Harare GMT +2
EY
+263 (4) 750-906
Mail address: Fax: +263 (4) 773-842, P.O. Box 62 or 702 +263 (4) 750-707 Harare Zimbabwe
Street address: Angwa City Kwame Nkrumah Avenue/ Julius Nyerere Way Harare Zimbabwe
Principal Tax Contact
Nigel Forsgate +263 (4) 750-979 Email: nigel.forsgate@zw.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Nigel Forsgate +263 (4) 750-979 Email: nigel.forsgate@zw.ey.com Shelton Kusotera +263 (4) 750-979 Email: shelton.kusotera@zw.ey.com
International Tax and Transaction Services – Transfer Pricing
Kudakwashe Chigumira +263 (4) 750-979 Email: kudakwashe.chigumira@zw.ey.com Fungai Vongayi +263 (4) 750-979 Email: fungai.vongayi@zw.ey.com
Business Tax Services
Nigel Forsgate
+263 (4) 750-979 Email: nigel.forsgate@zw.ey.com Shelton Kusotera +263 (4) 750-979 Email: shelton.kusotera@zw.ey.com
Business Tax Advisory
Nigel Forsgate +263 (4) 750-979 Email: nigel.forsgate@zw.ey.com
Shelton Kusotera +263 (4) 750-979 Email: shelton.kusotera@zw.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Nigel Forsgate +263 (4) 750-979 Email: nigel.forsgate@zw.ey.com Sifelani Nhliziyo +263 (4) 750-979 Email: sifelani.nhliziyo@zw.ey.com
People Advisory Services
Nigel Forsgate +263 (4) 750-979 Email: nigel.forsgate@zw.ey.com
Velile Ngwenya +263 (4) 750-979 Email: velile.ngwenya@zw.ey.com
Indirect Tax
Nigel Forsgate
Shelton Kusotera
A. At a glance
+263 (4) 750-979
Email: nigel.forsgate@zw.ey.com
+263 (4) 750-979
Email: shelton.kusotera@zw.ey.com
Corporate Income Tax Rate (%) 24 (a)(b)
Capital Gains Tax Rate (%) 1/5/20 (c)
Capital Gains Withholding Tax Rate (%) 1/2/5/15 (d)
Branch Tax Rate (%) 24 (a)(b)
Withholding Tax (%)
Dividends 10/15 (e)
Interest Received by Residents
Paid by Banks, Other Financial Institutions and Building Societies 0/5/15 (f)
Accruing from Treasury Bills, Bankers’ Acceptances and Discounted Instruments
Traded by Financial Institutions 15 (g)
Royalties 15 (h)(i)
Remittances 15 (i)(j)
Fees and Commissions 15/20 (i)(k)
Contract Payments 10 (i)(l)
Value-Added Tax Withholding Tax (%) 33 (m)
Intermediated Money Transfer Tax 2 (n) Net Operating Losses (Years)
Carryback 0 Carryforward 6 (o)
(a) Special tax rates apply to certain enterprises. For details, see Section B. (b) An AIDS levy of 3% is imposed on certain income tax payable (excluding tax on income subject to special rates).
(c) Tax is imposed on capital gains on the disposal of specified assets, including listed and unlisted marketable securities, immovable property (including rights in residential, commercial or industrial stands and membership inter ests in condominiums) and intangible property requiring formal registration. See Section B.
(d) A capital gains withholding tax is withheld from funds held by a depositary on behalf of a seller of a specified asset. The 1% withholding tax on the disposal of securities listed on the Zimbabwe Stock Exchange is a final tax. See Section B.
(e) The 10% rate applies to dividends paid by companies listed on the Zimbabwe Stock Exchange to resident individuals and nonresidents. The 15% rate applies to dividends paid to resident persons other than companies and all nonresidents.
(f) This is a final withholding tax imposed on residents. The following types of interest are exempt from income tax and withholding tax:
• Interest on deposits with a term of more than 12 months
• Interest paid by the People’s Own Savings Bank
• Interest on building society Class C (tax-free) shares
The 5% rate applies to interest on fixed-term deposits of at least 90 days with financial institutions. The 0% rate applies to fixed-term deposits of more than 12 months.
