Value-added tax (VAT)
VAT is a transaction tax, and the implications will vary for different transactions. Some transactions are taxed at a rate of 14.5% (effective 1 January 2020; previously 15%) or 0%, while other transactions are exempt from VAT. Input tax deductions may be claimed, subject to certain provisions. Advice on VAT implications of specific transactions related to corporate operations should be obtained prior to execution of transactions. The registration threshold has been increased to an annual turnover of 1 million Real Time Gross Settlement (RTGS) dollars (from 60,000, which was unadjusted from United States dollar [USD] based currency).
VAT is levied on every taxable supply by a registered person. A taxable supply means any supply of goods or services in the course or furtherance of a taxable activity. A taxable activity means any activity that is carried on continuously or regularly in Zimbabwe that involves the supply of goods or services for consideration.
VAT is payable on all imports for local consumption into Zimbabwe, subject to certain exemptions (e.g. in terms of a technical assistance agreement, donations to the state, goods of which the local supply is zero-rated). Import VAT is payable on the import value plus the applicable customs duty. This is generally payable in the currency that was paid for the goods imported.
A registered VAT vendor is entitled to deduct input tax credits paid in the course of taxable supplies made to such person, provided that a tax invoice is available to support the input tax deduction. It is also important to take note of deemed input tax deductions and prohibited input deductions. Import VAT paid may only be deducted as input tax if the import was in furtherance of a taxable activity and the required documentation (e.g. stamped customs entries) is held by the importer.
VAT returns are due by the 25th day following the month to which the VAT relates.
It is mandatory for all registered taxpayers (i.e. everyone that has a tax Business Partner Number) to use electronic fiscal registers (EFRs) that can be linked to the Zimbabwe Revenue Authority (ZIMRA). Penalties of up to USD 25 per day per point of sale may be imposed.
The concept of appointing VAT agents was adopted in April 2017. Several large mining companies were designated as agents, and the legislation demands that they deduct 10% of a gross invoice as a VAT WHT. The agents must then issue the payees with a certificate showing that the VAT WHT has been deducted in order to enable the payee to claim this against the following month’s VAT liability.
With effect from 1 January 2019, where sales of goods or services are effected in foreign currency, the VAT operator must account for the related VAT in the same currency.
Zimbabwe is a member of the Southern African Development Community (SADC) as well as the Common Market for Eastern and Southern Africa (COMESA). Customs duties are payable according to the general customs tariffs that are legislated for in Zimbabwe. Preferential duty rates apply on imports from SADC or COMESA countries, while goods may be imported free of customs duties from Namibia in terms of the Zimbabwe-Namibia Free Trade Agreement.
25% surtaxes have been imposed on a number of imported goods (including footwear, clothing, and certain foodstuffs) in order to protect the local manufacturing sector.
A security deposit is required by Customs on all temporary importations of equipment to cover import VAT and customs duties (if applicable).
A list of imported goods has been published by the government that require the import duties to be paid in foreign currency. The list includes motor vehicles, excluding commercial vehicles.
It is possible to import goods that are subject to customs duties into registered Customs' bonded warehouses, where goods are kept for later use. In this case, the payment of duties may be deferred until the goods are taken out of the bonded warehouse for home consumption or acquitted if the goods are subsequently exported.
Excise duties are levied on local production of excisable products and are included on most excisable products imported from other countries.
Examples of the excise products and applicable rates include the following:
- Cigarettes: 40% + USD 7 per 1,000 sticks.
- Spirits: USD 2 per litre.
- Wine: USD 0.50 per litre.
Excise and fuel levies are also levied on petrol, diesel, and illuminating kerosene.
Property taxes are levied by cities, towns, and rural councils. Each of these bodies conducts periodic valuations of the properties in their area and annually set out a 'rates schedule' based on a percentage of the valuations. These may alter each year depending upon the entities’ budgetary requirements for funds. Valuations of the properties are usually based on estimates, as there are very few qualified property valuators operating in Zimbabwe at present.
