Eswatini

Rates and scope

The VAT rates are as follows:

• 0% on goods and services exported from Eswatini

• 0% on supplies of electricity to individuals and 15% for commercial entities.

• 15% on all other taxable supplies and services (the standard rate).

All goods and services that are subject to VAT, including zero-rated supplies, are referred to as ‘taxable supplies’. The total value of these supplies is referred to as ‘taxable turnover’ for VAT registration purposes.

VAT is a tax on the disposal, either by sale or transfer of goods or services, either supplied in Eswatini or imported into Eswatini, including supplies to government.

A ‘supply’ of goods means any arrangement under which the owner of goods parts with, or will part with, possession of those goods. ‘Goods’ means not only tangible movable property but also buildings and developments. The supply of goods also includes the application of the goods for the supplier’s personal or non-business use.

The supply of services includes making available any facility, tolerating any situation or omitting to act, thereby causing a person to receive payment; or the application of services for own use.

VAT is charged on a supply by auction, the sale of goods by instalments, lay-by sales and the supply of taxable fringe benefits. A supply of goods or services by an agent for a principal is regarded as a supply by the principal.

A supply is taxable if it is made by a vendor for a consideration, as part of a trade or profession. A ‘vendor’ is someone who is, or should be, registered for VAT.

VAT registration

Compulsory registration

Eswatini’s currency is the lilangeni. The VAT registration threshold is SZL500,000 taxable turnover in the past or next 12 months. The SRA may register a person who should be registered for VAT but has failed to apply for registration. The vendor will be liable to pay VAT on all the taxable supplies made after the registration date, regardless of whether tax was actually charged. A person who:

• fails to apply for registration as required under section 6

• fails to notify the Commissioner-General of a change in circumstances as required by section 9(10), or

• fails to apply for cancellation of registration as required by section 8(1)

• commits an offence and is liable on conviction:

  • where the failure is deliberate or reckless, to a fine not less than SZL6,000 but not exceeding SZL15,000 or to imprisonment for a term not exceeding six years or to both; or 

  • in any other case, to a fine not less than SZL2,000 but not exceeding SZL6,000 or to imprisonment for a term not exceeding three years, or to both.

Voluntary registration

Registration of non-residents

A person living in Eswatini may be required to register for VAT notwithstanding the fact that only part of their business is carried on in Eswatini while the other part is carried out abroad. A person will also be required to register for VAT if they have a place of business in Eswatini but live or only supply goods or services abroad.

A local fiscal representative is required, but a bank account in Eswatini is not a necessity.

Application for registration

Deregistration

The SRA should be notified in writing if the following should happen and deregistration has to take place:

• where there is a change in the legal status of an entity (e.g. a partnership is dissolved)

• if the business is sold

• if the business permanently ceases to trade

• if a person was registered as an intended trader and the intention to make supplies has ceased.

Output tax

Exempt supplies

Exempt supplies, in relation to which no input tax deductions can be made, include the following:

• The supply of financial services

• The supply of insurance services

• The supply of land and buildings except for land and buildings used for commercial and industrial purposes

• A supply by way of lease or letting of immovable property, other than a:

  • Lease or letting of commercial premises

  • Lease or letting of hotel or holiday accommodation

  • Lease or letting of residential accommodation for periods not exceeding 45 days

  • Lease or letting of space for parking or storing cars or other vehicles

• the supply of education services

• the supply of medical, dental, and nursing services

• the supply of social welfare services

• the supply of betting, lotteries, games of chance or casino gambling services

• the supply of burial and cremation services

• the supply of precious metals and other valuables to the Central Bank of Eswatini for the Treasury of the Government of Eswatini

• the supply of passenger transportation services, other than services provided by registered tour operators

• the supply of sewage services

• the supply of services and goods closely linked to welfare and social security work, including those supplied by old people’s homes, by bodies governed by public law or by other bodies recognised as being devoted to social wellbeing

• the supply by an amateur sporting organisation of sporting activities, where such activities are deemed for purposes of the Act to be non-professional

• the supply of non-profit making cultural activities and services

• the supply of goods and services in a charity arrangement.