(g) This is a final tax imposed on the income to maturity of treasury bills, bank ers’ acceptances and discounted instruments traded by financial institutions that are purchased by resident investors who are not financial institutions. The tax is imposed at the time of disposal or maturity of the instrument.
(h) This withholding tax is imposed on nonresidents. The income is also subject to income tax unless a tax treaty provides that the withholding tax is a final tax.
(i) The withholding taxes are accounted for to the Zimbabwe Revenue Authority in the currency of the transaction that relates to the payment from which the tax is withheld.
(j) This is a final tax imposed on remittances transferred from Zimbabwe to nonresidents for allocable technical, managerial, administrative or consulting expenditures with respect to services that were provided to a resident by a nonresident person in relation to trade carried on in Zimbabwe.
(k) The 15% rate applies to payments by residents to nonresidents of technical, managerial, administrative and consulting fees. The 20% rate applies to pay ments for non-executive directors’ fees and property and insurance commis sions paid to residents and nonresidents who are not employees. The tax withheld is deductible from income tax payable.
(l) This is a tax on the payee, which is withheld by the payer from all payments made under contracts for more than a specified threshold to resident and nonresident suppliers who cannot provide a tax-clearance certificate.
(m) The tax is withheld by an appointed Value-Added Withholding Tax Agent from payments for taxable supplies to specified noncompliant registered value-added tax (VAT) operators. The tax is offset in the following month against output tax for the following month.
(n) The tax is withheld at 2% on amounts exceeding ZWL500 that are mediated by a financial institution. The maximum tax is ZWL800,000 for transactions that exceed ZWL40 million.
(o) Mining losses are ring fenced to specific locations and may be carried forward indefinitely.
B. Taxes on corporate income and gains
Corporate income tax. Income tax is levied on all amounts (other than capital) received or accrued to residents from a Zimbabwean or a deemed Zimbabwean source, less expenditures that are incurred in the production of income or for purposes of trade. Certain specific types of income are exempt.
Nonresident companies that carry on business in Zimbabwe are subject to corporate income tax on all taxable income, wherever arising, attributable to a permanent establishment in Zimbabwe.
Foreign interest and dividends accruing to taxpayers that are ordinarily resident in Zimbabwe are deemed to be from a source in Zimbabwe. A corporation is ordinarily resident in Zimbabwe if it is managed and controlled in Zimbabwe.
Rates of corporate tax. Resident and nonresident companies are subject to income tax at a rate of 24%. Residents are subject to income tax at a rate of 20% on gross foreign dividends receivable.
Special tax rates. Special tax rates apply to the following enter prises.
Type of enterprise Rate (%)
Investors operating in export-processing zones licensed before 1 January 2007 24
Special mining lease operations 15
(plus additional profits tax)
Build-own-operate-transfer (BOOT) and build-operate-transfer (BOT) projects
Years 1 through 5 0
Years 6 through 10 15
Year 11 and thereafter 24 Industrial park operators 24 Manufacturing enterprises exporting 31% to 51% of their production 15/17.5/20
Licensed power generation projects
Years 1 through 5 0
Thereafter 15
Type of enterprise Rate (%)
Satellite nonresident broadcasting services and electronic commerce platforms; tax is imposed on the excess over USD500,000 of the annual gross amounts receivable for goods or services provided by them to resident Zimbabweans for goods and services
Interest received by residents on deposits with Zimbabwean finan cial institutions with a term of over 12 months is exempt from in come tax and withholding tax.
Other interest received by residents from Zimbabwean financial institutions is exempt from income tax, but it is subject to a final withholding tax of 5% or 15% for fixed-term deposits of at least 90 days. A final withholding tax of 15% is also imposed on the income to maturity of treasury bills, bankers’ acceptances and discounted instruments traded by financial institutions that are purchased by resident investors other than financial institutions. The tax is imposed at the disposal or maturity of the instrument. No expenses or losses are deductible from the income.
