Business law in Eswatini

14 Mar 2025 --
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Business Law in Eswatini (formerly known as Swaziland) is based on a mix of English common law, statutory law, and customary law. The legal system provides a framework for business formation, operations, taxation, and dispute resolution, while ensuring a balance between modern business practices and traditional customs. Eswatini's legal environment is designed to encourage both local and foreign investment, though challenges such as bureaucratic processes, legal enforcement, and access to finance exist.

1. Legal Framework

Eswatini’s business law is primarily governed by a combination of the following:

The Constitution of Eswatini (2005): Provides the foundation for legal rights, including the right to engage in business activities and the protection of private property.
The Companies Act of 2009: Governs the formation, operation, and dissolution of companies in Eswatini.
The Income Tax Act of 2001: Governs the taxation of individuals and businesses in Eswatini.
The Employment Act of 1980: Regulates employment relationships, including labor rights and obligations.
The Commercial Code: Governs commercial transactions and commercial contracts.
The Trade Marks Act: Regulates the protection of intellectual property and trademarks in Eswatini.
The Customs and Excise Act: Deals with customs duties, import and export regulations, and related taxes.
The Land and Property Act: Addresses property rights, land registration, and related matters.

2. Types of Business Entities

In Eswatini, there are several types of business structures available for both local and foreign entrepreneurs. These include:

a. Sole Proprietorship

Liability: The business owner has unlimited personal liability for the debts and obligations of the business.
Capital: There is no minimum capital requirement.
Registration: The business must be registered with the Registrar of Companies.
Taxation: The profits of the sole proprietorship are subject to personal income tax.

b. Partnerships

Liability: In a general partnership, all partners share unlimited liability for business debts. In a limited partnership, there are both general and limited partners, with limited partners only liable to the extent of their capital contributions.
Capital: No minimum capital requirement.
Registration: Partnerships must be registered with the Registrar of Companies.
Taxation: Income from the partnership is taxed as personal income for the partners.

c. Private Limited Company (Pty Ltd)

Liability: Shareholders’ liability is limited to the amount of their contributions to the company’s share capital.
Capital: The minimum share capital for a private limited company is E2,000 (approximately US$120).
Registration: Private limited companies must be registered with the Registrar of Companies.
Taxation: Corporate income tax is imposed on the company’s profits. The corporate tax rate is 27.5%.

d. Public Limited Company (PLC)

Liability: Shareholders' liability is limited to the amount of their shareholding.
Capital: The minimum capital for a public limited company is E5,000 (approximately US$300).
Registration: Public companies must also be registered with the Registrar of Companies and comply with regulations from the Eswatini Stock Exchange (ESE) if publicly listed.
Taxation: Similar to private limited companies, public limited companies are subject to corporate income tax.

e. Branch of a Foreign Company

Liability: The parent company is liable for the operations of its branch.
Registration: Foreign companies wishing to establish a branch in Eswatini must register with the Registrar of Companies and obtain necessary licenses.
Taxation: Foreign branches are subject to the same corporate tax rates as local businesses.

3. Business Registration and Licensing

Starting a business in Eswatini involves several steps, which are relatively straightforward:

Choose a Business Name: The business name must be unique and not already in use. You can verify this with the Registrar of Companies.
Register the Business: Businesses must register with the Registrar of Companies under the Ministry of Commerce, Industry, and Trade. This involves submitting incorporation documents, such as Articles of Association and a notice of directors.
Obtain a Tax Identification Number (TIN): All businesses must apply for a Tax Identification Number (TIN) with the Eswatini Revenue Authority (SRA).
Register for VAT: Businesses with an annual turnover of over E1 million (approximately US$60,000) must register for Value Added Tax (VAT) with the SRA.
Obtain Necessary Licenses: Depending on the type of business, specific licenses may be required (e.g., for food businesses, financial services, or export businesses).

