Zimbabwe
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Mail address:
Angwa City
Corner of Julius Nyerere and Harare Kwame Nkrumah Zimbabwe Harare Zimbabwe
P.O. Box 62
Executive and immigration contacts
Nigel Forsgate
Velile Ngwenya
+263 (242) 750-979; +263 (772) 303-603
Fax: +263 (242) 773-842 Email: nigel.forsgate@zw.ey.com
+263 (242) 750-979
Fax: +263 (242) 773-842 Email: velile.ngwenya@zw.ey.com
Effective from 24 June 2019, the Zimbabwe dollar was declared the sole legal tender for transacting in Zimbabwe. This was relaxed on 29 March 2020 to allow for payment of goods and services priced in Zimbabwe dollars to be made in foreign currency using free funds, at the exchange rate prevailing on the date of payment. However, effective from 24 July 2020, a seller of goods and services is permitted to display, quote or offer the price of such goods and services in Zimbabwean and/or foreign currency at the ruling exchange rate.
A. Income tax
Who is liable. All individuals are subject to income tax on income that is accrued or received by or in favor of a person or deemed to have accrued or received by or in favor of a person from a true or deemed Zimbabwean source in a year of assessment. Compensation for services that are rendered in Zimbabwe is deemed to be derived from a Zimbabwean source, regardless of where the payment is made or where the payer resides.
The terms “resident” and “ordinarily resident” are not defined in the tax law. Residential status depends on the facts and circum stances indicating a degree of presence. For example, a person living and working temporarily in Zimbabwe is considered resi dent but not ordinarily resident, while a transient visitor is con sidered neither ordinarily resident nor resident.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Tax is levied on all forms of employee remuneration, including salary, wages and allowances whether in cash or in kind.
All allowances paid by an employer or on an employer’s behalf behalf to an employee are taxable. These include, among others, school fees and allowances, free or subsidized accommodation, gifts to employees, holiday allowances, use of company motor
vehicles (deemed benefit from the use of company vehicles), free or subsidized shares and free food.
The following are the annual deemed benefits on the use of an employer’s vehicle by an employee.
Engine capacity
ZWL USD
Up to 1,500 cc 54,000 675 1,501 cc to 2,000 72,000 900 2,001 cc to 3,000 108,000 1 350 3,001 cc and above 144,000 9,800
Nonresidents are also taxed on their employment income in Zimbabwe at the rates shown in Employee tax rates.
Partners are not employees and, therefore, are not subject to employee tax. They are individually taxed on their share of part nership profits at a rate of 24% plus the 3% AIDS levy.
Executive directors’ fees. Executive directors’ fees are taxed together with other employment income.
Self-employment and business income. Income tax is levied on total income received by or accrued to or in favor of any person or income deemed to have been received by or accrued to or in favor of a person from a Zimbabwean or deemed Zimbabwean source. This excludes amounts proved by the taxpayer to be capital in nature. Certain types of income are exempt from tax. These are covered in the Third Schedule to the Income Tax Act.
Income from sources other than employment is subject to tax at a rate of 24% plus the 3% AIDS levy. The combined tax rate is 24.72%.
Nonresident persons with business income are taxed at 24.72%.
Investment income. The following are the tax rates for dividends.
• Zimbabwe Stock Exchange listed securities: 10%
• Victoria Falls Stock Exchange listed securities: 5%
• Unlisted shares: 15%
Dividends received from another country are taxed at a special rate of 20% on the gross amount. The AIDS levy is not charge able. The amount of withholding tax paid in the payer jurisdiction can be claimed as a credit. The credit is limited to the tax payable in Zimbabwe.
Interest paid on deposits with local building societies, banks and other financial institutions are exempt from income tax. However, it is subject to a final withholding tax of 15%.
Interest on fixed-term deposits for at least 90 days or 1 year, is taxed at 5% or 0%, respectively.
Interest deemed to be from a Zimbabwean source is taxed as business income at a rate of 24.72% of taxable income. Credits are granted on foreign tax withheld on interest income.
Employer-provided stock options. A taxable benefit arises on an option provided to purchase stocks below market value. The ben efit arises on the date the option is exercised.
For options granted before and exercised after 1 February 2009, the taxable amount is the market value of the shares at the date the option is exercised. The benefit is subject to the Pay-As-You Earn (PAYE) system at a rate of 5% plus the 3% AIDS levy.
For options granted after 1 February 2009, the value of the ben efit is the market value of the shares on the date the option is exercised, less the price paid by the employee. The benefit is subject to the PAYE system at the normal rates set forth in Employee tax rates.