Other interest received by a resident is taxable at the normal corporate tax rate after deducting allowable expenses and losses.
Tax concessions. Previously, tax incentives were available to income generated in designated export-processing zones. These have since been eliminated. Effective from 1 January 2017, income accruing to licensed investors in designated Special Economic Zones (SEZs) is taxed at special rates. The goods pro duced must have been exported or generated foreign currency.
Corporate tax. The following are the corporate tax rates in SEZs:
• First five years: 0%
• Thereafter: 15%
The 3% AIDS levy is not chargeable.
Employment tax. Income accruing to expatriate employees of licensed investors in SEZs is subject to tax at a rate of 15% plus the AIDS levy.
The following are exemptions from withholding taxes in SEZs:
• Shareholder taxes
• Dividend payments to resident and nonresident shareholders
• Fees and royalties paid to nonresident persons
Other concessions. The following are other concessions in SEZs:
• No customs duty is imposed on imported capital equipment and raw materials used in SEZs.
• Imported goods are exempt from VAT.
International bodies that provide finance for approved projects for development in Zimbabwe are exempt from income tax and capital gains tax.
Income from mortgage financing accruing to commercial banks is exempt from income tax. The expenses are consequently not tax-deductible.
Capital gains. Withholding tax is charged on the disposal of specified assets, which are marketable securities, immovable
property and intangible property requiring formal registration under different pieces of legislation.
Withholding taxes are collected and paid by a depositary (people collecting the proceeds in an agency capacity).
The following withholding taxes apply:
• Specified assets acquired before 22 February 2019
• Listed marketable securities: 1%
• Unlisted marketable securities: 5%
• Immovable property: 15%
Effective from 1 January 2022, the following additional with holding taxes apply:
• Securities acquired and disposed of within six months: 2.5%.
• Securities acquired and disposed of after six months: 1%
• Specified assets acquired on or after 22 February 2019
This tax is offset against any assessed capital gains tax.
Tax is chargeable at 20% on the capital gain on disposals of immovable property and unlisted shares.
The following deductions are available:
• Recoupment chargeable to tax in terms of the Income Tax Act [Cap 23:06]
• Improvements to immovable property
• An inflationary allowance of 2.5% per year on both purchase cost and improvements
• Selling and associated costs of the property
Any capital gains withholding tax paid is credited with any excess amount being refundable.
The 1% withholding tax on the disposal of listed securities is a final tax.
Capital gains on the disposal of shares to an approved indigenization partner or community share ownership trust or scheme are charged on the amount paid and not the fair market price.
Administration. Zimbabwe’s tax year ends on 31 December. Tax returns must be filed by 30 April of the following year. However, capital gains tax returns must be submitted within 30 days from date of the transaction. Tax is based on self-assessment except for employees who would have worked for less than a full calendar year.
Corporate and employment tax must be paid in the currency the income was earned, received or accrued.
If income is earned in both local and foreign currency, tax must be paid in both currencies based on their relative contributions. A single computation of taxable income and tax should be carried out.
Corporate tax is paid quarterly in accordance with the following schedule:
• 25 March: 10% of projected annual tax
• 25 June: 25% of projected annual tax
• 25 September: 30% of projected annual tax
• 20 December: 35% of projected annual tax
Quarterly payment date shortfalls must be within 10% of annual tax beyond which interest will be chargeable. Interest is charged at 25% and 10% per annum on tax payable in local and foreign currency, respectively. Interest assessed by the Commissioner cannot be objected to. There is no penalty on quarterly payment dates.
However, once the annual return is submitted or required to have been submitted, penalties can be imposed on unpaid tax. Any withholding taxes with respect to corporate tax will be credited, provided the required evidence is available.
Dividends. Dividends that are paid between two local companies are exempt from tax.
Dividends paid by a listed company are charged at the following rates:
• Company listed on the Zimbabwe Stock Exchange (ZSE): 10%
• Company listed on the Victoria Falls Stock Exchange (VFSE): 5%
Dividends paid by private corporations are subject to a 15% with holding tax.
