
I. Background
The Zimbabwean tax system is sourced-based, with
a
standard corporate income tax rate of 25 percent and maximum personal income tax rate of 45 percent.
A
three percent AIDS levy is imposed on both corporate and personal income tax




The disposal of immovable property and marketable securities are subject to capital gains tax at rates ranging from one percent of gross proceeds to 20 percent of the net gain.
VAT is imposed on the supply of goods and services
in
Zimbabwe and on the importation of goods into Zimbabwe. VAT on imported services only applies to services not utilised for the making of taxable supplies.


Withholding tax is deducted at source on specified payments both to residents and non-residents. Withholding tax is generally an advance tax
in
the case of residents and
a
final tax
in
the case of non-residents.








II. Corporate income tax
Every person who has derived taxable income
in
a
particular year of assessment is subject to corporate income tax. “Taxable income” is calculated as gross income less exempt income and allowable deductions. Gross income is defined as the total amount received by or accrued to or
in
favour of
a
person
in
any year of assessment from
a
source within or deemed to be within Zimbabwe and generally excludes amounts of
a
capital nature.


















III. Concept of permanent establishment (PE)
Non-resident companies are subject to corporate income tax on income from
a
source within or deemed to be within Zimbabwe, irrespective of whether or not the company has
a
PE
in
the country. Capital gains of
a
non-resident company from
a
source within Zimbabwe are also taxable
in
Zimbabwe.












The concept of PE is not defined under domestic tax rules, but is defined
in
the relevant double tax agreements entered into by Zimbabwe.


The standard corporate tax rate applicable to both branches of foreign companies and local incorporated companies is 25 percent.
In
addition,
a
3 percent AIDS levy is due, increasing the effective tax rate to 25.75 percent.




The following industry-specific tax rates apply:
• pension funds’ income from trade and investment is subject to 15 percent tax;
• manufacturing companies exporting 50 percent or more of their output is subject to corporate income tax at the rate of 20 percent;
• approved Build-Own-Operate-Transfer (BOOT) or Build-Operate-Transfer (BOT) arrangements are tax exempt for the first five years and then subject to 15 percent tax for the next five years and 25 percent after 10 years;
B. Minimum tax
Zimbabwe does not apply an alternative minimum tax.
C. Capital gains
The sale of immovable property (land and buildings) and marketable securities (shares
in
public or private companies)
in
Zimbabwe are subject to capital gains tax
in
terms of the Capital Gains Tax Act (Cap 23:01).






Capital gains tax is levied at
a
rate of 20 percent of the net gain realised on the disposal of unlisted marketable securities acquired on or after February 1, 2009, whereas such securities acquired before February 1, 2009 are subject to tax at five percent on the gross proceeds. The disposal of shares
in
companies listed on the Zimbabwe Stock Exchange (ZSE) is subject to
a
flat rate of one percent of the gross proceeds.






The gross proceeds of the disposal of immovable property acquired before February 1, 2009 is subject to tax at five percent, whereas the net gain realised on the disposal of immovable property acquired on or after February 1 is subject to 20 percent tax.
D. Deductible expenses
Generally, any revenue expense which is incurred for trading purposes during the year of assessment is deductible.
E. Carry forward losses
Trading losses may be carried forward for
a
period of six years. Losses arising from mining operations may be carried forward without any restriction.


Capital losses arising from the disposal of immovable assets or marketable securities may be carried forward without restriction.
F. Tax treaty network and transfer pricing
Zimbabwe has entered into double tax agreements with Bulgaria, Canada, France, Germany, Kuwait, Malaysia, Mauritius, the Netherlands, Norway, Poland, South Africa, Sweden and the United Kingdom.
Zimbabwe does not have specific transfer pricing legislation. However, transfer pricing is dealt with under the general anti-avoidance provisions,
in
terms of which the Commissioner-General has the power to make adjustments to inter alia any transaction, operation or scheme which has created rights or obligations which would not normally be created between persons dealing at arm’s length under
a
transaction, operation or scheme of the nature of the transaction, operation or scheme
in
question.






G. Withholding taxes
Withholding tax is applicable on specified payments made to resident and non-resident companies.
In
respect of payments to resident companies, this tax is generally an advance tax.


The withholding tax rates applicable to payments to non-residents may be reduced or eliminated
in
terms of
a
double tax agreement entered into between Zimbabwe and the recipient’s country of residence.








Royalties paid to
a
non-resident are subject to 15 percent withholding tax. No withholding tax is levied on interest paid to non-residents, but interest earned by
a
resident on fixed-term deposits (having
a
tenure of at least 90 days) is subject to 5 percent withholding tax and other interest is subject to 15 percent withholding tax.