4. Taxation in Eswatini

Eswatini offers a competitive tax regime, and businesses must comply with the following tax obligations:

a. Corporate Income Tax

Corporate tax rate: The standard corporate income tax rate is 27.5% on profits.
Tax on Dividends: Dividends are subject to withholding tax at a rate of 10%, but this rate may vary depending on tax treaties.
Capital Gains Tax: Eswatini does not impose a separate capital gains tax; capital gains are taxed as part of the income tax.

b. Value Added Tax (VAT)

The standard VAT rate in Eswatini is 14%, applied to most goods and services.
A reduced rate of 0% applies to certain goods and services, such as exports and certain food products.
Businesses with a turnover exceeding E1 million are required to register for VAT.

c. Personal Income Tax

Personal income is taxed at progressive rates ranging from 10% to 33%, depending on income levels.
Employees’ salaries are subject to Pay-As-You-Earn (PAYE), which employers are responsible for withholding and remitting to the tax authorities.

d. Customs and Excise

Eswatini imposes duties on imports and exports in accordance with its obligations under the Southern African Customs Union (SACU). The Customs and Excise Act governs these duties.

e. Social Security Contributions

Employers must contribute to the Social Security Fund (SSF) for their employees. The contribution is 5% of an employee’s monthly salary, which is matched by the employer.

5. Labor Law in Eswatini

Labor law in Eswatini is governed by the Employment Act and other regulations related to workers' rights, wages, and conditions of employment.

a. Employment Contracts

All employees must have a written employment contract outlining terms of employment, duties, and compensation.
Fixed-term and indefinite-term contracts are permitted.
A probation period of up to 6 months is commonly used in employment contracts.

b. Working Hours

The standard working week is 48 hours, typically divided into 6 working days of 8 hours each.
Overtime work is compensated at higher rates.

c. Leave Entitlements

Annual Leave: Employees are entitled to 21 days of paid annual leave after one year of service.
Sick Leave: Employees are entitled to 30 days of paid sick leave annually, provided a medical certificate is presented.
Maternity Leave: Female employees are entitled to 12 weeks of paid maternity leave.

d. Termination of Employment

Notice Period: Employees are entitled to a notice period or severance pay if terminated. The notice period varies based on length of employment.
Severance Pay: Employees are entitled to severance pay if dismissed without cause.

6. Intellectual Property (IP) Law

Eswatini offers protection for intellectual property, though enforcement mechanisms are still developing. The key areas of IP law in Eswatini include:

a. Trademarks

Trademarks are protected under the Trade Marks Act, and registration with the Registrar of Companies is required for legal protection.
Trademarks are protected for 10 years, and they can be renewed.

b. Patents

Patents for new inventions can be granted by the Registrar of Companies for a period of 20 years, after which they can be renewed.

c. Copyright

d. Industrial Designs

Industrial designs can be registered with the Registrar of Companies and are protected for a period of 10 years.

7. Foreign Investment and Incentives

Eswatini offers a range of incentives to encourage both local and foreign investment, particularly in key sectors such as agriculture, manufacturing, tourism, and mining. Some of the key incentives include:

Investment Promotion: The Eswatini Investment Promotion Authority (EIPA) provides various incentives for investors, including tax breaks, duty exemptions, and assistance with business registration.
Tax Incentives: Foreign investors in certain sectors may be eligible for reduced tax rates or tax holidays.
Access to SACU Market: As a member of the Southern African Customs Union (SACU), Eswatini offers businesses access to the broader SACU market, including South Africa, Botswana, Lesotho, and Namibia.

8. Dispute Resolution

Disputes in Eswatini can be resolved through both litigation and alternative dispute resolution (ADR) mechanisms:

Litigation: Commercial disputes are heard in the High Court and the Industrial Court

for labor-related issues.

Arbitration: Eswatini is a signatory to the New York Convention on international arbitration, and commercial disputes can be resolved through arbitration.
Mediation: Mediation and other forms of ADR are increasingly being encouraged as alternative means to resolve disputes without going to court.

Conclusion

Eswatini provides a reasonably favorable legal environment for businesses, with straightforward processes for business registration and a relatively low tax burden on retained earnings. However, investors should be aware of challenges such as bureaucratic inefficiencies and limited access to finance. The country offers opportunities for businesses in several sectors, especially those involved in exports, manufacturing, and tourism. Understanding the local business laws and regulations is essential for navigating the Eswatini market effectively.

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