The disposal of shares by the employee has no employee tax effect. Their taxation is covered under the rules discussed in Capital gains and losses
Capital gains and losses. Capital gains tax (CGT) is charged on the disposal of specified assets, which are marketable securities, immovable property and right or title to property transfer for which registration is required, whether tangible or intangible.
For specified assets acquired or constructed on or after 22 February 2019, the tax is charged on the capital gains.
The CGT rate is 20%.
The following is the formula for calculating capital gains:
SP – [(C + (C+CPI)n) + (Im + (Im * CPI)n)]
The following are the description of the items contained in the above formula:
• “SP” is the selling price.
• “C” is the purchase or construction cost.
• “Im” is improvements made on fixed property.
• “CPI” is the Consumer Price Index.
• “n” is the number of years from date of purchase, construction or improvement.
Assets acquired or constructed before 22 February 2019 are sub ject to 5% CGT on the gross selling price.
The tax is paid in foreign currency unless the taxpayer proves that proceeds were received in ZWL.
Securities listed on the Victoria Falls Stock Exchange securities are exempt from CGT.
Zimbabwe Stock Exchange securities are exempt from CGT if the 1% CGT withholding tax has been withheld.
The disposal of specified assets is also subject to capital gains withholding tax at the following rates:
• 15% of the selling price of immovable property acquired on or after 22 February 2019
• 5% of the gross capital amount for immovable property acquired before 22 February 2019
• 1% of selling price for listed securities
• 5% of selling price for unlisted securities
The tax is withheld by a depository and paid to the Zimbabwe Revenue Authority (ZIMRA) on or before the third business day following the transaction. A depository is any intermediary han dling the transaction and includes the purchaser.
A penalty of 100% and interest of 10% per year will be charged on late or underpaid CGT.
Capital losses may be carried forward indefinitely.
Individuals aged 55 and older are exempt from CGT on the sale of their principal private residence and on the first ZWL140,000 of total proceeds received during the year from the sale of listed and unlisted marketable securities.
Rollover relief is also available for the sale and replacement of a principal private residence and compensation received for dam age or destruction of a specified asset.
Withholding tax. Registered taxpayers and government and statu tory bodies must withhold 10% from any payments made to a person who has not furnished a valid tax clearance certificate. The tax is not withheld on payments for goods and services not exceeding ZWL80,000 annually. The tax withheld must be remit ted to the Commissioner General on the 10th day of the following month. The person withholding the tax must issue a withholding tax certificate in favor of the payee. The amounts withheld are credited against the payee’s annual tax.
Non-executive directors are subject to 20% withholding tax on gross fees paid to them. This is a final tax.
Freelance insurance agents, insurance brokers and property nego tiators are subject to 20% withholding tax. They are required to submit annual returns on 30 April of the following year. The 20% tax is credited against annual tax.
Nonresident artists or entertainers performing in Zimbabwe are subject to withholding tax of 15%.
The payment of fees for technical, managerial, administrative and consulting services; royalties; and remittances to nonresident persons is subject to 15% withholding tax. The rate may be reduced if there is a double tax treaty. A withholding tax certifi cate must be issued in favor of the nonresident person so that they can claim a tax credit in their residence state.
Exemptions. The following are exemptions from employment income:
• Annual aggregate amount not exceeding ZWL25,000 or USD320 on the payment of a bonus or a performance-related award. Effective from 1 November 2021, the exempt portion of the bonus is increased to ZWL100,000 or USD700.
• Fifty percent of the amount waived with respect to tuition and boarding fees and levies payable by a member of the staff of a school, up to a maximum of three children.
• The greater of the first ZWL50,000 or USD3,200 of severance pay and 1/3 of severance pay, up to a maximum of ZWL240,000 or USD15,100, respectively. A retrospective amendment, which is effective from 1 January 2021, increases the ZWL-exempt portion to the greater of ZWL400,000 or 1/3 of the retrench ment package, up to a maximum of ZWL2 million. The USD figures remain the same.
• The greater of the first ZWL800,000 or one third, up to a maximum of ZWL3,600,000, of the amount of any untaxed
pension commutation or annuity payable on cessation of employment due to retrenchment, to an employee below the age of 55 years before the beginning of the year of assessment.
• Proceeds received or accrued on the sale or redemption of any shares, units or other interest of the employee by a trust that accrues to an employee participating in an approved employee share ownership trust.
• Medical expenses (including related travel), invalid appliances and the cost of approved medical aid society contributions paid by an employer for an employee, his or her spouse, minor chil dren and dependents.
• Rewards paid by the Commissioner General for information leading to the recovery of tax revenue.
