On 19 March 2025, the Minister of Finance, Economic Development, and Investment Promotion promulgated several Statutory Instruments (SIs) that introduced changes to the interest rates on unpaid and overpaid taxes in Zimbabwe. These amendments impact various tax categories, including Value Added Tax (VAT), Income Tax, Capital Gains Tax (CGT), and Customs and Excise Duties. The revisions aim to update the interest rates applied to overdue taxes as well as those on overpaid taxes that are not refunded promptly. The  recent changes in interest rates have brought significant shifts in how unpaid taxes are treated in Zimbabwe and it crucial for taxpayers and businesses to understand these changes as they can lead to unexpected financial burdens if not properly understood and managed.

Below is a detailed breakdown of the key changes introduced by these amendments:

1.0 Capital Gains Tax (CGT) – Statutory Instrument 22 of 2025
Statutory Instrument 22 of 2025 revises the interest rates applicable to unpaid or overpaid capital gains tax through the Capital Gains Tax (Rate of Interest) Notice, 2025. The following changes were introduced:

a. Interest Rate for Unpaid or Overpaid Tax in Local Currency
The rate of interest for any period during which capital gains tax remains unpaid or overpaid in local currency shall be calculated as follows:

“The Bank Policy Rate (as revised from time to time) plus an additional 5% of the Bank Policy Rate.”

This change aligns the interest rate with the Bank Policy Rate, providing for periodic adjustment to reflect prevailing economic conditions. The addition of a 5% premium ensures that the interest charged on outstanding taxes remains above the base rate, reflecting the cost of delayed payments and the inflationary environment.

b. Interest Rate for Unpaid or Overpaid Tax in Foreign Currency

“For taxes unpaid or overpaid in foreign currency, the interest rate shall be set at a flat 10%.”

These new provisions replace the earlier Capital Gains Tax (Rate of Interest) Notice, 2022, as stipulated in SI 211 of 2022.

c. Refunds for Overpaid Capital Gains Tax
Section 2 of the Capital Gains Tax (Rate of Interest) Notice, 2025 further stipulates that interest shall be payable on overpaid capital gains tax if the refund is not processed within a specified period. Specifically, the Commissioner is required to pay interest on any capital gains withholding tax that has been overpaid but not refunded within 60 days from the date the taxpayer claims the refund or from the date of the completion of the tax assessment, whichever is later.

Exemption from Interest Payments
However, the Commissioner shall not be liable to pay interest where the overpayment was the result of a defective return or other error on the part of the taxpayer. In such cases, where the error is attributable to the taxpayer and not the Commissioner, no interest will accrue on the overpayment.

Resetting the 60-Day Period for Defective Returns
If the taxpayer submits a defective return, the Commissioner is required to notify the taxpayer of the deficiency within 60 days. In such cases, the 60-day period for the refund claim and interest payment shall be reset, and shall begin to run from the date the taxpayer resubmits a correct and complete return.

2.0 Value Added Tax (VAT) – Statutory Instrument 25 of 2025

Amendments to the Fifth Schedule of the Value Added Tax (General) Regulations, 2003
The following amendments have been made to the Fifth Schedule of the Value Added Tax (General) Regulations, 2003:

a. Deletion of “Zimbabwe dollars” and Substitution with “Local Currency”

The term “Zimbabwe dollars” has been deleted and replaced with “local currency”.

This change reflects the transition from the use of the Zimbabwean dollar to the local currency in the country’s taxation system, ensuring that the regulations remain in line with the current monetary regime.

b. Substitution of “Twenty-Five Percentum” with “Bank Policy Rate Plus 5%”

The previous fixed interest rate of 25% for unpaid or overpaid VAT in Zimbabwe dollars has been replaced with a more dynamic rate, calculated as:

Bank Policy Rate (revised from time to time) plus an additional 5%

3.0 Customs and Excise
Through Statutory Instrument 24 of 2025, the Customs and Excise (General) (Amendment) Regulations, 2025 (No. 124), the Customs and Excise (General) Regulations, 2001 have been amended by the repeal of section 178 (prescribed rate of interest) and the substitution of the following:

For the purposes of sections 125 and 202 of the Customs and Excise Act [Chapter 23:02], which relate to the refund of overpaid duty by the Commissioner and interest on unpaid duty, the applicable interest rate shall be as follows:

a. For amounts in local currency:

Bank Policy Rate as revised from time to time, plus an additional 5%.

b. For amounts in foreign currency:

10% per annum

4.0 Income Tax – Statutory Instrument 26 of 2025
Through Statutory Instrument 26 of 2025, the Income Tax (Rate of Interest) Notice, 2025, the rate of interest for any month or part thereof during which tax remains unpaid or overpaid to the Commissioner shall be as follows:

For amounts in local currency:
Bank Policy Rate as revised from time to time, plus an additional 5%.

For amounts in foreign currency:
10% per annum.

The Income Tax (Rate of Interest) Notice, 2025 repeals the Income Tax (Rate of Interest) Notice, 2022, published in Statutory Instrument 212 of 2022.

Subsection (2) of the Notice stipulates that the Commissioner shall pay interest at the rate prescribed above on any amount of income tax overpaid but not refunded within 60 days from the date the taxpayer claimed the refund or the date of completion of the assessment, whichever is later. However, no interest shall be payable where the overpayment was due to an incomplete or defective return or any other error on the part of the taxpayer rather than an error on the part of the Commissioner.

Where the non-payment of the refund was due to the submission of an incomplete or defective return, which the Commissioner brought to the taxpayer’s attention within 60 days, the 60-day period shall restart from the date of resubmission of the corrected return.

The recent changes in interest rates for unpaid taxes in Zimbabwe bring about important considerations for all taxpayers. These changes require businesses and individuals to be more vigilant in managing their tax affairs. Staying informed and proactive can help mitigate the financial impact and ensure compliance with Zimbabwe’s tax laws.

For more assistance with tax inquiries kindly email our tax practice on info@mmmlawfirm.co.zw