Zimbabwe: Tax provisions in 2017 budget

Zimbabwe: Tax provisions in 2017 budget

The 2017 budget in Zimbabwe was presented on 8 December 2016. As proposed, a definition of "permanent establishment" would be added to the income tax law, so as to capture taxation of attributable profits earned by non-residents when they are not already captured by an income tax treaty or agreement. Also, there is a proposed reduction in withholding taxes on fees paid to non-resident directors, which up to now have been subject to double taxation at an effective rate of 35%. These would only be subject to the 20% withholding tax rate.

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There are proposals concerning the value added tax (VAT) zero rating for a number of staple food items including rice, margarine, cereals, maheu, pork, beef, fish, chicken and potatoes, and changes to customs duties imposed across a variety of products such as fabric; printing and packaging materials (both increased); raw materials used in soap manufacture and importation of 30,000 litres of raw wine (reduced). 

 

Among other tax provisions included in the 2017 budget are the following items:

  • Clarification of tax incentives to be provided to “special economic zone” entities.
  • Exemption of 15% withholding non-resident tax on fees, in respect of fees already subjected to 20% withholding taxes as non-executive directors fees
  • Reduction of presumptive taxes, but with a requirement to administer these on a monthly (not quarterly) basis
  • Restricted deductibility of management fees now to include arrangements between associated entities (not only limited to parent / subsidiary relationships)
  • Expansion of the definition of “specified assets” to be subjected to the capital gains tax
  • An exemption from capital gains tax for housing units donated to local communities or share ownership and community schemes
  • Removal of additional goods from the open general license
  • Amendment of certain goods and services to standard rated (not zero rated)
  • Moratorium on small and medium size enterprises (SMEs) with regards to potential VAT penalties

 

Read a December 2016 report [PDF 1 MB] prepared by the KPMG member firm in Zimbabwe

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