• Allowances for accommodation and transport and grants of quarters or housing for staff of district hospitals or rural clinics owned, operated or sponsored by a religious body or a rural district council.
• Risk allowances payable to frontline public sector health per sonnel involved in combating the COVID-19 pandemic, for a period of 12 months beginning on 1 April 2020 and ending on 31 March 2021.
The following are exemptions for taxpayers aged 55 and above:
• The first ZWL240,000 of interest on deposits with financial institutions.
• Income from treasury bills and discounted instruments traded by financial institutions, if the terms sheet specifies that their income will be tax-free. However, this income is subject to a final withholding tax of 15% at the time of disposal or maturity of the instrument.
• The first ZWL120,000 of rental income.
• Pension paid from a pension fund or the Consolidated Revenue Fund. The taxpayer must have attained the age of 55 years before the commencement of the year of assessment concerned.
Deductions
Employee deductible expenses. Pension contributions not exceed ing ZWL240,000 per employee per year are tax deductible. This ceiling applies with respect to both pension and retirement fund contributions.
Business deductions. Capital allowances are deductible on fixed assets and/or software used during a tax year at 25% of cost over four years. Wear-and-tear allowances may be claimed on com mercial buildings at a 2.5% rate on cost over 40 years. A taxable recoupment arises on the disposal of assets for which allowances were previously claimed. The recoupment is limited to capital allowances that were claimed.
Credits. The following tax credits are deductible from basic income tax payable:
Type of credit Amount
Taxpayers over 55 years of age
Blind or disabled person
Medical expenses, cost of invalid appliances and contributions to medical aid societies
ZWL72,000 per year
ZWL72,000 per year
50% of amount paid
Calculation of employee tax. The following steps must be fol lowed to calculate employee tax when income is in the same currency:
• Step I: Calculate the income tax on the taxable income accord ing to the tax rate structure set out in Employee tax rates.
• Step II: Calculate the tax credit entitlement discussed in Credits.
• Step III: Deduct the amount in Step II from the amount in Step I to determine the income tax payable.
• Step IV: Calculate 3% AIDS levy and add it to the amount computed in Step III to determine the total amount payable.
The following steps must be followed to calculate employee tax on income in both local and foreign currency:
• Step 1: Convert the ZWL amounts to USD amounts using the auction rate prevailing on the processing date.
• Step 2: Add amount converted in Step 1 to USD income.
• Step 3: Calculate taxable income [gross income – (exempt income + allowable deductions)].
• Step 4: Calculate the tax on the result from Step 3 according to the tax rate structure set out in Employee tax rates.
• Step 5: Calculate the available tax credits (convert ZWL values to USD using the prevailing auction rate).
• Step 6: Subtract the amount in Step 5 from the amount in Step 4 to determine the tax payable.
• Step 7: Calculate 3% AIDS levy on the amount calculated in Step 6.
• Step 8: Add the results of Step 6 and Step 7.
• Step 9: Allocate the tax determined in Step 8 to ZWL and USD using the income basis.
• Step 10: Convert the tax portion relating to ZWL earnings, as allocated in Step 9, back to ZWL using the exchange rate on the processing date.
Employee tax rates. The tax rates below apply to annual taxable employment income for the year ending 31 December 2021.
following are the ZWL rates.
Taxable income
Taxable income
rate
rate
A 3% AIDS levy is imposed on the cumulative tax due.
Relief for losses. Assessed losses on income from trade and investment can be carried forward for up to six years. Assessed losses from mining operations can be carried forward indefi nitely. However, an assessed loss from one mining location is not deductible from income other mining locations. Losses from trade and investment activities are not deductible against employ ment income.
B. Other taxes
Estate and gift taxes. Estate tax is levied on the estates of all deceased persons with assets located in Zimbabwe or with foreign assets arising from Zimbabwean sources. The family home and a family vehicle are not included in the dutiable value of the estate. The first ZWL50,000 of the dutiable value is tax free. The rate of the estate tax on the balance of the dutiable value is 5%.
Zimbabwe does not levy gift tax. However, the market value of a donation of marketable securities or real property is subject to capital gains tax (see Section A).
Presumptive tax. Presumptive tax is imposed on the following:
• Informal traders
• Cross-border traders
• Hairdressers
• Operators of commercial waterborne vessels and fishing rigs, taxicabs, omnibuses, specified goods’ vehicles, driving schools, licensed and unlicensed bottle stores and restaurants
• Cottage industry operators (cottage industries are trades or industries involved in furniture making and upholstery or metal fabrication and other industries prescribed in statutory instruments)
• Self-employed professionals (architects, engineers, legal practi tioners, health practitioners and real estate agents)
Presumptive tax is charged if one of the above persons did not submit his or her annual return for the previous year. The pre sumptive tax may be claimed against final tax on assessment.
