# Eswatini transfer pricing: associate persons, the arm's length rule, methods and documentation (year to 30 June 2026) v0.1

> **General reference only.** This skill is general tax/accounting reference material for AI-assisted workflows. It has not been reviewed for any specific person's facts, documents, elections, deadlines, residency, filing status, or local procedures. Do not rely on it to file, pay, amend, or take a tax position without review by a qualified professional in the relevant jurisdiction.

Eswatini's transfer pricing rules are sections 65quat (arm's length determination), 65quin (transfer pricing methods) and 65sex (tested party) of the Income Tax Order 1975, inserted by section 31 of the Income Tax (Amendment) Act 2023 (Act 20 of 2023, assented 14 July 2023). The Act commenced on a date set by Gazette notice (s1(2)); the Eswatini Revenue Service (ERS) says the amendments took effect on 1 July 2024. The Eswatini Revenue Service administers the rules. The year of assessment runs from 1 July to 30 June; this skill covers the year 1 July 2025 to 30 June 2026, whose return is due in 2026. The 2026 Budget Speech lists the 2023 Act among completed tax reforms (para 165) and announces no tax increases for 2026-27 other than excise duties (para 166).

## Who this applies to

- **Associate person (s2, as added by Act 20 of 2023 s2).** Any other person who acts, or is likely to act, in accordance with the directions, requests, suggestions or wishes of the person. Without limiting that test, these are associates:
  - a relative;
  - a partner, an associate of a partner, or a partnership in which the person is a partner;
  - the trustee of a trust under which the person or an associate benefits or can benefit;
  - a company in which the person, alone or with an associate, controls directly or indirectly 50% or more of the share capital or voting power, or which is accustomed or may reasonably be expected to act on the directions or wishes of the person or an associate.
- **Older "associate" definition (s2 of the Order, from before 2023).** The Order already defined "associate" in different words: a relative or partner is an associate unless the Commissioner is satisfied that neither acts on the other's directions; a company is an associate where a person controls 50% or more of its voting power directly or through interposed companies, partnerships or trusts, and the reverse. The 2023 Act added "associate person" alongside it without repealing it. Ask a specialist where the two give different answers (see "Not yet confirmed").
- **Controlled transaction (s2):** any transaction between associated persons. An **uncontrolled transaction** is one between independent persons.
- **Who must price at arm's length (s65quat(1)).** The rule applies where:
  - a person liable to tax in Eswatini deals, directly or indirectly, with an associated person in a transaction, operation or scheme (domestic and cross-border dealings are both caught); or
  - a person not liable to tax in Eswatini deals with an associated person not liable to tax in Eswatini, where the transaction relates to a permanent establishment in Eswatini of one of them.
- **Beneficial tax regime counterparties (s65quin(7), (8)).** The arm's length rule also applies to a transaction between a person liable to tax in Eswatini (or an Eswatini permanent establishment of a non-resident) and a person in a jurisdiction that the Commissioner determines provides a beneficial tax regime, **whether or not they are associated**. A regime is beneficial where its effective tax rate is within limits the Minister sets by Gazette notice.
- **Small-value exclusion (s65quin(13)).** The section does not apply to controlled transactions between persons liable to tax in Eswatini where they satisfy the Commissioner that the value of all transactions between them in the year is below a threshold the Minister sets by Gazette notice, unless the Commissioner directs in writing, before the year, that it applies. This exclusion covers only domestic pairs; no threshold notice was found (see "Not yet confirmed").

Not covered here, refer to a specialist: the 30% of tax EBITDA interest cap in s65sep (see [Corporate income tax](sz-corporate-income-tax.md)), treaty rates and mutual agreement procedures, and the general anti-avoidance rule in s65.

