By Phephile Motau
Minister of Finance Neal Rijkenberg told the Eswatini Financial Times that this would only be opened to companies which are developmental enterprises. The minister clarified that foreign investors who would-be beneficiaries are new businesses or enterprises that will significantly contribute to sustainable economic growth and employment creation in the medium to long term through enhanced competitiveness.
Rijkenberg detailed that the qualifying companies should also contribute significantly to the development of a knowledge-based economy through science and technology or the stimulation of the start-up growth of technologically intensive industries in the country. Initially, the companies set to get this incentive are those that will do business in the Special Economic Zones (SEZs) as specified by the Special Economic Zones Act of 2018. To regulate how the investors will be afforded the tax incentive, the Minister of Finance has introduced the Income Tax Amendment Bill of 2022 which is yet to be debated by Parliament and be passed into an Act.
The Bill states that when the minister of finance is satisfied that an investment project proposed by a new business would be beneficial to the development of the economy, he may, with prior approval of the Cabinet enter into a tax agreement and nominate such a qualifying business as a development enterprise, granting it the tax concession. The Bill further states that a tax concession granted through a development enterprise agreement shall be given for a non-renewal period of 10 years in respect of the 10 per cent company tax rate. The grant for a development enterprise will only apply to qualifying new investments, businesses or enterprises engaged in manufacturing activity of an industrial, scientific, or educational nature within Eswatini.
The grant will also be applicable for businesses in mining or mineral beneficiation, energy and power generation, assembly, agro-industries, and tourism.
The Bill further states that the minister may revoke or amend a development enterprise in consultation with Cabinet in the event the company fails to meet the eligibility criteria, fails to meet tax obligations, or fails to substantially carry out the development or investment specified. Rijkenberg highlighted that this was a practice world over. He said the problem arises when a local company offering the same service is charged the normal tax rate, which renders them uncompetitive compared to its international counterparts.
“By also making better tax rates for everybody, we are trying to level the playing ground between domestic and foreign companies,” he said.
The qualifying companies will operate in Special Economic Zones (SEZs)