C. Social security
For 1 June 2020 to 31 May 2021 payrolls, 4.5% of the first ZWL5,000 was withheld from the employee’s pensionable earn ings by employers and paid to the National Social Security Authority (NSSA) monthly, together with an equal amount con tributed by the employer. Effective from June 2021, the NSSA ceiling for insurable earnings changed from USD5,000 to 75% of the Total Consumption Poverty Line (TCPL) of five persons for the previous month. The rate at which the contribution is com puted remains the same at 4.5% of the insurable earnings.
D. Tax filing and payment procedures
Employers withhold tax under the Pay as you Earn or the Final Deduction System. The Final Deduction System (FDS) applies to employees who worked for an employer for the full fiscal year of 1 January to 31 December. The employer must collect the correct tax by the end of the year. The FDS provides for refund or recov ery of tax excesses or shortfall, respectively. The employee is not
required to file an annual return unless he or she received taxable income from another source. The employer submits an annual employee tax reconciliation on 30 January of the following year. The late submission of the return attracts a civil penalty of ZWL30 per day up to a maximum of 91 days.
The employer must issue employee tax certificates to each employee. During the year, the employer calculates and with holds employee tax, which is paid to the tax office on the 10th day of following month.
Under the PAYE system, the employer calculates tax on a monthby-month basis without reference to tax paid in the previous month. This applies to employees who worked for less than the full year or have other sources of income. The employer issues an employee certificate (Form P6) to the employee. The employee must submit a tax return (ITF1) to the ZIMRA on 30 April of the following year
Nonresidents are generally subject to the same filing require ments as those applicable to residents but are usually allowed 90 days to file returns. Employees leaving the country must file a date of departure return. Those returning or assuming new roles in Zimbabwe must file their annual returns unless they worked from 1 January to the end of the year.
Quarterly payment dates for trade and investment income. The following are the quarterly payment dates and the respective cumulative tax percentages of the estimated annual tax payable for provisional tax payments that must be made during the tax year:
• 10% by 25 March
• 35% by 25 June
• 65% by 25 September
• 100% by 20 December
Submission of the annual income tax self-assessment return (ITF 12C) for trade and investment income. The return must be sub mitted by 30 April of the year following the end of the year of assessment (that is, 31 December). However, the Commissioner General may in certain instances provide an extension for the submission of the ITF 12C to a date later than 30 April. Any outstanding tax should also be paid by the time of submission of the ITF 12C.
Other. Married persons are taxed separately on all types of income.
E. Double tax relief and tax treaties
A credit is available for foreign taxes paid, limited to Zimbabwe taxes payable on the underlying foreign-source income.
Zimbabwe has entered into double tax treaties with the following jurisdictions.
Botswana France Netherlands
Bulgaria Germany Norway
Canada Iran* Poland
China Mainland Kuwait* South Africa
Congo Malaysia Sweden (Democratic Mauritius
United Arab Emirates Republic of)* Namibia* United Kingdom
* This treaty has not yet entered into force.
F. Temporary entry permits
Entry visas are required for all foreign nationals. The government of Zimbabwe issues single- and multiple-entry visas. Certain categories of visitors (specified by the immigration authorities) are automatically granted entry at the port of entry. Others are required to obtain visas before reaching the port of entry.
Visitors’ entry certificates. Visitors’ entry certificates are valid for up to six months and may be obtained on entry. This type of permit does not allow the holder to engage in any work, occupa tion or activity for gain, unless prior authority is given.
Student and scholars’ permits. A student permit may be issued for the purpose of attending any educational institution other than a school. This type of permit is valid for one year from the date of issue and may be extended for additional periods.
A scholar’s permit authorizes a foreign national to attend any school approved by the Chief Immigration Officer. This type of permit remains valid for a period of one school term from the date of issue and may be extended for further study. The permit remains valid automatically if the scholar remains at the same school for which the scholar’s permit is issued.
The holder of a student or a scholar’s permit may not engage in any gainful occupation except during school holidays.
Business visitors’ permits. Visitors to Zimbabwe on business must enter under business visitors’ permits. This type of permit is valid for 30 days and cannot be extended.
G. Work permits
Any person who wishes to engage in an occupation (including work for gain or in the interests of any business undertaking) in Zimbabwe must obtain a valid temporary employment permit (TEP). TEP holders must train Zimbabweans to develop the skills for which the foreign nationals were admitted. Applications for temporary residence permits (see Section H) must be submitted in conjunction with TEP applications.