## Rates, bands and thresholds

| Item | Amount and conditions | Tax year | Official URL |
|---|---|---|---|
| Company income tax rate on an upward adjustment | 25% of taxable income (Third Schedule Part I para 1(a), as replaced by Act 20 of 2023 s39) | 2026 | https://www.ers.org.sz/documents/IncomeTaxAmendmentAct2023.pdf |
| Company rate confirmed for 2026 returns | 25% (ERS notice for returns for the year ended 30 June 2026, para 5) | 2026 | https://ers.org.sz/whatsnew-file/1791462650754-1784270658474_Notice_for_Filing_Income_tax_Returns_Public_Notice_Final_Aligned.pdf |
| Associate control threshold | 50% or more of share capital or voting power, directly or indirectly, alone or with an associate (s2 "associate person" (d)) | 2026 | https://www.ers.org.sz/documents/IncomeTaxAmendmentAct2023.pdf |
| Approved transfer pricing methods | Five: comparable uncontrolled price, resale price, cost plus, transactional net margin, transactional profit split (s65quin(3)) | 2026 | same |
| Domestic small-value exclusion | Below a threshold set by the Minister by Gazette notice (s65quin(13)); figure not found | 2026 | same |
| Intangible rights payments to an associate | Capped at a percentage, set by the Minister by Gazette notice, of the earnings before interest, taxes, depreciation, amortisation and royalties payable from the activity in which the rights are used (s65quin(12)); figure not found | 2026 | same |
| Additional tax on an understatement | Twice the tax understated; the Commissioner may waive or remit part or all where there was no intent to evade (s40(1)(b), (c), (3)) | 2026 | https://www.ers.org.sz/documents/IncomeTaxOrder1975.pdf |
| Interest on tax paid late | 18% a year from the due date to payment; the Minister may change it by Gazette notice (s57(2)) | 2026 | same |
| Failure to produce documents on request, attend for examination, or give access and assistance to officers (s35(1), (2), (4), (7)) | E25 a day while the failure continues, up to E10,000 (s35(9), added by Act 20 of 2023 s20) | 2026 | https://www.ers.org.sz/documents/IncomeTaxAmendmentAct2023.pdf |
| Records offence (failing to keep s35bis records) | Fine up to E10,000, imprisonment up to one year, or both (s66(1)(h)) | 2026 | https://www.ers.org.sz/documents/IncomeTaxOrder1975.pdf |
| Records retention | At least five years after the end of the year of assessment, kept in Eswatini, in English or siSwati (s35bis(3)) | 2026 | same |
| Annual return and payment, companies (year ended 30 June 2026) | 31 October 2026; other approved year ends within four months of year end | 2026 | https://ers.org.sz/whatsnew-file/1791462650754-1784270658474_Notice_for_Filing_Income_tax_Returns_Public_Notice_Final_Aligned.pdf |
| Withholding on royalties and management charges paid to a non-resident | 15% of the gross amount, final tax (s32B) | 2026 | https://www.ers.org.sz/documents/IncomeTaxOrder1975.pdf |

## The base

**The arm's length principle (s2, s65quat(1)).** The arm's length principle means the price payable between independent enterprises. Each associated person's taxable income must be determined consistently with it. Taxable income is consistent with the principle if the conditions of the transaction do not differ from those that independent persons would have applied in comparable transactions in comparable circumstances.

**The adjustment (s65quat(2), (3)).** Where the conditions are not at arm's length and the effect is to reduce or postpone anyone's tax for any year, taxable income is computed as if the conditions were at arm's length. Both the test and the size of the adjustment follow s65quin(1). Section 65quat(2) applies only where the effect is to reduce or postpone tax; it gives no mechanism to reduce Eswatini income where the pricing overstates it.

**Permanent establishments (s65quat(4)).** No deduction is allowed for amounts paid or payable by an Eswatini permanent establishment to its head office or other offices (other than reimbursement of actual expenses):
- as royalties, fees or similar payments for the use of patents or other rights;
- as commission for specific services or for management;
- as interest on money lent to the permanent establishment, except in a banking enterprise.

**Methods (s65quin(1) to (6)).**
- Use the most appropriate method, chosen by weighing:
  - the strengths and weaknesses of the approved methods;
  - the nature of the transaction, through a functional analysis of functions, assets and risks;
  - the availability of reliable information;
  - the degree of comparability, including the reliability of comparability adjustments.
- The five approved methods and their financial indicators (s2 "financial indicator", s65quin(3)):
  - comparable uncontrolled price (the price);
  - resale price (the resale margin);
  - cost plus (the mark up on costs);
  - transactional net margin (the net profit margin relative to costs, sales or assets);
  - transactional profit split (the division of operating profit or loss). Where some functions can be priced by another method, the profit split is applied to the residual profit after those functions are remunerated.
- One method is enough (s65quin(4)).
- Another method may be used only if the Commissioner is satisfied that none of the five can reasonably be applied and the result matches what independent persons would achieve; the person using it must show both (s65quin(5), (6)).

**Tested party (s65sex).** For cost plus, resale price and TNMM, select the tested party consistently with the functional analysis. It is normally the party with the less complex functions and the most reliable comparables. Where the tested party is foreign, enough information must be available to apply the method to it and for the Commissioner to review that application. The Act refers to information under "regulation 11", meaning the Transfer Pricing Regulations; those Regulations were not found (see "Not yet confirmed").

