ZIMBABWE PERSONAL INCOME TAX
NB: The tax brackets below have changed. Please click here for updated tax tables for 2013.
Zimbabwe individual income tax is imposed at progressive rates up to 35%. The 3% AIDS Levy is also imposed.
Income Tax Rates Deduction
0 – 1,980.00 0% –
1,981 – 6,000.00 20% 396
6,001 – 12,000.00 25% 696
12,001 – 18,000.00 30% 1,296
Above 18,001 35% 2,196
Basis – Individuals pay tax only on Zimbabwe-source earnings or income deemed to be Zimbabwe source.
Residence – An individual is resident if he/she is ordinarily resident and resides in Zimbabwe for an aggregate period of 183 days in a year of assessment.
Tax Filing status – Spouses are taxed separately; joint filing of tax is not permitted.
Taxable income – Only income from a source within Zimbabwe or deemed to be from a source within Zimbabwe is subject to tax. This includes income from employment or income from trade and investments.
Taxation of Capital gains – The rules applicable to companies also apply to individuals. Rollover relief is available on the disposal of a principal private residence or land purchased for the purposes of constructing such a residence. The same applies to transfers between spouses. A taxpayer over the age of 55 is not subject to capital gains tax on the disposal of a principal private residence.
Tax Deductions and allowances – With effect from 1 January 2010, the first USD 1,920 of taxable income per annum and up to a maximum of USD 5,000 on a retrenchment package is tax free. With effect from 1 November 2009, a USD 400 of bonus is tax free. Employee NSSA and pension contributions are also tax free up to a combined amount of USD 5,400 per annum.
TAX CONCESSIONS FOR ELDERLY PERSONS 2010 TAX YEAR
The current tax legislation provides for a number of tax concessions which are meant to provide tax relief to elderly persons.
– Exemption from Income Tax of the first US$3 000.00 per annum on rental income earned by persons aged 55 years or above.
– Exemption from Income Tax of the first US$3 000.00 per annum on income earned by persons aged 55 years or above from bankers acceptances
– Exemption from Income Tax of the first US$3 000.00 per annum on income earned by persons aged 55 years or above from interest on deposits to financial institutions.
– Taxpayers aged 55 years or above are entitled to an elderly persons’ credit of US$900.00 per annum.
– Pensions received from a pension fund or the Consolidated Revenue Fund by taxpayers aged 55 years or above are exempt from Income Tax.
– Where an employer disposes of a motor vehicle to an employee aged 55 or above whether on termination of employment or otherwise, the benefit is exempt from tax.
Capital Gains Tax
– The full amount arising from the disposal of a Principal Private Residence (PPR) by persons who are 55 years or above on the date of the sale is exempt from Capital Gains Tax.
– The first US$1 800.00 that accrues to a person aged 55 years or above on the sale of any unlisted marketable security is exempt.
Other taxes on individuals:
Capital duty – No
Stamp duty – Stamp duty is payable on registration in a deeds registry on the acquisition of immovable property.
Capital acquisitions tax – No
Real property tax – No
Inheritance/estate tax – Estate duty of 5% is levied on the value of worldwide assets of a deceased individual who was ordinarily resident in Zimbabwe. If the deceased was not ordinarily resident, estate duty is levied only on property within Zimbabwe. The blanket exclusion from dutiable amount in an estate is USD 50,000.
Net wealth/net worth tax – No
Social security contributions – The employee and the employer contribute 3% of gross income to social security. Pension contributions are also made to various pension funds.
Zimbabwe Tax year – Zimbabwe tax year is the calendar year
Filing and payment of tax – Individuals are not required to file returns if they are on the final deduction system of paying tax. Where an individual receives more than 1 source of income, changes employment during the year of assessment or terminates employment during the assessment year, he/she is required to submit a return upon notice to do so by the Commissioner.
Penalties – Penalties apply for failure to comply, late filing or non-filing.
ZIMBABWE CORPORATE TAX
Rate – The corporate tax rate is 25% (reduced from 30% as from 1 January 2010), although lower rates may apply under incentive schemes.
Residence – A company is resident if its central management and control is in Zimbabwe.
Basis – Companies are taxed on Zimbabwe source income.
Taxable income – Taxable income includesall income received or accrued from sources within Zimbabwe or deemed to be within Zimbabwe (excluding amounts of a capital nature and revenue accruals that are specified as exempt) and is calculated after deduction of specified expenditure and allowances.
Taxation of dividends – Dividends received from a Zimbabwe company are exempt from income tax. Foreign-source dividends are subject to tax, with any withholding tax deducted in the foreign country able to be credited up to the amount of the tax applicable in Zimbabwe.
Capital gains tax – Capital gains tax is chargeable on gains from a source within Zimbabwe from the sale or deemed sale of specified assets: immovable property (land and buildings) and marketable securities (stocks and shares). Capital gains from the sale or disposal of a marketable security and immovable property acquired before 1 February 2009 is the amount realised from the sale or disposal at a rate of 5%. A sale of a marketable security and immovable property acquired after that date is taxed at 20% after allowing deductions such as the cost of acquisition, additions and alterations of the specified asset. An inflation allowance of 2.5% of the cost, alterations and additions of the asset is granted. Certain deferrals may be elected where assets are transferred under a scheme of reconstruction or merger between companies under the same control. This arises where shares are exchanged for no cash consideration under such a scheme, or if a business property that has been sold is replaced shortly thereafter. Zimbabwe also imposes a capital gains withholding tax.