Zero-rated supplies

ZERO RATED:

SUPPLY OF GOODS USED OR CONSUMED FOR AGRICULTURAL, PASTORAL OR OTHER FARMING PURPOSES

• The goods in respect of the supply or import of which the rate of zero percent shall apply under the provisions of section 24(4) of Value-Added Tax Act 2011 shall, subject to various provisions of paragraph 2, be as follows –
  •  animal feeds consisting of-
    • any substance obtained by a process of crushing, gritting or grinding, or by addition to any substance or the removal therefrom of any ingredient;
    • any condimental food, vitamin or mineral substance or other substance which possesses or is alleged to possess nutritive properties;
    • any bone product;
    • any maize product, intended or sold for the feeding of livestock, poultry, fish or wild animals (including wild birds); or
    • stock lick or substance which is of a kind which can be and is in fact used as a stock lick, whether or not such stock lick or substance possesses medicinal properties,
  • animal remedy consisting of a substance intended or offered for use in respect of livestock, poultry, dog, fish or wild animals (including wild birds), for the diagnosis, prevention, treatment or cure of any disease, infection or other unhealthy condition, or for the maintenance or improvement of health, growth, production or working capacity;     
  • fertiliser consisting of a substance in its final form which is intended or offered for use in order to improve or maintain the growth of plants or the productivity of the soil   
  • pesticide goods consisting of any chemical substance or biological remedy, or any mixture or combination of any such substance or remedy, intended or offered for use    
    • in the destruction, control, repelling, attraction, disturbance or prevention of any undesired microbe, alga, bacterium, nematode, fungus, insect, plant, vertebrate or invertebrate; or
    • as a plant growth regulator, defoliant, desiccant, adjuvant or legume inoculant, and anything else which the Minister responsible for agriculture has by notice in the gazette declared     to be a pesticide;   
  • plant goods consisting of living trees and other plants, bulbs, roots, cuttings and similar plant products in a form used for cultivation;
  • seeds and seedlings in a form used for cultivation.    
• The provisions shall apply only where –   
  • a tax invoice in respect of the relevant supply is issued containing such particulars as required by section 29(4) of Value-Added Tax Act 2011; and      
  • the import, acquisition, disposal, sale or use of the said goods is not prohibited under any law.   

SUPPLY OF GOODS CONSISTING OF CERTAIN FOODSTUFFS

• The goods in respect of the supply of which the rate of zero percent shall apply under the provisions of section 24(4), subject to the provisions of paragraph 2, consists of the following-    
  • brown bread consisting of dough made from brown wheaten meal and water, with or without other ingredients that has fermented by yeast or otherwise leavened and has been baked in the form, size or shape stipulated in the Weights and Measures (Sale of Bread) Regulations;
  • maize, where it is dried kernels or grains fit for human consumption, not further prepared or processed and not packaged as seeds excluding popcorn (Zea mays everta);   
  • maize meal graded as super maize meal, special maize meal, sifted maize meal or unsifted maize meal, not further processed other than by the addition of minerals and vitamins not exceeding one per cent by mass of the final product, solely for the purpose of increasing the nutritional value;   
  • samp, not further prepared or processed;   
  • dried beans, whole, split, crushed or in powder form but not further prepared or processed or where packaged as seed;   
  • dairy products, being milk of all kinds; fermented milk, buttermilk, fresh or UHT cream or sour cream, buttermilk powder, condensed milk, baby milk formulas, butter and margarine; and whey;
  • rice, whether husked, milled, polished, glazed, parboiled or broken;    
  • vegetables, not cooked or treated in any manner except for the purpose of preserving such vegetables in their natural state, but excluding dehydrated, dried,canned or bottled vegetables or such vegetables as are described under separate paragraphs in this Part;
  • fruit, not cooked or treated in any manner except for the purposes of preserving such fruit in its natural state, but excluding dehydrated, dried, canned or bottled fruit and nuts;    
  • vegetable oil marketed and supplied for use in the process of cooking food for human consumption, but excluding olive oil; or
  • fresh eggs, being raw eggs laid by hens of the species Gallus gallus domesticus, whether supplied in their shells or in the form of egg pulp being raw pulp consisting of the yolk and white which is obtained from such eggs after the shells have been removed.
• The provisions of paragraph I shall not apply where any goods mentioned in that paragraph are supplied in the course of carrying out any agreement for the furnishing or serving of any meal, refreshment, cooked or prepared food or any drink, as the case may be, so as to be ready for immediate consumption when so supplied

