Zimbabwe - Income Tax

Zimbabwe - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

Employees earning income from one source throughout the year are not required to file a tax return. In all other cases returns have to be filed by 30 April of the subsequent tax year. Specifically, within four months after the end of the year of earning.

What is the tax year-end?

31 December of each year.

What are the compliance requirements for tax returns in Zimbabwe?

Where applicable, the returns should be filed by 30 April of the year following year of operation.

Tax rates

What are the current personal income tax rates in Zimbabwe?

Income tax rates for 2015: Employees

Aggregate annual income is taxed as follows:

US $ 0-3,600 0%
  3,601-18,000 20%
  18,001-36,000 25%
  36,001-60,000 30%
  60,001-120,000 35%
  120,001-180,000 40%
  180,001-240,000 45%
  240,001+ 50%
Add Aids Levy: 3% of tax
Head of Household
  0 0%
Single
  0 0%
Gains on immovable assets and marektable securities sold 20%
Qualified dividends (dividends from domestic corporations, and certain foreign corporations) 15%

Tax rates applicable to employees

As per the table above.

Tax rates applicable to independent (self-employed) professionals

25 percent plus Aids Levy of 3 percent giving an effective rate of 25.75 percent.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Zimbabwe?

Aggregate presence in Zimbabwe exceeding 183 days per calendar year.

Is there, a de minimus number of days rule when it comes to residency start and end dates? For example, taxpayers can’t come back to the host country for more than 10 days after their assignments end and they repatriate.

There are no such rules.

What if the assignee enters the country before his/her assignment begins?

Assignee can enter the country as a tourist but will not be allowed to carry out any work until all the conditions have been fulfilled.

Termination of residence

Are there any tax compliance requirements when leaving Zimbabwe?

Assignee should seek and obtain a tax clearance from the Zimbabwe Revenue Authority.

What if the assignee comes back for a trip after residency has terminated?

Permissible, as a tourist.

Communication between immigration and taxation authorities

Do the immigration authorities in Zimbabwe provide information to the local taxation authorities regarding when a person enters or leaves the country?  

Not as a mandatory requirement but there is a general understanding that Government Departments can exchange information.

Filing requirements

Will an assignee have a filing requirement in the host country after he/she leaves the country and repatriates? 

It is possible if the assignee continues to earn income from a Z|imbabwean source, for instance rental income from immovable property situated in Zimbabwe.

Economic employer approach

Do the taxation authorities in Zimbabwe adopt the economic employer approach to interpreting the Income from Employment article (Article 15) of the xxx treaty? If no, are the taxation authorities in Zimbabwe considering the adoption of this interpretation of economic employer in the future?

No and we are not aware of any interest to adopt this in the near future.

De minimus number of days

Is there a de minimus number of days before the local taxation authorities will apply the economic employer?

Not applicable.

Types of taxable compensation

What categories are subject to income tax in general situations? 

Remuneration in the form of salaries and benefits.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Zimbabwe? If so, please provide a general definition of these areas.

Income that is specifically provided to be exempt in the legislation.

Retirement pension accruals to persons over fifty five years of ageThe first US$3 000 of rental income accruing to persons over fifty five years of age.

Contributions to profit sharing or pension plans

Contributions, subject to a maximum annual threshold are deductible.

Medical expense reimbursements and accident and health insurance premiums

No tax deduction

Meals and lodging

Taxable in employee’s hands if provided by employer.

Certain fringe benefits

Taxable, such as interest on soft loans provided by the employer, and free usage of vehicles supplied by employer.

Moving expenses

Initial recruitment and repatriation costs are deductible.

Temporarily-away-from-home travel expenses

If business travel, then deductible.

Expatriate concessions

Are there any concessions made for assignees in Zimbabwe?

There are no concessions.

Salary earned from working abroad

Is salary earned from working abroad taxed in Zimbabwe? If so, how?

No, but may be taxable if salary earned during temporary (not exceeding 183 days per tax year) absence from Zimbabwe.

Taxation of investment income and capital gains

Are investment income and capital gains taxed in Zimbabwe? If so, how?

Yes, investment income is taxable at an effective rate of 25.75 percent (being 25% plus 3% aids levy) while capital gains on specified assets are taxable at 20 percent.

Dividends

15 percent if from an unlisted entity and 10 percent if from a listed entity if accuring to a taxpayer other than a local company. 

Interest

Bank interest is subject to withholding tax of 15 percent, other interest is taxed at 25 percent plus 3% Aids Levy.