Dividends received from foreign companies are taxed at 20% of the gross amount with credit being claimed on withholding tax paid in the paying jurisdiction.
Foreign tax relief. Tax relief is provided by treaty or provisions of domestic law. The tax credit cannot exceed the Zimbabwean income tax on the income.
C. Determination of trading income
General. Income tax is levied on all receipts and accruals from a Zimbabwean source or a source that is deemed to be in Zimbabwe. Income includes any recoupment on disposal of assets for which allowances were claimed in earlier years. The recoupment is limited to the capital allowances previously claimed. However, for income from mining operations, the recoupment is equal to sales proceeds for all assets except passenger motor vehicles and staff housing for which allowances were restricted. This excludes income that is proven by the tax payer to be capital in character or income that is exempt from tax.
Exempt income includes the following:
• Dividends received from a local company
• Interest on deposits with a term of more than 12 months
• Individual’s own savings bank interest
• Interest from certain building society investments
• Interest on deposits with financial institutions and treasury bills designated as tax-exempt
Deductions. A taxpayer is entitled to deduct all expenses that were incurred for purposes of the business or in the production of the income except those that are prohibited by statute or that are capital in nature.
The following classes of expenses are not deductible:
• Expenses incurred in the production of exempt income or income not derived or deemed to be derived from Zimbabwe
• Pension fund contributions more than a prescribed amount
• Cost of attending trade missions and conventions exceeding the prescribed amount
• Costs for maintaining idle assets
• Payments in restraint of trade
• Entertainment expenses
• Provisions and accrued but not incurred expenses
• Excess passenger motor vehicles leasing costs
• Excessive financing costs if debt is more than three times equity
• Group fees exceeding 0.75% or 1% of total allowable deduction that are respectively incurred in the first and subsequent year of trade
Special deductions include the following:
• Donations of up to a specified threshold for the construction, maintenance or operation of hospitals and schools run by the state, local authorities or religious organizations and donations to approved research institutions.
• Allowance equal to cost of export market development.
• Amounts contributed to approved scientific and educational bodies for industrial research or scientific experimental work.
• Loans by corporate taxpayers to acquire shares that are repay able from dividends foregone by the taxpayers on those shares. They are deductible in equal annual installments over the period of the loan.
Inventories. Inventory is valued at cost using the first-in, first-out method or the market value as may be appropriate.
Provisions. Provisions are not tax-deductible.
Capital allowances. Taxpayers must deduct capital allowances with respect to qualifying assets that are purchased or acquired for the purposes of trade.
A taxpayer may elect to claim Special Initial Allowance (SIA) of 25% of cost in the first year an asset is used by the business and claim the balance equally over the following three years. Some assets are not eligible for SIA, such as commercial buildings.
The following table lists certain assets, the method used and ap plicable wear and tear rates.
Asset Method Rate (%)
Commercial buildings Straight-line 2.5
Industrial buildings* Straight-line 5
Office equipment Declining-balance 10
Motor vehicles Declining-balance 20
Plant and machinery Declining-balance 10
* Toll roads and toll bridges declared to be such under the Toll Roads Act are classified as industrial buildings.
On disposal of an asset, capital allowances previously claimed will be included in gross income and taxed at the normal corpo rate tax rate. The recoupment is limited to allowances that were previously claimed. If proceeds exceed the allowances, the excess amount is not taxable.
Relief for losses. Losses, including assessed tax losses, are taxdeductible. Assessed tax losses can be claimed up to six years
from the year they are realized, after which they expire. However, assessed losses for mining operations are perpetual; that is, they do not expire. Losses from one mining operation cannot be claimed by another operation. Assessed losses cannot be carried back.
Groups of companies. Tax is charged on a separate entity approach. Therefore, no tax is levied on a group.