There is no branch profit tax
in
Zimbabwe, but
a
15 percent withholding tax is levied on remittances of allocable expenditure of
a
technical, administrative, managerial or consultative nature by
a
Zimbabwean branch to its non-resident parent.














IV. VAT
VAT at
a
standard rate of 15 percent is imposed on every taxable supply of goods and services made
in
Zimbabwe, and on every importation of goods into Zimbabwe or taxable supply of any imported service. Generally imported services would only subject to VAT if the recipient of an imported service is not
a
registered operator or the service is not for making taxable supplies.






Any person who makes taxable supplies of goods or services with an annual turnover
in
excess of US$60 000 should register for VAT purposes as
a
“registered operator”.




V. Individual or personal taxation (employment income)
Individuals who are “ordinarily resident”
in
Zimbabwe are subject to income tax
in
respect of taxable income from
a
source within or deemed to be within Zimbabwe. Tax is levied at
a
progressive scale with the maximum rate of 45 percent.
In
addition, the three percent AIDS levy also apply to individuals.










The term “ordinarily resident” is not defined
in
the Income Tax Act, but
in
terms of the common-law interpretation which applies, an individual is ordinarily resident
in
a
country:








• which is his/her usual place of residence; or
Employment income earned by
a
non-resident individual from
a
source within or deemed to be within Zimbabwe, is subject to income tax
in
Zimbabwe, and levied
in
terms of the PAYE system. Employment income is deemed to be from
a
source within Zimbabwe if:










• it is from services rendered during temporary absence (not more than 183 days) from Zimbabwe;
• it is payment for services rendered to the Zimbabwean government.
Employees and employers are required to make monthly social security contributions to the National Social Security Authority (NSSA). The NSSA operates two schemes: the National Pension Scheme (NPS), to which both employers and employees are to contribute three percent of basic salary per month, with
a
cap of US$200 and the Accident Prevention and Workers’ Compensation Scheme (APWCS) or Workers’ Compensation Insurance Fund/Scheme (WCIF), to which the employer is obliged to contribute. The employer contribution rate is calculated using
a
risk factor dependent on the type of industry the employer is involved
in
.






Employers are also obliged to contribute one percent of the gross wage and salary bill as
a
manpower development levy and 0.5 percent of gross salaries as
a
standards development levy.




VI. Tax incentives/favourable tax regimes


An industrial park developer qualifies for an initial five year tax holiday. Subsequently, the normal corporate tax rate of 25 percent applies. An “industrial park” is defined as any premises or area approved by the Minister by statutory instrument and
in
which goods or components intended for export from Zimbabwe are manufactured.


Manufacturing operations of which 50 percent or more of its total manufacturing output for
a
year is exported from Zimbabwe, is subject to
a
corporate income tax rate of 20 percent.




Business operations
in
Growth Point Areas, designated as such by the Minister by notice
in
the Gazette, are entitled to
a
special initial allowances and an investment allowance of 15 percent on the cost incurred
in
respect of new commercial or industrial buildings or staff housing, additions or alterations to such buildings and new machinery and utensils.








An approved company commencing manufacturing operations
in
a
new project
in
a
Growth Point Area is subject to corporate income tax at 10 percent and
a
person engaged
in
a
new project providing infrastructure
in
a
Growth Point Area is subject to corporate income tax at 15 percent.


















Companies engaged
in
an approved BOOT or BOT arrangement qualifies for an initial five year tax holiday.
In
the subsequent five years, the income is taxable at
a
reduced tax rate of 15 percent. Thereafter, the income is taxable at the normal corporate tax rate of 25 percent.






Operators of
a
tourist facility
in
an approved tourist development zone qualify for an initial five year tax holiday. After this period, the normal corporate tax rate of 25 percent applies.




Farming operations are entitled to capital deductions
in
respect of expenditure on fencing, clearing and stamping land, sinking boreholes and wells and aerial and geophysical surveys.








VII. Compliance/Administration
The corporate tax year
in
Zimbabwe is the calendar year. With approval from the Commissioner-General,
a
company may have an accounting year which is different from the corporate tax year.




Corporate taxpayers must submit an annual income tax return by not later than four months from the end of its corporate tax year, supported by financial statements. Companies on the self-assessment system need not submit financial statements unless specifically requested to.


















VAT returns are due by the 25th of the following month and returns for PAYE are due by 10th of the following month. Withholding tax returns are due within 10 days of the distribution or payment.
VIII. Exchange control
Zimbabwe has limited exchange controls regulations, with mainly capital account transactions requiring exchange control approval. Commercial banks monitor ongoing compliance and may request additional information
in
respect of transactions and or refer any matter to exchange control.


IX. Document retention
For More Information
Celia Becker is Tax Advisor at ENSafrica
in
Johannesburg and she may be contacted by email at cbecker@ensafrica.com or by telephone at +27 11 269 7758.

