The 2025 National Budget introduces several key tax and royalty changes that will significantly impact various sectors, including mining, energy, and retail. These measures aim to enhance revenue collection, ensure tax compliance, and promote economic growth. From adjustments to mineral royalties and capital gains tax to the introduction of new surcharges on fast food and film incentives, the proposed changes highlight the government’s strategic approach to managing Zimbabwe’s fiscal challenges while encouraging investment in critical industries. This article discusses the key budget highlights and their potential implications.

1. Collection of Mineral Royalties

• Introduction of Penalties: Starting January 1, 2025, penalties will be imposed on mining entities for the late remittance of royalties, irrespective of any pending civil or criminal proceedings related to the payment or non-payment of royalties. This ensures timely tax compliance.
• Royalties Designation as Tax: Royalties will now be included under the definition of “tax,” ensuring fairness. The Income Tax Act grants the Commissioner the power to exempt taxpayers from penalties if non-compliance is not intended to harm the State, a treatment previously unavailable for royalties.
• Royalty Rate Changes:
  • Coal: Current rate of 1% increased to 2%.
  • Black Granite: Maintained at 2%.
  • Other Dimensional Stones: Reduced from 2% to 0.5%.
  • Quarry Stones: New rate of 0.5%.

2. Special Economic Zones (SEZ)

• Tax Holiday Removal: The existing tax holiday for investors in Special Economic Zones (SEZ) will be removed, replaced by a 15% Corporate Income Tax rate starting in 2025. Any tax holiday currently enjoyed by licensed investors will expire on January 1, 2025.
• Withholding Tax: Withholding tax on SEZ investments will be reduced from 15% to 10%.

3. Value Added Tax (VAT)

• Exemption for Liquefied Petroleum Gas (LPG): LPG will be exempt from VAT starting January 1, 2025, to reduce its cost and encourage its use as an alternative energy source.
• Payment Deadline Shift: The VAT payment deadline will move from the 25th of the following month to the 15th, creating a balance between revenue collection and timely expenditure.
• Automatic VAT Registration for Large Tenders: Any supplier offering taxable goods and services in tenders above US$25,000 will automatically be registered for VAT purposes. This change ensures a level playing field, as all businesses operating at this threshold will be subject to the same VAT compliance requirements.

4. Capital Gains Tax

• Marketable Securities: A 1% withholding tax on capital gains for marketable securities will be introduced starting January 1, 2025, a reduction from the current 2% rate. The tax will be deducted at the time of the sale of these securities.
• Special Capital Gains Tax on Mineral Titles: A special capital gains tax will be levied on the transfer of mining titles. The tax will apply to any mineral titles transferred after December 31, 2023, regardless of whether the transfer occurred within or outside Zimbabwe.

5. Customs and Excise

• Smuggled Goods: The following items will be considered smuggled unless documentary evidence proves that Customs duty has been properly accounted for:
  • Alcoholic and non-alcoholic beverages
  • Dairy products
  • Cement
  • Clothing and footwear
  • Washing powder and detergents
  • Diapers
  • Sugar
  • Rice and pasta
    
• Suspension of Duty on Imported Buses: Effective January 1, 2025, duty on imported public service buses will be suspended.
• Excise Duty on Alcoholic Beverages: Excise duty on certain alcoholic beverages, including wine and spirits, will increase from US$0.25 per litre to US$0.30 per litre.
• Suspension of Duty on Raw Wine: A 100,000-litre per annum duty suspension on raw wine for two years, effective January 2025, is proposed.

6. Tax Incentives for the Film Industry

• Film Production: Tax incentives for the film production industry will be introduced in consultation with stakeholders. Extensive consultations will take place in 2025, with a comprehensive incentives package expected later in the year.
  
  

7. Surcharge on Fast Foods

• New 0.5% Surcharge: A 0.5% surcharge will be introduced on certain fast food items, effective January 1, 2025. These include:
  • Pizza
  • Burgers and hot dogs
  • Shawarma
  • French fries
  • Chicken
  • Doughnuts and similar products
  • Tacos

Summary of Key Tax Changes

Conclusion
The 2025 Budget introduces several critical tax and royalty changes impacting various sectors, including mining. The increase in royalties for coal and the introduction of new taxes like the fast food surcharge and special capital gains tax on mining titles reflect the government’s continued focus on revenue generation, especially in the extractive industries. The shift in VAT deadlines, exemption for LPG, and changes to the customs regime aim to foster a balanced and efficient tax environment, promoting compliance and creating a fair playing field for businesses operating in Zimbabwe.

For assistance with any tax inquiries kindly get hold of our tax practice group on info@mmmlawfirm.co.zw