SUPPLY OF OTHER GOODS AND SERVICES

• Goods or services are treated as exported from Eswatini where in the case of –
  • goods, they are delivered to, or made available at, an address outside Eswatini as evidenced by documentary proof acceptable to the Commissioner General; or,
  • services, they are supplied for use or consumption outside Eswatini as evidenced by documentary proof acceptable to the Commissioner General;
  • the services are supplied directly in respect of goods temporarily admitted into Eswatini from an export country which are exempt from tax on importation under Item 470 of paragraphs 34 and 35 of First Schedule.
• International transport of goods or passengers occurs where the goods or passengers are transported by road, rail or air from a place –
  • outside Eswatini to another place outside Eswatini where the transport or part of the transport is across the territory of Eswatini;   
  • outside Eswatini to a place in Eswatini; or,
  • in Eswatini to a place outside Eswatini.
• The goods in respect of the supply of which the rate of zero percent shall apply under the provisions of section 24 (4) of Value-Added Tax 2011 shall, subject to the provisions of paragraph 2, are as follows-
  • petrol, diesel and liquid petroleum gas;
  • paraffin (kerosene) intended for cooking, illuminating and heating, provided it is not mixed or blended with any other substance for any purpose other than cooking, illuminating or heating;
  • supply of exercise books and textbooks approved by the Ministry responsible for education for the furtherance of education in a qualified educational institution established under public law;
  • medicines and drugs supplied –
    • for use in a qualified medical facility;
    • to the Government Central Medical Stores; or
    • to an individual, subject to submission by that individual, of a qualified medical practitioner's prescription issued within thirty (30) days prior to the supply and in such quantities as prescribed by the qualified medical practitioner; or,
  • the supply of international transport services in connection with the international transport of goods or passengers.

Input tax

Input tax deductions allowed

VAT incurred on goods purchased for resale, raw materials purchased by manufacturers and certain services used for the installation of capital goods may be deducted as input tax.

However, input tax does not include the VAT paid on goods or services for someone else’s business, or the VAT on private purchases. VAT incurred on goods and services acquired to make exempt supplies is not recoverable.

The vendor must be in possession of a proper VAT invoice for purchases made in Eswatini, or customs documentation in respect of goods imported into the country.

Where a vendor has lost a tax invoice, they should request the supplier for a duplicate of the invoice, otherwise a photocopy of the invoice is not allowed when seeking input tax credit. The replacement invoice must be clearly marked by the supplier as a duplicate.

Input tax expressly denied

There are specific items on which VAT cannot be reclaimed or partially claimed:

• mobile telephone bills — only 50%

• motor cars with a weight of less than 3.5 tons. This includes maintenance and repairs to motor vehicles under this weight

• business entertainment, namely hospitality of any kind provided in connection with a business, including the supply of meals, drinks and entertainment at clubs and the provision of recreational facilities.

Partial exemption

Preregistration and post-deregistration VAT

A vendor is allowed to claim input tax credit for VAT paid not more than two months prior to the date of VAT registration in respect of:

• goods held for re-supply on the date of registration

• a supply to or an import by the vendor prior to the date of registration of goods or services to be used in manufacturing goods for supply after the date of registration.

The claim for pre registration VAT credit must be submitted within four years of registration and the vendor must provide details of the stock on hand, invoice copies etc. to support the claim.

International trade

Imports

Goods

VAT is payable on the importation of goods by any person into Eswatini. The VAT paid by the vendor on the importation of goods for their business can be claimed as an input tax deduction.

Goods imported from a country from the Southern African Customs Union (SACU) (i.e. Botswana, Namibia, South Africa and Lesotho) are deemed to have been imported into Eswatini at the time the goods physically enter Eswatini. Goods are deemed to have been imported into Eswatini from outside SACU on the date on which the goods enter the borders for use within Eswatini.

The taxable value for imported goods includes the value of any services relating to the import, such as commission, packaging, transportation, short-term insurance and warranty expenses.

Where goods are imported from outside SACU, their taxable value is the sum of the customs value of the imported goods and the customs duty payable on it.

Where goods are imported from a SACU country, their value for VAT is the price charged for the goods plus freight and insurance.

If an importer is not registered for VAT or is registered but without a VAT account, VAT officers will collect the VAT payable on the import at the time the goods physically enter Eswatini.

If goods are imported by post, VAT officers at the post office will collect the VAT when goods are collected from the post office.

Where the importer is a registered vendor or (in certain circumstances) a foreigner who has arranged a VAT import account, VAT is payable on the import by the 20th day of the month following the month during which the goods were imported.

Goods that would have been exempt or zero-rated if supplied in Eswatini are subject to the same VAT when imported into Eswatini.

Services

An imported service is a supply of services by a person in the course or furtherance of an enterprise carried on outside Eswatini that are meant for use or consumption in Eswatini. VAT is payable on the imported service by the person importing the service into Eswatini, except where a registered person imports a service to make taxable supplies.

Exports

The exportation of goods is zero-rated if sold directly to a business abroad, the goods are exported by or on behalf of the supplier, and the required proof of exportation is maintained.

The exportation of services is zero-rated.

Refunds to foreigners are made through the South African Revenue Service.