**Commodities (s65quin(9), (10)).** For exports or imports with an associate of grains, oil seeds, other products of the land, hydrocarbons or their derivatives that have a quoted price on a commodity exchange, a price-reporting agency or a government price-setting agency, the quoted price on the shipment date is used. The person can rebut it with evidence that adjustments are appropriate. For goods exported from Eswatini, if the price agreed between the group and an independent person is higher than the quoted price, that agreed price is used. The shipment date is the bill of lading or airway bill date unless the actual pricing date is proved.

**Intangibles (s65quin(12)).** Consideration for the transfer of rights in an intangible to or from an associate (other than an outright alienation) may not exceed a percentage, set by the Minister in the Gazette, of the earnings before interest, taxes, depreciation, amortisation and royalties payable, derived from the activity in which the rights are used.

**OECD Guidelines (s65sex(6), (7)).** Sections 65quat, 65quin and 65sex are interpreted in accordance with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Where the Order and the Guidelines conflict, the Order prevails.

**Related asset rules.** A business asset acquired in a non-arm's length transaction has a cost base equal to its market value at acquisition (s32I(3)). A disposal to an associate, or in a non-arm's length transaction (other than a transmission to a trustee or beneficiary on death), is treated as made for the greater of the cost base and the fair market value (s32J(2)). Trading stock acquired other than at arm's length is taken at a cost equal to the current market price in the Commissioner's opinion (s11bis(6)).

**Documentation (s65quin(11), s35bis).** A person in a transaction covered by s65quat(1) must keep the documentation required under s35bis and any further documents the Commissioner requires under the Transfer Pricing Regulations. Section 35bis requires records in Eswatini, in English or siSwati, kept for at least five years after the year (longer while an objection or appeal is open), and lets the Commissioner disallow a deduction that cannot be supported.

**Rulings.** A taxpayer may apply for a private ruling (s68ter). No additional tax under s40(1)(b) or (c) arises where the incorrect statement is the subject of a private ruling application filed before or when the return is furnished (s40(9), added by Act 20 of 2023 s23).

## Deadlines and filing

| Obligation | When | Source |
|---|---|---|
| Annual income tax return and payment, all non-individual entities, year ended 30 June 2026 | 31 October 2026, on TaxEase only; draft financial statements accepted, signed audited statements to follow | ERS notice, returns for tax year end 2026, paras 3 to 6 |
| Approved year end other than 30 June | within four months after the end of the approved financial year | same, para 4 |
| Extension of time for a return | on written application, where good cause is shown (s33(1) proviso, added by Act 20 of 2023 s18) | Act 20 of 2023 |
| Transfer pricing documentation | kept under s35bis and produced when the Commissioner requires it; no statutory contemporaneous deadline was found | s65quin(11), s35bis |
| Withholding on management charges and royalties paid to a non-resident associate | remit within 15 days from the date of payment (s32B(4)(b)); the ERS rates page shows the 15th of the following month | Order s32B; ERS Rates and Thresholds |
| Notify ERS of an agreement with a non-resident for services in Eswatini | within 30 days of entering into it (s59C) | Order s59C |

How to file: the transfer pricing position is part of the annual company return on TaxEase (https://taxease.ers.org.sz/). The return form's transfer pricing fields were not seen for this version.

## Penalties and interest

- **Additional tax.** Under s40(1)(b) and (c), an omission or incorrect statement that understates tax attracts additional tax of twice the difference. Under s40(5), a deduction that is not permissible under the Order counts as an omission; whether a charge adjusted under s65quat(2) is such a deduction is not spelled out (a head office charge barred by s65quat(4) plainly is). The Commissioner may remit all or part where there was no intent to evade (s40(3)). No additional tax under s40(1)(b) or (c) applies where a private ruling application covering the point was filed by the return date (s40(9)).
- **Interest.** Tax not paid by its due date carries interest at 18% a year from the due date until payment (s57(2)).
- **Documents.** Failing to produce documents or information the Commissioner requires under s35: E25 a day, up to E10,000 (s35(9)). Failing to keep s35bis records, or to produce books or documents without just cause, is an offence: a fine up to E10,000, imprisonment up to one year, or both (s66(1)(b), (h)).
- **Withholding on related-party payments.** See [Cross-border](sz-cross-border.md) for the 20% additional tax on tax not withheld and the 10% to 25% scale on late remittance (s40bis).
- **Company officers.** Where a company commits an offence, its public officer or other similar officer (or a person acting as one) is deemed to have committed it, unless it was committed without their consent or knowledge and they used reasonable diligence to prevent it (s66bis, added by Act 20 of 2023 s32).

