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Zimbabwe

Country Name: Republic of Zimbabwe
Currency: Zimbabwean Dollar (ZWL) (multi-currency system in practice, with USD and ZAR commonly used)
Primary Tax Authority: Zimbabwe Revenue Authority (ZIMRA)
Key Legislation:

  • Income Tax Act
  • Value Added Tax (VAT) Act
  • Customs and Excise Act
  • Zimbabwe Investment and Development Agency (ZIDA) Act
  • Tax Procedures Code

Fiscal Authority Allocation

Centralized Fiscal System:
Zimbabwe operates a centralized tax system, with the Zimbabwe Revenue Authority (ZIMRA) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 24%
Zimbabwe imposes a corporate income tax rate of 24% on resident companies and non-resident companies with a permanent establishment in the country. A 3% AIDS levy is applied on top of CIT, bringing the effective rate to 24.72%.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Zimbabwe-sourced income.

Exemptions and Incentives:

  • Investment Incentives: The ZIDA Act provides tax incentives, such as tax holidays and VAT exemptions, for companies investing in priority sectors like agriculture, manufacturing, mining, and tourism.
  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from CIT reductions, customs duty exemptions, and VAT relief for a specified period.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 14.5%
Zimbabwe imposes VAT at a standard rate of 14.5% on most goods and services. VAT applies to both domestic production and imports.

Exemptions:
Certain goods and services, such as unprocessed agricultural products, basic foodstuffs, healthcare, education, and financial services, are VAT-exempt. Exports are zero-rated, allowing businesses to claim VAT refunds on inputs used in producing export goods.

Personal Income Tax (PIT)

Progressive Rates:
Zimbabwe applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Zimbabwe-sourced income.

Resident Tax Rates for 2023 (Annual Income in ZWL):

  • Up to ZWL 1,200,000: 0%
  • ZWL 1,200,001 to ZWL 3,000,000: 20%
  • ZWL 3,000,001 to ZWL 6,000,000: 25%
  • ZWL 6,000,001 to ZWL 12,000,000: 30%
  • Above ZWL 12,000,001: 40%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 15% on Zimbabwe-sourced income.

Deductions and Allowances:
Taxpayers may deduct social security contributions, pension contributions, and certain personal expenses such as medical expenses and charitable donations from taxable income.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to Zimbabwe’s social security system, which is managed by the National Social Security Authority (NSSA).

  • Employer Contribution: 3.5% of gross salary.
  • Employee Contribution: 3.5% of gross salary.

Withholding Taxes

  • Dividends: 10% for residents, 15% for non-residents
  • Interest: 15% for residents, 15% for non-residents
  • Royalties: 15% for residents, 15% for non-residents
    Zimbabwe imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under Zimbabwe’s double taxation agreements (DTAs).

Transfer Pricing Rules

Zimbabwe follows the arm’s-length principle for related-party transactions. Companies must ensure that cross-border transactions between related entities are conducted at market value. Transfer pricing documentation is required for multinational companies engaged in related-party transactions.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from tax holidays, VAT exemptions, and customs duty reductions for up to 5-10 years. These zones aim to attract foreign direct investment in sectors such as manufacturing, energy, and technology.
  • Investment Incentives: Under the ZIDA Act, companies investing in strategic sectors such as agriculture, mining, and tourism benefit from tax holidays, reduced CIT rates, and customs duty exemptions.

Other Taxes

  • Customs Duties: Zimbabwe applies customs duties on imported goods, with rates ranging from 0% to 40%, depending on the type of goods. Essential goods and raw materials may qualify for reduced or zero customs duties.
  • Excise Taxes: Excise taxes are levied on alcohol, tobacco, petroleum products, and luxury items.
  • Capital Gains Tax (CGT): A 20% capital gains tax is imposed on the sale of immovable property and marketable securities. CGT on principal residences is reduced to 5%.
  • Property Tax: Local authorities impose property taxes on land and buildings based on their assessed value.

Double Taxation Agreements (DTAs)

Zimbabwe has signed several double taxation agreements (DTAs) with countries such as South Africa, the United Kingdom, and Mauritius. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Zimbabwe and other jurisdictions.

Local Taxes

Local governments in Zimbabwe may impose property taxes, business license fees, and local service levies. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Zimbabwe Revenue Authority (ZIMRA).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed within six months following the end of the financial year. Personal income tax returns are generally due by June 30th. VAT returns are filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The ZIMRA imposes interest at 10% per annum on overdue taxes, with additional penalties for tax evasion or underreporting.

Recent Developments

Mining Sector Focus:
Zimbabwe’s mining sector, particularly in gold, diamonds, and lithium, has attracted significant foreign investment. The government offers tax incentives, including CIT reductions, VAT exemptions, and customs duty reductions for mining companies.

Agriculture and Manufacturing Incentives:
Zimbabwe is promoting investment in agriculture and manufacturing through tax incentives such as CIT holidays, VAT exemptions, and reduced customs duties on imported agricultural and manufacturing equipment.

Digital Taxation and E-Government:
Zimbabwe is implementing digital tax measures and e-government initiatives aimed at improving tax compliance and efficiency. Electronic tax filing systems are being expanded to simplify tax administration for businesses and individuals.

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