Rental income

25 percent plau 3% Aids Levy.

Gains from stock option exercises

Taxed as employment income.

Residency status Taxable at:
  Grant Vest Exercise
Resident N/Y Y N/Y
Non-resident N/Y Y N/Y

 

Foreign exchange gains and losses

Taxable at normal business rates and losses deductible.

Capital losses

Not deductible, but scrapping allowances may be available.

Personal use items

If provided by employer, benefit taxable.

Gifts

Depending on nature, exempt and not deductible.

Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Zimbabwe? If so, please discuss.

No, there are no additional capital gains tax issues in Zimbabwe.

Are there capital gains tax exceptions in the Zimbabwe? If so, please discuss.

Yes, certain proceeds are exempt per section 10 of the Capital Gains Tax Act.

Pre-CGT assets

Not applicable.

Deemed disposal and acquisition

Any change in the ownership of a specified asset will be deemed to be a disposal, and would therefore be subject to capital gains tax.

General deductions from income

What are the general deductions from income allowed in Zimbabwe?

Expenses and losses to the extent to which they are incurred in the production of income, excluding capital expenses per section 15 of the Income Tax Act (Chapter 23:06).

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Zimbabwe?

Through the final deduction system of administering employee’s tax; which is the responsibility of the employer. However where the taxpayer has filed a tax return, then reimbursement would be through an assessment.

Calculation of estimates/pre-payments/withholding

How are estimates/pre-payments/withholdings of tax handled in Zimbabwe? For example: Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), etc.

Pay-as-you-earn (PAYE) withholding

Employer required administering deduction from employee remuneration on a monthly basis.

PAYG installments

When are estimates/pre-payments/withholdings of tax due in Zimbabwe? For example, monthly, annually, both, etc.

These remittances are due on a monthly basis and should be paid in most cases by the 10th of the month following month of withholding.

Relief for foreign taxes

Is there any relief for foreign taxes in Zimbabwe?

Yes, subject to a maximum relief which does not exceed the Zimbabwean tax chargeable on the same income.

General tax credits

What are the general tax credits that may be claimed in Zimbabwe? Please list below.

  • Medical expenses credit: 50 percent of the aggregate amount not recoverable from a medical aid society.
  • Elderly person’s credit.
  • Blind person’s credit.

Sample tax calculation

  2009USD

2010USD 2011USD
Salary 30,000 30,000 30,000
Bonus 3,000 3,000 3,000
Cost-of-living allowance 2,400 2,400 2,400
Housing allowance 1,200 1,200 1,200
Company car 1,800 1,800 1,800
Moving expense reimbursement 1,000 1,000 1,000
Home leave 1,000 1,000 1,000
Education allowance 2,000 2,000 2,000
Interest income from non-local sources 500 500 500
Pension contributions (5,400) (5,400) (5,400)

Calculation of taxable income

Year ended 2009USD 2010USD 2011USD
Days in Zimbabwe 0 0 0
Earned income subject to income tax      
Salary 30,000 30,000 30,000
Bonus 3,000 3,000 3,000
Cost-of-living allowance 2,400 2,400 2,400
Net housing allowance 1,200 1,200 1,200
Company car 1,800 1,800 1,800
Moving expense reimbursement 1,000 1,000 1,000
Home leave 1,000 1,000 1,000
Education allowance 2,000 2,000 2,000
Total earned income 42,400 42,400 42,400
Other income 0 0 0
Total income 42400 42400 42400
Standard deduction 0 0 0
Pension contribution (5,400) (5,400) (5,400)
Moving expenses reimbursement (1,000) (1,000) (1,000)
Personal exemptions (400) (400) (400)
Bonus 0 0 0
Total taxable income 35,600 35,600 35,600

Calculation of tax liability

  2009USD 2010USD 2011USD
Taxable income as above 35,600 35,500 35,500
Zimbabwe tax 6,953 10,538 10,589
Alternative minimum tax 0 0 0
Less:      
Foreign tax credits 0 0 0
Total federal income tax 0 0 0
Social security tax  0 0 0
Total Zimbabwe taxes 6,953 10,538 10,589

2015

Total Taxable income 42,400.00
Maximum pension contributions (5,400.00)
Bonus exemption (1,000.00)
Taxable income 36,000.00
Tax 7,380.00
Aids Levy 221.40
  7,601.40

© 2016 KPMG Zimbabwe, Zimbabwean partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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