No penalty specific to transfer pricing was found in the Order as amended.

## Cross-border points

- **Branches:** an Eswatini permanent establishment of a non-resident is inside the arm's length rule (s65quat(1)(b)). It cannot deduct royalties, management commissions or (outside banking) interest charged by its head office (s65quat(4)). Branch profits tax and the permanent establishment definition are in [Cross-border](sz-cross-border.md).
- **Payments to a foreign associate:** a management charge or royalty bears 15% final withholding on the gross amount (s32B). An amount above arm's length is also disallowed under s65quat(2).
- **Treaties:** the South Africa treaty (Article 9) lets each State adjust profits of associated enterprises to arm's length, and the other State may make an appropriate corresponding adjustment, with consultation between competent authorities if needed. Other treaties published by ERS (Botswana, Lesotho, Mauritius, Seychelles, Taiwan, United Kingdom) were not read for their associated-enterprises article.
- **Low-tax counterparties:** transactions with persons in a beneficial tax regime jurisdiction are tested at arm's length even when unrelated (s65quin(7)).

## Two worked examples that recompute

### Example 1: under-remunerated Eswatini distributor (TNMM)

Lubombo Distributors (Pty) Ltd, an Eswatini company with a 30 June year end, is 100% owned by its South African parent and buys all its stock from it. For the year to 30 June 2026, sales are E20,000,000 and its operating margin is 1%. A TNMM benchmark of independent distributors gives an arm's length operating margin of 4%.

- **Adjustment (s65quat(2)):** (4% - 1%) x E20,000,000 = E600,000 of extra taxable income.
- **Extra tax at 25%:** E150,000.
- **Additional tax under s40(1)(c):** twice E150,000 = E300,000, which the Commissioner may waive or remit in whole or part if there was no intent to evade (s40(3)).
- **Interest:** if the extra tax is paid one year after the 31 October 2026 due date, 18% x E150,000 = E27,000.

```oa-check
name: Eswatini distributor TNMM adjustment, sales E20m, 1% vs 4% (year to 30 June 2026)
inputs:
  sales: 20000000
  actual_margin: 0.01
  arm_length_margin: 0.04
  rate: 0.25
  interest_rate: 0.18
steps:
  - adjustment: (arm_length_margin - actual_margin) * sales
  - extra_tax: adjustment * rate
  - max_additional_tax: extra_tax * 2
  - interest_one_year: extra_tax * interest_rate
expected:
  adjustment: 600000.00
  extra_tax: 150000.00
  max_additional_tax: 300000.00
  interest_one_year: 27000.00
```

### Example 2: decision, keep a E2,000,000 management fee or reprice it to arm's length

Mbabane Manufacturing Ltd pays its UK parent a management fee of E2,000,000. A benchmark supports E1,200,000 as arm's length. Should it keep the fee or reprice it? Assume no treaty reduction of the 15% withholding.

- **Keep the fee:**
  - withholding at 15% on the gross amount (s32B), the parent's final tax: E300,000;
  - the E800,000 excess is disallowed under s65quat(2), so extra company tax at 25% is E200,000;
  - Eswatini tax cost: E500,000, before any s40 additional tax and interest.
- **Reprice to E1,200,000:**
  - withholding 15% = E180,000;
  - no adjustment, because the fee is at arm's length.
- **The figure that decides it:** keeping the fee costs E320,000 more, before any additional tax. Repricing is cheaper, provided the benchmark and the functional analysis are documented under s65quin(11).

```oa-check
name: Eswatini management fee E2m vs arm's length E1.2m (year to 30 June 2026)
inputs:
  fee: 2000000
  arm_length_fee: 1200000
  wht_rate: 0.15
  cit_rate: 0.25
steps:
  - keep_wht: fee * wht_rate
  - keep_disallowed: max(0, fee - arm_length_fee)
  - keep_extra_cit: keep_disallowed * cit_rate
  - keep_total: keep_wht + keep_extra_cit
  - reprice_wht: arm_length_fee * wht_rate
  - reprice_total: reprice_wht
  - saving_from_repricing: keep_total - reprice_total
expected:
  keep_wht: 300000.00
  keep_disallowed: 800000.00
  keep_extra_cit: 200000.00
  keep_total: 500000.00
  reprice_wht: 180000.00
  reprice_total: 180000.00
  saving_from_repricing: 320000.00
```

