Zimbabwe

As of February 5, 2025, employers in Zimbabwe have various tax obligations, including payroll taxes, corporate income tax, and other levies. These obligations are crucial for maintaining compliance with Zimbabwean tax laws.

Payroll Taxes (PAYE)

The Pay As You Earn (PAYE) system requires employers to deduct income tax from employee salaries and pensions before disbursement. The system operates on a progressive tax rate structure, meaning higher earners pay a larger percentage of their income in tax. The tax-free threshold is ZWL 2,800.00 or USD 100.00 monthly. The highest tax rate is 40% for both ZWL and USD earnings. This highest rate applies to annual earnings above ZWL 84,000.01 and USD 36,001.00, respectively. In addition to the standard PAYE rates, a 3% AIDS levy is added to the calculated tax liability.

• Submission and Payment: PAYE returns and payments are due by the 10th of the following month.
• Exemptions: Certain income types are exempt, such as specific bonuses. Allowable deductions like pension contributions reduce the taxable income.

Corporate Income Tax (CIT)

Companies operating in Zimbabwe are subject to corporate income tax. Payment is done in quarterly installments:

• 1st Quarter: 10% due by March 25th
• 2nd Quarter: 25% due by June 25th
• 3rd Quarter: 30% due by September 25th
• 4th Quarter: 35% due by December 20th

Other Levies and Obligations

Employers also contribute to the following:

• National Social Security Authority (NSSA): Both employers and employees contribute 3% of gross income to NSSA.
• Zimbabwe Development Fund Levy: Employers pay 1% of their total wage bill.
• Workers' Compensation Insurance: Employers must provide accident prevention and workers' compensation insurance.

Beyond these, there may be specific requirements for certain industries, such as mining royalties, which are payable in cash and in kind, and presumptive taxes for certain transport operators. Further information can be obtained from the Zimbabwe Revenue Authority (ZIMRA).

In Zimbabwe, employers are legally obligated to deduct Pay As You Earn (PAYE) taxes from employee salaries and remit them to the Zimbabwe Revenue Authority (ZIMRA).

PAYE Calculation

The PAYE system is progressive, meaning higher earners pay a larger percentage of their income in tax. The tax-free threshold for 2025 is ZWL 2,800.00 or USD 100.00 monthly. The highest tax rate is 40% for earnings above ZWL 84,000.01 or USD 36,001.00 annually. For salaries paid in both ZWL and USD, the USD tax tables are used, and the tax due is apportioned accordingly. A 3% AIDS levy is added to the tax after credits.

The general process for calculating PAYE is:

1. Calculate gross income (including benefits and allowances).
2. Deduct exempt income (e.g., certain bonuses, reimbursements).
3. Deduct allowable deductions (e.g., pension contributions).
4. Apply relevant tax rates to the taxable income.
5. Deduct applicable tax credits.
6. Add the 3% AIDS levy.

Deductions and Exemptions

Several deductions and exemptions can reduce an employee's taxable income. These include contributions to approved pension funds (up to ZWL 852,000 or USD 3,000 annually), certain business expenses (travel, entertainment, motor vehicle), and charitable donations. Employer contributions to retirement funds and medical aid schemes are not taxable for employees.

Tax Credits

Tax credits reduce the final tax liability after the tax calculation. These include credits for the elderly, blind or disabled persons (USD 900 or ZWL equivalent annually), and a medical credit (USD 1 for every USD 2 spent).

Additional Considerations

• Employers must register with ZIMRA if they have employees earning above USD 300 monthly (or equivalent).
• PAYE returns and payments are due to ZIMRA by the 10th of the following month.
• Late payments incur a 100% penalty and 10% annual interest.
• Employers must maintain detailed records of employee compensation and tax deductions.

General Tax Information for Employees in Zimbabwe

Beyond the employer's obligations regarding PAYE, employees should be aware of other aspects of the tax system in Zimbabwe.

• Tax Residency: Individuals are considered tax residents if they are ordinarily resident and reside in Zimbabwe for at least 183 days in a tax year. Residents are taxed on their Zimbabwe-sourced income. Non-residents are taxed on income from services rendered in Zimbabwe, unless an applicable Double Taxation Agreement (DTA) exists and the employment lasted less than 183 days.

• Capital Gains Tax: Capital gains are taxed, although rollover relief is available for certain situations like the sale of a primary residence.

• Other Taxes: Employees also contribute to the National Social Security Authority (NSSA).

