The Finance Act 2024 (No.2) gazzetted in October of 2024 has introduced significant amendments to Zimbabwe’s tax laws, aiming to enhance revenue collection and improve compliance among taxpayers.. This article outlines the key amendments, their implications for businesses and individuals, and the broader impact on Zimbabwe’s economy.
Payment of Taxes in Foreign Currency
Under the Finance Act No. 13 of 2023, taxpayers were required to remit taxes in foreign currency based on the portion of their income earned in that currency. For example, if Company A had a taxable income comprising 70% foreign currency and 30% local currency, the tax payable would be calculated according to the specified rates for each currency portion.
However, section 2 of the new Finance Act has repealed Section 4A (b) (c) (d) with the substitution of the following;
As of July 1, 2024, individuals and entities whose taxable income is received or accrued in whole or in part in foreign currency must pay tax in the same or another specified foreign currency on so much of that income as is earned, received or accrued in that currency. However, if more than 50% of their total income is received in foreign currency, they must account for tax as if half of the income was earned in foreign currency. For the purposes of converting the foreign currency tax shall be remitted in local currency at the official rate of exchange the day of payment.
In addition to the changes, Presumptive taxes are now payable in local currency at the prevailing rate of exchange on the day of payment, notwithstanding the currency of trade. Previously this was payable in foreign currency.
Payment of Provisional tax payments
The period from the 1st of April 2024 to the 30th of June which relates to the Second QPD (Quarterly payment date)/ provisional tax payment which is remitted on the 25th of June for the year 2023 the taxpayer shall pay half of the foreign currency portion of tax payable in local currency at the official rate of exchange on the day of payment.
More so, for the period of the 1st of April 2024 to the 30th of June 2024 which is the second quarterly instalment of provisional tax payable for the 2024 year of assessment the taxpayer shall pay tax as if half of the income was earned in foreign currency at the official rate of exchange on the day of payment.
Automated Financial Transactions Tax (AFTT)
The Finance Act amends the AFTT, effective May 3, 2024. Under the new provisions, the tax will be charged at a local currency equivalent of $0.05 USD for each withdrawal exceeding the local currency equivalent of $100 USD.
Presumptive Tax
The Act revises the presumptive tax rates for various categories of taxpayers. Presumptive tax is now calculated based on specific rates for different types of businesses. For example:
- Taxi operators with seating for up to seven passengers: $35 per month.
- Omnibus operators with seating for 8-14 passengers: $50 per month.
- Goods vehicles with a carrying capacity of more than 10 tonnes but less than 20 tonnes: $200 per month.
- Driving schools for class 4 vehicles only: $50 per month.
- Hairdressing salons: $5 per chair per month.
- Butcheries – US$50 per month
These amounts shall be paid in local currency at the official selling rate of exchange on the day of payment
Compliance for Self-Employed Professionals
Self-employed professionals, including architects, engineers, legal practitioners, health practitioners, and real estate agents, who previously paid the Self-Employed Professional presumptive tax will continue to do so until January 25, 2025. After this date, they must comply with the self-assessment return requirements outlined in Section 37A.
Intermediated Money Transfer Tax
IMTT on Zimbabwe Gold (ZiG)
The tax is calculated at a rate of 0.02 (or 2%) on every Zimbabwe Gold (ZiG) unit, or part thereof, for each transaction. If a single transaction exceeds the equivalent of $500,000 USD in ZiG (based on the prevailing interbank rate), a flat tax of $10,150 USD in ZiG will be charged.
IMTT on United States Dollars
The tax is calculated at a rate of 0.02 (or 2%) on every United States dollar, or part thereof, for each transaction. If a single transaction exceeds $500,000 USD, a flat tax of $10,150 USD is applied.
IMTT on Foreign outbound payments
The tax shall be calculated at the rate of 0,02 US$ on every dollar of every outbound foreign payment or part thereof for each transaction on which tax is payable.
IMTT on Zimbabwe gold-backed digital token
The tax shall be calculated at the rate of 0,02 US$ on every dollar of every Zimbabwe gold-backed digital token or part thereof for each transaction on which tax is payable.
Year of Assessment
Section 2 of the Income tax act is amended in the definition of year of assessment as follows:
The year of assessment beginning on the 1st January, 2024, in respect of the taxable income from employment of a person other than a company, a trust or a pension fund, consists of the following two periods
- the period beginning on the 1st January, 2024, and ending on the 4th April, 2024
- the period beginning on the 5th April, 2024, and ending on the 31st December, 2024
Tax clearances
The following professions shall not be certified ,registered or licensed to practice the profession unless valid tax clearances are produced:
- Architects
- Engineers or Technicians
- Land surveyors
- Legal Practitioners
- Auditors, Accountants
- Health Practitioners
- Real estate agents
- Quantity Surveyors
Exemptions from Income Tax ( Bonuses)
Bonuses or performance-related awards received by an employee or agent are exempt from income tax, provided that the employee does not receive more than one bonus per year and the total amount does not exceed $700 USD or its local currency equivalent at the time of payment.
VAT Deferment
Requirements:
- Proof to the satisfaction of the Minister that he or she has imported goods of a capital nature for specified industries.
- A statement from the Commissioner that he has not defaulted on payment of any of the taxes payable in terms of the CGT Act, Customs and Excise Act, Income Tax Act.
- The Commissioner shall authorize deferment of payment of tax on such goods for a prescribed period not exceeding 180 days from the date the goods are deemed to be imported.
Measures to Protect value chain integrity and to counter unfair competition from informal traders
The amendments to Section 81A of the Value Added Tax Act (Chapter 23:12) in Zimbabwe, as outlined in the 2024 Finance Act, aim to protect value chain integrity, ensure transparency, and counter unfair competition by informal traders
Only registered manufacturers, wholesalers, and retailers with valid tax clearance certificates can purchase goods from manufacturers. Other persons can only purchase goods at intervals of not less than 30 days and up to a limit of US$1000 per purchase
Manufacturers and wholesalers must withhold 5% of the value of each purchase made by non-compliant persons. Exemptions apply to supply of milk, bread, newspapers. Penalties shall apply to none compliant individuals.
Surtax on Sugar
A surtax is an additional tax levied on top of an existing tax. This shall be levied, collected and paid in respect of added sugar beverages at the appropriate rate provided in the Special surtax tariff.
Energy/ fuel
The owner of any fuel being removed in transit shall at the port of entry of the fuel provisionally pay the duty and levies as if it were not being removed in transit this amount shall be reimbursed to the owner of the fuel upon the fuel being acquitted at the port of exit
However, this does not apply to an owner of any fuel being removed in transit who uplifts the fuel from the National Oil Infrastructure Company of Zimbabwe Private Limited.
Our Corporate & Tax practice group is available to assist with any tax-related inquiries or concerns on info@mmmlawfirm.co.zw
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