A TEP may be issued for a maximum period of three years and may be extended for a maximum period of five years if approved by the Chief Immigration Officer.
A TEP is subject to the following conditions:
• The permit holder may not engage in any occupation other than the occupation specified.
• If the permit is issued on application by a particular employer, the holder may not take up employment with any other employer.
• The holder and all the persons authorized to enter with him or her must leave Zimbabwe on or before the expiration of the period stated in the permit.
To apply for a TEP and temporary residence permit, the follow ing documentation must be submitted to the Department of Immigration Control:
• Duly completed and signed TEP and temporary residence per mit application forms. The forms can be downloaded from the Department of Immigration of Zimbabwe official website.
• Offer of employment to the prospective employee. This offer letter should indicate the salary and conditions of service.
• Because it is government policy to give Zimbabweans precedence over foreign workers, the employer must justify the employment of an expatriate rather than a Zimbabwean resi dent. Documentary evidence, in English, of qualifications and experience in the proposed occupation in the form of certified copies of educational qualifications such as degrees, diplomas, certificates and testimonials must be provided.
• A detailed curriculum vitae of the applicant in English.
• Certified copy of a valid passport.
• Two recently taken passport-size photos of applicant (all certi fied as true likeness of the applicant).
• Certified copy of birth and/or marriage certificate (if applica ble).
• Police clearance letter.
All applicants for TEPs are referred by the Department of Immi gration to the Ministry of Public Service, Labour and Social Welfare for approval.
After submission of the application to the Department of Immi gration Control, the applicant should receive a letter confirming that the documents are in order and are being processed. Delays of one month or more may be expected in processing applications, depending on the volume of work in the ministries concerned. Prospective employees must remain outside Zimbabwe while applications are being considered.
On approval of the permit, the prospective employee is sent a letter confirming the application for a TEP, which must be presented to the appropriate offices of the Department of Immigration Control at least 14 days after entering the country to obtain the permit. The employee must present the following documents together with the approval letter:
• Passport
• Valid radiological certificate of freedom from active pulmonary tuberculosis
All TEP applicants must submit the following items together with the permit application:
• Two full-face photographs of the applicant, the spouse and each child younger than 18 years of age, if the spouse and children are accompanying the applicant or joining him or her later
• A certified copy of the birth certificate of the applicant and, if applicable, of the spouse and children
• One certified copy of the marriage certificate, if married
• Proof of adequate financial means by the guarantor or fully completed close relative guarantee form
• Proof of residence of the guarantor
The application fee is USD500 for the applicant and USD300 per dependent if any.
H. Residence permits
Permission to reside in the country permanently is very difficult to obtain. A residence permit for an indefinite period may be issued to any individual who meets any of the following conditions:
• He or she is a dependent of a resident who will support the person (dependents may be any close relatives).
• He or she possesses substantial financial means and will invest in a business venture in Zimbabwe. A fee of USD1,000 is pay able on application plus USD500 per dependent.
• He or she holds a TEP and has been resident in Zimbabwe for a continuous period of at least five years. The application fee is USD500.
I. Personal and family considerations
Family members. An applicant’s spouse and children younger than 18 years of age may be included under a TEP, but a separate work permit must be obtained for a working spouse.
Children younger than 18 years of age may attend school in Zimbabwe if they are included under a parent’s TEP.
Marital property regime. The default marital property regime in Zimbabwe is a separate property system. However, couples may elect into a community property regime. Zimbabwe enforces com munity property claims brought between spouses married outside Zimbabwe.
Driver’s permits. Most foreign driver’s licenses may be used in Zimbabwe for up to one year after the date of entry into Zim babwe. After the expiration of this period, a Zimbabwean license must be obtained. The validity of the foreign license is extended to three years for expatriates entering Zimbabwe on governmentto-government contracts.
If no driver’s license reciprocity exists between Zimbabwe and the country that issued the foreign license, an international driv er’s license is necessary. An international driver’s license is valid for two years after the date of entry into Zimbabwe.
To obtain a local Zimbabwean driver’s license, an applicant must first obtain a provisional driver’s license. The provisional license, which is valid for one year, entitles a person to drive a car with learner license plates if he or she is accompanied by a qualified driver. Possession of a foreign driver’s license provides exemp tion from the requirement to drive with a qualified driver if the Zimbabwean provisional license is obtained within the first year of residence in Zimbabwe.
A competence test taken during the period of validity of the pro visional license must be passed to obtain a driver’s license.