Losses – Trading losses may not be carried forward beyond 6 years, except for losses incurred in mining operations where there is no restriction. Any loss incurred on the disposal of an asset is offset against any future capital gains. Capital losses arising from the disposal of immovable assets or marketable securities are carried forward without restriction. The carryback of losses is not permitted.
Surtax – A 3% AIDS Levy is generally imposed on corporate tax.
Alternative minimum tax – No
Foreign tax credit – Where foreign-source income is also taxable in the source country, a credit for the foreign tax paid is granted up to the amount of the applicable Zimbabwean income tax.
Participation exemption – No
Holding company regime – No
Tax Incentives – Reduced income tax rates apply to certain classes of taxpayers as follows:
licenced investors, 0% for the first 5 years and 15% thereafter; special mining lease and mining operations, 15%; manufacturing or processing companies that export 50% or more of their output, 20%; operators of tourist facilities in an approved tourist development zone, 0% for the first 5 years and 25% thereafter; and build, own, operate and transfer projects, 0% for the first 5 years and 15% thereafter.
Dividends – With effect from 1 January 2010, dividends from securities listed on the Zimbabwe stock exchange are taxed at a rate of 10%; otherwise, the rate is 15%. The tax rate may be reduced under a tax treaty.
Interest – Bank interest from a Zimbabwean source is taxed at 15%.
Royalties – With effect from 1 January 2010, royalties paid to nonresidents are subject to a 15% withholding tax. The rate may be reduced under a tax treaty.
Branch remittance tax – No
Other taxes on corporations:
Capital duty – No
Payroll tax – No
Real property tax – No
Social security contributions – The employer and the employee contribute 3% of gross income to social security. Pension contributions are also made to various pension funds.
Stamp duty – Stamp duty applies to a limited range of transactions, the most important being acquisitions of immovable property, such as land and buildings. Rates vary depending on the transaction value.
Transfer tax – No
Other – Remittances paid to nonresidents are taxed at 20%. The capital gains withholding tax is withheld and paid by depositories, agents or payees on a sale or transfer of a specified asset (unless it can be demonstrated that the eventual capital gains tax payable upon assessment will be less than the tax withheld). With effect from 1 February 2009, 15% is withheld on the sale proceeds of immovable property and as from 1 August 2009, 1% is withheld on the sale proceeds of marketable securities.
Transfer pricing – While no specific legislation is in place, where the authorities deem that a transaction was not conducted at arm’s length, a “fair” price may be substituted.
Thin capitalisation – Expenditure incurred by a local branch or subsidiary of a foreign company or by a local company or its subsidiary in servicing debt contracted in connection with the production of income to the extent such debt causes the person to exceed a debt-to-equity ratio of 3:1 is disallowed.
Controlled foreign companies – No
Other – Exports are declared under the Reserve Bank Regulations. The pricing of mineral exports are monitored by the Mineral Marketing Corporation of Zimbabwe.
Disclosure requirements – No
Zimbabwe Tax year – Zimbabwe tax year is the calendar year, for all companies, although taxpayers may seek approval from the Commissioner to use a different accounting year.
Consolidated tax returns – The consolidation of tax returns is not permissible; each company must file a separate return.
Tax Filing requirements – Tax returns must be filed by 30 April after the close of the tax year. The annual return must be supported by financial statements (which need not be audited). Income tax is paid quarterly, based on estimated annual taxable income, on 25 March, 25 June, 25 September and 20 December during the assessment year for taxpayers on a 31 December financial year end. For those with financial year ends other than 31 December, the Commissioner may allocate different payment dates upon application by the taxpayer.
Penalties – Interest on unpaid tax is levied on late remittances at a rate of 5% above the London Inter-Bank Offered Rate (LIBOR) for the month immediately preceding the month in which the tax remains unpaid. Penalties of up to 100% of unpaid taxes also may be imposed.
Rulings – The Commissioner General may issue an advance tax ruling on any provision in the Income Tax Act, whether on his own initiative or upon application by a taxpayer or class of taxpayers on a transaction that is or may be liable to tax.
Zimbabwe VAT (Value Added Tax)
The standard rate of VAT in Zimbabwe is 15%. The VAT rate is 0% on some food stuffs. Some supplies are exempt from VAT, such as education, public transport and medical services.
Taxable transactions – VAT is payable in respect of a broad range of goods and services supplied by registered operators or which are imported.
VAT Registration – The VAT registration threshold is USD 60,000 per annum. Where the annual taxable turnover is lower, voluntary registration may be considered upon application to the Zimbabwe Revenue Authority.
Filing and VAT payment – With effect from 1st August 2010, the due date for the submission of VAT returns and payment has been extended from the 10th to the 15th of the month following the end of the tax period. The VAT payment for the month of August 2010 shall become due and payable on or before 15th September 2010.
When a registered operator supplies another registered operator with goods or services, the supplier of those goods or services will levy Value Added Tax (VAT). The VAT incurred by a registered operator is known as Input Tax.
When this registered operator in turn supplies goods or services to other persons (or traders), VAT must be included in the price charged for those goods or services. This is known as Output Tax.
The difference between the output tax collected and input