Zimbabwe

No taxation of combined operations is allowed in Zimbabwe, including where operations are conducted by more than one company.

Transfer pricing

Effective 1 January 2014, transfer pricing legislation was introduced as an extension of the general ‘tax avoidance’ provisions.

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, the law also covers internal (domestic) transactions between connected persons.

Businesses involved in related-party transactions are required to prepare a transfer pricing document contemporaneously (by the due date for filing the respective CIT return) as well as file a transfer pricing return on an annual basis.

Penalties are provided as follows:

• Where contemporaneous transfer pricing documentation exists in relation to the transaction giving rise to the amended assessment, a penalty of 10% of the shortfall amount will be payable.
• Where contemporaneous transfer pricing documentation does not exist in relation to the transaction giving rise to the amended assessment, a penalty of 30% of the shortfall amount is payable.
• If there is evidence of avoidance, reduction, or postponement of liability to tax actuated by the use of fraud or evasion, a 100% penalty is payable.

Thin capitalisation

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.