annual wealth or capital worth taxes are levied except for the tax on mineral rights (see item 24).
Stamp Duties. Stamp duties are payable on numerous documents. The transfer of marketable securities attracts a stamp duty of 1.5% which is payable by the purchaser.
COMPUTATION OF TAXABLE INCOME
26. Capital Gains
There are no capital gains taxes.
27. DepreCIAtion and Depletion
Wear and tear allowances are granted on plant and machinery and other capital assets used in the production of income. The rates vary according to the type of asset, life expeCTAncy, and intensity of use and are based on the reducing-balance method. The straight-line method is only permitted if the prior consent of the Commissioner of Taxes is obtained. There is a scrapping allowance (or taxable recoupment) on disposal or scrapping of assets eligible for the wear and tear allowance. An annual allowance of 4% of the cost of any industrial building and any improvements is granted. No allowances are granted for expenditure on goodwill, mineral rights, or lands.
In respect of mining operations, capital expenditure incurred (which includes preproduction expenditures but excludes expenditures on land and mineral rights) less any recoupments may be deducted from income in full in the year of assessment in which the expenditure was incurred.
28. Treatment of Dividends
Dividends received by companies are exempt from income tax. Dividends in excess of E2,000 received from a Swaziland source y resident individuals are included in taxable income and are taxable at 20% unless received from a company listed with the Swaziland Stock Exchange, in which case they are taxed at 10%. Dividends received by nonresident shareholders are subject to withholding tax of 15% or 12.5% (see item 17).
29. Loss Carryovers
Where permissible deductions exceed income in a year of assessment, an 揳ssessed loss?results. An assessed loss is carried forward indefinitely and set off against the income of subsequent years until the loss is recouped, as long as the taxpayer continues to carry on business and derive income. SpeCIAl provisions discourage dealing in assessed loss companies.
30. Transactions Between Related Parties
The Commissioner of Taxes is entitled to disregard transactions that are not on normal and arm-length terms and that result in avoidance, diminution, or deferment of tax. The Commissioner of Taxes has discretion as to what deduction he will allow to a Swaziland taxpayer claiming expenditure incurred outside Swaziland in the production of taxable income.
The prior paragraph also applies to capital ransactions between related parties. However, as there is no capital gains tax other than on mineral rights, the Commissioner of Taxes is primarily concerned with the implications as to wear and tear and other allowances on eligible capital expenditure.
31. Consolidation of Income
In Swaziland, each company and/or individual is a separate legal entity for tax purposes. It is not permissible to consolidate, combine, or subvent income or expenditure between group companies.
32. Tax Periods
For both individuals and companies, the year of assessment runs from July 1 to June 30, and the applicable tax rate is fixed by a King Order-in-Council each year. If the income cannot be conveniently determined for that period, the Commissioner may accept returns ending on a date other than June 30.
33. Other Matters
Concept of Taxable Income. Taxable income can be expressed, very broadly, as all income (other than certain specified exempt income) of a revenue nature from a source within or deemed to be within Swaziland, less expenditure of a revenue nature incurred in the production of that income, and less specific allowances in respect of capital expenditure and training expenditure.
34. Incentives and Grants
Exempt Income. Investment is encouraged in particular areas, notably, deposits in the Swaziland Development and Savings Bank and certain shares in building societies. Such income is wholly or partially exempted from tax. Exemption is also granted in respect of interest receivable by nonresidents on loans made to the King in trust for the Swazi N
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