No taxation of combined operations is allowed in Zimbabwe, including where operations are conducted by more than one company.
Effective 1 January 2014, transfer pricing legislation was introduced under a provision titled ‘tax avoidance’. This legislation does not detail any parameters or requirements that corporations should follow, nor has ZIMRA issued any practice notes.
This legislation was enhanced with effect from 1 January 2016 to enable the use of the Organisation for Economic Co-operation and Development (OECD) and United Nations (UN) guidelines in respect of cross-border transactions.
It is important to note that, in addition to cross-border transactions between connected persons being examined, the law also covers internal (domestic) transactions between connected persons.
The government has announced that it plans to regulate compliance by requiring corporate entities to submit annual returns as well as to being able to produce transfer pricing documentation when required.
The limit on the deductibility of interest is based on a company incurring interest charged by a subsidiary, a fellow subsidiary, or a holding company when the debt-to-equity ratio exceeds 3:1.
Controlled foreign companies (CFCs)
Zimbabwe currently has no CFC rules.