Transfer duty is payable on the acquisition value of property purchased at the following rates:
|Value of the property (USD)||Rate of transfer duty|
|0 to 5,000||USD 400|
|5,001 to 20,000||2% of the value above USD 5,000|
|20,001 to 50,000||3% of the value above USD 20,000|
|50,001 and above||4% of the value above USD 50,000|
Transfer duty is normally payable by the buyer, but the agreement for the sale of the property will determine the person liable to pay these costs. In addition, conveyance costs of up to 4% (plus 14.5% VAT) must be added on.
Certain transactions may attract stamp duty. The amount of stamp duty payable will differ and will be based on the nature of every individual transaction.
The basic transactions can be summarised as follows:
|Bonds||0.4% (USD 0.40 for every USD 100 or part thereof)|
|Brokers notes - purchase of securities||0.25% (USD 0.25 per every USD 100 or part thereof)|
|Brokers notes - purchase/sale of any movable property other than a security||0.10% (USD 0.10 per every USD 100 or part thereof)|
|Brokers notes - purchase/sale of any immovable property||1% (USD 1.00 per every USD 100 or part thereof)|
|Off market share transfer instruments||2% or USD 2|
|Cheques||0.05% (USD 0.05)|
Tax advice should be obtained for major transactions in respect of the transactions mentioned above in order to ensure that the correct stamp duty implications are considered.
Capital gains tax
It should be noted that capital gains tax is payable in Zimbabwe on the disposal of immovable property or shares that are held in listed (on the Zimbabwean Stock Exchange) or unlisted companies at the following rates:
Acquired pre-22 February 2019
- Listed securities: 1% of proceeds.
- Property: 5% of proceeds.
- Unlisted securities: 5% of proceeds.
Acquired post-22 February 2019
- Listed securities: 1% of proceeds.
- Property: 20% of capital gain.
- Unlisted securities: 20% of capital gain.
Zimbabwe operates a pay-as-you-earn (PAYE) system that is called the ‘Final Deduction System’ (FDS). This is based on the presumption that all employers must register for PAYE (both local and foreign-based employers), and that they are responsible for calculating, collecting, and paying the correct amount of PAYE every month to ZIMRA. Tax audits are carried out periodically (every year or two) to test the payroll systems.
The full burden of collecting the correct tax is placed on the employer, and, because of this, there is no requirement for employees to file annual tax returns in respect of employment income.
Social security contributions
Zimbabwe has a limited social security system. The National Social Security Scheme (NSSS) contributions are payable at the same rate of 4.5% of basic salary by the employer and employee, with a salary cap set at ZWL 5,000 per month.
With effect from 12 June 2021, Statutory Instrument 169 of 2021 revised the maximum amount of monthly insurable earnings from ZWL$ 5,000 to 75% of the previous month’s Total Consumption Poverty Line (TCPL) for an average of five persons per household as published by Zimbabwe National Statistics Agency. In the event that the TCPL figure is not available or has not been published, the last published figure remains applicable. NSSA will publish the monthly insurable earnings applicable for each month by the 1st of each month on the NSSA website.
If an employee’s basic salary is greater than their respective regular allowances and benefits, the NSSA contribution is calculated on the basic salary only. However, if an employee’s regular allowances or benefits are more than double their basic salary, the calculation of NSSA contributions should take into account the sum of basic salary, the allowances and benefits, limited to a maximum amount equal to the TCPL figure for that particular month.
For the purposes of applying the contribution rates, the income earned in US$ should be converted to its equivalent ZWL$ at the inter-bank rate prevailing when the income is paid. However, any person in Zimbabwe who earns remuneration in foreign currency is now required to pay their NSSA contribution in foreign currency.
Manpower training levy
Subject to some exceptions, employers are required to pay a 1% monthly training levy (on the gross wage bill) to the Zimbabwe Manpower Development Authority.
Under the Workmen's Compensation Act, employers are required to contribute to a fund that provides cash benefits for industrial injury, disability, and death. Contribution rates are supposed to vary according to inherent occupational risk, from less than 2% in most low-risk commercial/administrative occupations to 11% for high-risk sectors.
Standards Development Fund
With a few exceptions, employers are required to pay 0.5% of their quarterly gross wage bill to the Standards Development Fund. The amount is payable on all payments made by the employer on behalf of the employee, including medical aid and pension contributions.