Transfer of assets between companies under the same control. To avoid recoupment on the transfer of assets between companies under the same control, transferor and transferee may elect to transfer assets at their income tax values. Tax on the recoupment will be charged on the subsequent disposal of the assets to a person outside the group.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate
Value-added tax (VAT); imposed on the supply and importation of goods and services; certain items are exempt, including financial services, medical services, fuel, tobacco, educational or training services, long-term residential leases and transport of passengers by road or rail; also imposed on certain exports; suppliers of qualifying goods and services with an annual value in excess of a specified threshold must register; the annual threshold is currently ZWL1,000,000 Standard rate 14.5%
Exports of unbeneficiated hides
Greater of 75 cents/kg and 15% of the value
Exports of lithium 5% Exports of uncut and cut three-dimensional stones 2.5%/5% Unbeneficiated platinum Sliding scale based on the degree of beneficiation
Other exports, prescribed drugs and services (excluding accommodation) supplied by designated tourist facilities to tourists that are paid for with foreign currency Intermediated Money Transfer Tax 2% Presumptive taxes; varies by class Various
E. Miscellaneous matters
Foreign-exchange controls. The legislation and regulations with respect to foreign-exchange controls are continuously under review. They are discussed below in general terms.
A significant shortage of foreign currency exits in Zimbabwe.
The government still imposes broad controls over all transactions involving a nonresident. Applications through commercial banks are required for the approval of most transactions of this nature. Commercial banks refer exceptional items to the Reserve Bank of Zimbabwe.
Foreign investment of up to 35% in primary issues of shares and bonds is permitted if funded by inward transfers of foreign exchange. Purchases and disposals by foreign investors in the sec ondary market require specific approval from the authorities.
Agreements relating to foreign services (including borrowings) require registration with the commercial banker of the borrower before implementation. Borrowings of more than specified limits require Reserve Bank of Zimbabwe approval. The approvals are granted based on the merits of the borrowings in accordance with guidelines set by the External Loans Coordinating Committee. The guidelines provide that foreign borrowings may be approved only if they are used to fund productive, export-oriented ven tures that have the potential to generate sufficient foreign currency for loan principal and interest repayments without recourse to the foreign-currency market. Foreign loans to purchase shares, existing companies or real estate, or to fund private consumption, personal loans or retail inventories, are generally discouraged.
All offshore remittances require pre-approval depending on na tional priorities.
Remittances to related or unrelated nonresident persons are re stricted to 3% of audited gross annual revenue of the payer.
Dividends are remitted 100% to nonresident shareholders within one year after the accrual of the profits when approved by exchange control. Specific approval is required for dividend remit tances with respect to prior years.
After-tax dividends and capital gains derived from investments on the Zimbabwe Stock Exchange are fully remittable.
Debt-to-equity rules. Debt-to-equity rules apply to all companies (see Section C).
Transfer pricing. Zimbabwe introduced transfer-pricing legisla tion, effective from 1 January 2016. The new transfer-pricing legislation endorses the arm’s-length principle and imposes docu mentary obligations on taxpayers. The legislation covers transac tions between all connected persons and applies to both domestic and international transactions. These new provisions are aligned with transfer-pricing principles developed by the Organisation for Economic Co-operation and Development (OECD); consequent ly, the law recognizes OECD manuals on the subject as relevant sources of interpretation.
F. Treaty withholding tax rates
shown in
the rate under
Republic of)
tax law.
rate
Dividends (a) Interest Royalties Fees % % % %
Germany 10 0 7.5 7.5
Iran (b) 5 0 5 5
Kuwait (b) 0/5/10 0 10 0
Malaysia 10 0 10 10
Mauritius 10 0 15 0
Namibia (b) 5/10 0 10 0
Netherlands 10 0 10 10
Norway 10 0 10 10
Poland 10 0 10 10
South Africa 5/10 0 10 5
Sweden 10 0 10 10
United Arab Emirates 5 0 9 6
United Kingdom 5 0 10 10
Non-treaty jurisdictions 10/15 0 15 15
(a) Except for the Iran treaty, the reduced treaty rates apply only if the recipient is a company that controls at least 15% to 25% of the voting power of the payer company.
(b) The entry into force of these treaties has not yet been published.