I have the exact same issue when bundling. I added the flag manually in a additional plist fields entry with WKApplication=1 because my Info.Plist is generated and it didn't help. I wrote a custom Run Script Phase that added the flag and that didn't help as well. We need a reply from someone from Apple here. This needs to be fixed

Unfortunately this didn't change anything, still getting the same error. :/ And it still happens in validation when uploading the archive.

There is another issue here, that is experiencing the same issue, I commented on that one as well. https://developer.apple.com/forums/thread/784198

The App actualy doesn't use any watchkit extension, just a standalone watchOS target as you said, that's the strange thing.