## Ask the client first

1. Who owns or controls the Eswatini entity, and who it deals with: relatives, partners, trusts, the 50% capital or voting test, or anyone whose directions it follows.
2. Every transaction with those persons in the year (domestic and cross-border, including branch to head office), by type and amount.
3. Whether any counterparty sits in a low-tax jurisdiction, and whether any trade is in quoted commodities.
4. The method used, the tested party, and the benchmark and functional analysis, with their dates.
5. Management fees, royalties and interest paid to foreign associates, and the withholding deducted.
6. The year end, and whether a private ruling has been applied for.

## Sources

| Source | URL | Read on |
|---|---|---|
| Income Tax (Amendment) Act 2023 (Act 20 of 2023), scanned, pages rendered and read by eye: read for s1 (commencement), s2 (definitions: arm's length principle, associate person, controlled transaction, financial indicator, permanent establishment, tested party, transfer pricing methods), s17 (ss32H to 32K), s18, s20, s23 (s40(8), (9)), s31 (ss65quat, 65quin, 65sex, 65sep), s32 (s66bis) and s39 (Third Schedule Part I) | https://www.ers.org.sz/documents/IncomeTaxAmendmentAct2023.pdf | 2026-11-02 |
| Income Tax Order 1975, ERS consolidated copy to the 2013 amendments: read for s2 "associate", s11 deemed source, s11bis(6) trading stock, s32B, s33, s35, s35bis, s40, s40bis, s57, s59C, s65, s66, s68, s68bis, s68ter and the index | https://www.ers.org.sz/documents/IncomeTaxOrder1975.pdf | 2026-11-02 |
| ERS, Income Tax Order changes 2024 (read for the 1 July 2024 effective date and the transfer pricing summary) | https://ers.org.sz/whatsnew-file/1726738466004-Income_Tax_Order_Changes__2024.pdf | 2026-11-02 |
| ERS, public notice, annual income tax returns for tax year end 2026 (read for who files, TaxEase, deadlines, the 25% rate and draft financial statements) | https://ers.org.sz/whatsnew-file/1791462650754-1784270658474_Notice_for_Filing_Income_tax_Returns_Public_Notice_Final_Aligned.pdf | 2026-11-02 |
| ERS, Rates and Thresholds (read for the withholding due dates and the additional tax scale) | https://www.ers.org.sz/IncomeTax/RatesandThres | 2026-11-02 |
| Eswatini and South Africa double taxation agreement (read for Article 9, associated enterprises) | https://www.ers.org.sz/documents/SouthAfrica.pdf | 2026-11-02 |
| 2026-27 Budget Speech, ERS copy (read for paras 159 to 167 on tax measures) | https://ers.org.sz/whatsnew-file/1772201986460-2026_27_FY_Budget_Speech_2026.pdf | 2026-11-02 |
| ERS, Tax Legislations page and Practice Notes and Guidelines page (read for the list of published laws; no transfer pricing regulations or practice note listed) | https://www.ers.org.sz/LegalandPolicy/TaxLegislation | 2026-11-02 |

Not yet confirmed:
- Which definition governs "associated persons" in ss65quat to 65sex where the older s2 "associate" (relatives and partners excluded if the Commissioner is satisfied neither follows the other's directions; 50% of voting power through interposed entities) and the 2023 "associate person" (50% of share capital or voting power) give different answers; no ERS guidance found.
- The Transfer Pricing Regulations referred to in s65quin(11) and s65sex(4) ("regulation 11"): not found on the ERS site or on EswatiniLII; whether they have been made is unknown, so no documentation contents or deadline are given.
- The Gazette notices setting the s65quin(13) small-value threshold, the s65quin(12) intangibles percentage and the s65quin(8) beneficial tax regime limits.
- The Gazette commencement notice under s1(2) of Act 20 of 2023; 1 July 2024 rests on the ERS 2024 summary.
- Any Tax Administration Act replacing the Order's administrative and penalty provisions: none found on the ERS legislation page.
- Any country-by-country, master file or local file rule, and any advance pricing agreement procedure: none found in the texts read.
- The transfer pricing fields on the TaxEase company return.
- Whether s32B(4)(b) (remit within 15 days of payment) has been amended to the "15th of the following month" shown on the ERS rates page.