Place, time and value of supply

Place of supply

A supply of goods is deemed to be made at:

• the location of the goods upon allocation to a customer’s order. If the goods are in Eswatini when allocated, the supply is in Eswatini, while if the goods are not in Eswatini when allocated, the supply is normally outside the scope of VAT, or

• the place where the assembly or building of goods for the first time on site takes place.

A supply of services is deemed to be made at the place:

• where the supplier belongs, namely the supplier’s business or other fixed establishment, including a branch or agency

• if no such establishment exists, where a natural person usually lives or a company is legally constituted

• in the case of establishments in more than one country, at the location of the establishment most directly concerned with the supply

• if services are supplied wholly or partly in Eswatini, but not near the border between Eswatini and another country, the commissioner may determine that the services are supplied in Eswatini if the supplier is registered or operates in Eswatini, or

• in the case of the supply of radio, television, telephone or other communication services, if the signal or service originates outside Eswatini, where the recipient receives the signal or service, provided a consideration is payable for receiving the service or signal.

Time of supply

The time of supply of the goods or services determines when the liability for VAT arises. In terms of the general rule, the time of the supply is the earliest of when:

• except as otherwise provided under this Act, a supply of goods or services occurs —

  • where the goods or services on which input tax has been deducted, are applied to own use, on the date on which the goods or services are first applied to own use

  • where the goods or services are supplied by way of gift, on the date on which ownership in the goods passes or the performance of the services is completed, or

  • in any other case, on the earlier of the date on which — (i) the goods are delivered or made available, or the performance of the service is completed; (ii) payment for the goods or services is made, or, (iii) a tax invoice is issued for the services received

• a vendor is deemed to have made a payment on the date that they receive a VAT invoice. In relation to cheques, a vendor is deemed to have made a payment on the date that they send the cheque or the date on the cheque, whichever is later. In the case of credit cards, the credit card payment date is the date when the supplier makes out the sales voucher. Where a vendor makes a deposit payment that serves as an advance payment, they can claim a credit for the input tax for the payment made.

Value of supply

The general rule is that the taxable value of a taxable supply is the consideration received for the supply. ‘Consideration’ normally means money, but it can also mean any payment made directly or indirectly to a person. This includes credits or payments in kind, or any other indirect form.

Where monetary consideration for a supply is not sufficient or where there is no monetary consideration, a fair market value is adopted, such as in the following circumstances:

• hire purchase agreements and finance leases

• application of goods for own use

• supply for a reduced consideration

VAT compliance

Accounting basis and tax periods

Where a vendor has adopted the cash VAT accounting system, they account for VAT in the VAT return for the month in which payment for a supply is received, and input tax credit is claimed after payment has been made.

Where an invoice VAT accounting system is adopted, input tax credit may be claimed on the basis of a tax invoice showing a time of supply date that falls before the end of the return period during which the claim is lodged.

Registered businesses may apply to use the cash method if 90% or more of the taxable value relates to services, such as accountants, lawyers and hotels, and certain other requirements are met.

Returns and payment of VAT

Interest and penalties

Refunds

Where a vendor has overpaid VAT for any tax period, they have the option to either:

• set off the excess against any outstanding liability relating to an earlier period; or

• carry forward the excess, and apply for a refund in respect of each calendar quarter, ending on 31 March, 30 June, 30 September and 31 December.

Any repayment due must first be set off against any tax arrears. Where a vendor can satisfy the SRA that excess credits are a feature of their business activities, the quarterly rule may be waived and the vendor may be allowed to make monthly refund claims, or whenever a credit arises.

Objections and appeal

A person who is dissatisfied with a decision of a tax officer may submit an objection to the Commissioner-General within 30 days after the service of the notice of decision.

Where the Commissioner-General is satisfied that owing to absence from Eswatini, sickness or other reasonable cause, the person who is dissatisfied was prevented from submitting an objection within the time specified in subsection (1) and there has been no unreasonable delay by the person in lodging the objection, the Commissioner-General may accept an objection submitted after the time specified in subsection (1).

The objection shall be in writing and shall specify in detail the grounds upon which it is made.

Where an objection to, or a notice of appeal against an assessment has been submitted, the tax payable under the assessment is due and payable, and may be recovered, notwithstanding that objection or appeal.

The Commissioner-General shall only consider an objection submitted if the person has given sufficient security for the tax due under the assessment and any penalty tax that may become payable.

The Commissioner-General shall serve the person objecting with notice in writing confirming the receipt of the objection within 14 days of its receipt. If the Commissioner-General has not made an objection decision within 90 days after the receipt of the objection, the Commissioner-General shall be deemed to have made a decision to allow the objection.

