In Eswatini, individuals pay income tax on income earned in or from within the country. This follows a source-based tax system, where tax is charged based on where the income originates, regardless of where it is received.
The Income Tax Order, 1975, sets out how income tax is calculated and collected. Under the Second Schedule, employers are required to deduct Pay-As-You-Earn (PAYE) tax from employees’ earnings and submit it to the Eswatini Revenue Service (ERS) each month. This must be done within 7 days after the end of the month in which the payment was made.
Monthly PAYE Filing
ERS uses a monthly PAYE filing system to streamline reporting. Each return (from July to June) contributes to the annual tax calculation. If all 12 monthly submissions are filed correctly, there is no need for a separate year-end reconciliation.
Final Deduction System (FDS)
The FDS applies when an employee works continuously for the same employer for the full tax year. Under this system:
- The PAYE deducted during the year is treated as final.
- Employers must apply all relevant tax allowances and deductions.
- All PAYE payments and returns must be submitted and balanced by 30 September.
Tax Year-End Adjustment Requirements
At the end of the tax year, employers must:
- Compare the total PAYE deducted to the actual tax due.
- If overpaid, refund the employee and reduce the next PAYE payment to ERS.
- If underpaid, pay the shortfall to ERS and recover it from the employee.
Important: Employers are responsible for accurate deductions. If PAYE is under-deducted and the employee has already left, the employer is still liable for the unpaid tax, plus any penalties or interest.
TaxEase – Negative Adjustments for FDS Compliance
To help employers meet their responsibilities under the FDS, the TaxEase system allows negative PAYE adjustments, such as correcting over-deductions, only in December and June.
Key rules:
Adjustments must be offset against PAYE due for that month.
- Negative adjustments must not exceed the year-to-date (YTD) PAYE.
- If they do, the excess must be corrected in the original month when the over-deduction occurred.
- PAYE records must always reflect the correct tax due.
This process ensures PAYE reporting is accurate and final in line with FDS requirements, without needing further reconciliation at year-end.
Click here to access the Income Tax Order, 1975 (as amended).
Click here to access the ERS PAYE Deduction Tables.
Click here to access the New Monthly PAYE Tax Computation Tool.