Appeal to the Tax Tribunal

A person dissatisfied with an objection decision may, within 30 days after being served with notice of the objection decision, submit a notice of appeal with the Tax Tribunal and serve a copy of the notice of appeal on the Commissioner-General.

The Tribunal may admit an appeal after the expiration of 30 days if it is satisfied that the appellant has a good and sufficient reason for not submitting the notice of appeal within the time specified in subsection (1).

In an appeal to the tax tribunal against an objection decision, a person is limited to the grounds set out in the objection, unless the tribunal grants the person leave to add new grounds.

In deciding an appeal, the tribunal may make a decision:

• affirming, reducing, increasing, or varying the assessment under appeal; or

• remitting the assessment for reconsideration by the Commissioner-General in accordance with the directions of the tribunal.

Appeal to High Court

A person who is dissatisfied with a decision of the tax tribunal may, within 30 days after being notified of the decision, submit a notice of appeal with the registrar of the high court; and shall serve a copy of the notice of appeal on the other party to the proceedings before the tribunal.

An appeal to the high court may be made on questions of law only, and the notice of the appeal shall state the question or questions of law that will be raised on the appeal.

VAT records

VAT invoices

A registered vendor must issue a VAT invoice in respect of a taxable supply to a taxable vendor in the same month that the goods or services are

supplied. A VAT invoice must contain the following details:

• the words ‘value-added tax invoice’ or ‘VAT invoice’

• the vendor’s commercial name, address, place of business and VAT registration number

• individual invoice number

• the commercial name, postal address, place of business and VAT registration number of a vendor recipient

• date of issuing the VAT invoice

• brief description (including quantity or volume) of the goods or services supplied; and

• the selling price, excluding VAT and any discount, the total amount of VAT charged, and the selling price including VAT, or

• the total charge on the invoice inclusive of VAT, any discount and the rate of VAT.

Credit notes and debit notes

Credit notes may be issued where the VAT disclosed on an issued VAT invoice exceeds the correct amount chargeable. The credit note must contain the following information:

• the words ‘credit note’ in a prominent place

• the vendor’s commercial name, place of business, and VAT and TIN registration numbers

• the commercial name, place of business, and VAT and TIN registration numbers of the recipient

• the date the credit note is issued

• a brief explanation of the circumstances that gave rise to the issuing of the credit note

• sufficient information to identify the taxable supply to which the credit note relates

• the taxable value of the supply shown on the VAT invoice, the correct taxable value, the difference between the two amounts and the VAT relating to the difference (that is, the VAT overcharged).

Other than the fact that the words ‘debit note’ must appear in a prominent place, the information to be disclosed in a debit note is similar to the information

required in a credit note. The additional VAT amount in a debit note is due for payment in the period in which the additional liability arises.

Additional export documentation

The required proof of exportation includes:

• commercial invoices

• certified copies of the documents presented to Eswatini customs at exportation

• certified copies of customs import documents of the country of destination

• proof of payment (settlement), if applicable.

Record-keeping

A vendor must keep record of all supplies made and received, including zero-rated supplies, and a summary of VAT for each month. The VAT summary is referred to as the vendor’s VAT account. A separate record must be maintained for any exempt supplies made by a vendor.

If a vendor sells directly to the public, they do not need to issue a VAT invoice unless the customer asks for one, but they must make a summary of their sales, showing separate totals for:

• VAT on the sales

• value of the sales before VAT

• total of all exempt sales

• VAT on certain postal imports and imported services

• credits allowed to customers.

A vendor must keep a summary of supplier invoices received, showing separate totals for:

• VAT paid on purchases in Eswatini

• value of the purchases before VAT

• VAT paid on imported supplies

• credits received from suppliers.

A record must also be kept (for a period of six years) of:

• goods given away or taken from stock for employees’ or private use

• business purchases on which input tax is denied

• customs documents showing the import entry and the VAT receipt

• business records.

Specific VAT rules

Bad debts

VAT paid to the SRA by a taxpayer in respect of a taxable supply, but not received from an insolvent customer is allowed as a credit where the whole consideration for the supply is subsequently treated as a bad debt. The credit arises on the later of:

• the date on which the bad debt was written off in the accounts of the vendor, or

• 12 months after the end of the tax period in which the VAT was paid on the supply.

A supplier who wants to claim relief for bad debt must:

• make a claim to the administrator, receiver or liquidator against their debtor for the VAT-inclusive amount that they are owed by the insolvent debtor

• obtain a written statement from the administrator, receiver or liquidator that the debtor is insolvent and cannot pay the debt.

Where any amount on which a credit has been allowed is subsequently wholly or partly recovered by the vendor, the vendor must account for output tax on that amount.