Note: This information is current as of February 5, 2025, and is subject to change. Always consult with ZIMRA or a tax professional for the most up-to-date information.

In Zimbabwe, Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates and Thresholds

• Standard Rate: 15% (effective from January 1, 2023)
• Zero Rate: 0% applies to specific goods and services, primarily exports.
• Registration Threshold: USD 25,000 or the Zimbabwean dollar (ZWL) equivalent in taxable supplies within a 12-month period (effective from January 1, 2024).

Registration

• Compulsory Registration: Mandatory for businesses exceeding the USD 25,000 threshold.
• Voluntary Registration: Possible for businesses below the threshold, subject to ZIMRA's approval.
• Requirements: Include a valid Taxpayer Identification Number (TIN), up-to-date tax payments, sales records, sales projections, bank statements, lease agreement or title deed, and a public officer appointment letter.

Filing and Payment

• Returns: Monthly VAT returns (VAT7 form) are due by the 25th day of the month following the reporting period.
• Payment: VAT payments are due alongside the return submission.
• Currency: VAT should be remitted in the currency of the original transaction. Foreign currency transactions should be converted to RTGS dollars using the interbank exchange rate on the transaction date for reporting purposes.
• Fiscalization: Electronic Fiscal Devices (EFDs) are mandatory for recording and transmitting taxable transactions to ZIMRA in real-time.

Exempt Goods and Services

Some goods and services are exempt from VAT, including:

• Water supplied for domestic use
• Domestic electricity
• Rates charged by local authorities
• Certain agricultural and horticultural equipment or machinery
• Fuel and fuel products
• Road toll fees
• Tobacco
• Basic foodstuffs
• Financial Services
• Medical Services
• Educational services (pre-school to secondary school)
• Residential accommodation
• Donated goods/services to non-profit organizations
• Public transport

VAT on Digital Services

• Zimbabwe levies VAT on digital and broadcast services provided by non-resident suppliers to residents since January 1, 2020.
• Non-resident providers exceeding the VAT threshold must register with ZIMRA or appoint a Fiscal Representative.

Information is current as of February 5, 2025, and subject to change.

Zimbabwe offers a range of tax incentives designed to stimulate investment and economic growth across various sectors. These incentives aim to attract both domestic and foreign investment, boost specific industries, and promote sustainable development.

Income Tax Incentives

• Corporate Tax Rate: The standard corporate income tax rate is 25.75% inclusive of the AIDS levy. However, specific sectors and activities benefit from reduced rates or tax holidays.
• Manufacturing and Exporting Companies: Businesses involved in manufacturing or processing that export a significant portion of their output enjoy reduced corporate tax rates. The specific rates depend on the export thresholds as of 2015. Exporting more than 30% but less than 41% qualifies for a 20% rate, while exporting more than 41% but less than 51% results in a 17.5% rate. More recent data (2025) indicates a rate of 20% for companies exporting 50% or more of their output.
• Special Economic Zones (SEZs): As of January 1, 2025, the tax holiday for companies operating within SEZs has been removed, and they are now subject to a 15% corporate income tax rate. The withholding tax on SEZ investments has also been reduced from 15% to 10%.
• Mining: The taxable income for holders of special mining leases is 15%, while companies engaged in general mining operations face a 25% tax rate.
• Build-Own-Operate-Transfer (BOOT) and Build-Operate-Transfer (BOT) Projects: Companies undertaking BOOT or BOT projects benefit from a tax holiday for the first five years of operation, followed by a 15% tax rate for the subsequent five years.
• Licensed Investors: Licensed investors who export all their goods and services are taxed at a rate of 25% for the first five years of operation. As of 2025, any existing tax holidays for licensed investors have expired.
• Agriculture: Farmers can claim special deductions for expenditures related to fencing, land clearing, borehole drilling, and aerial or geophysical surveys.

Value Added Tax (VAT) Incentives

• Tourism: Designated tourist facility operators in approved tourism development zones or those offering hunting safaris charge 0% VAT on services to non-residents paying in foreign currency.
• Agriculture: A range of farming inputs (animal feed, remedies, fertilizers, plants, seeds, pesticides) and agricultural equipment are zero-rated for VAT.
• Capital Goods: VAT on imported capital goods used in mining, manufacturing, agriculture, and aviation can be deferred. The deferment period varies from 90 to 180 days, depending on the equipment's value. As of 2015: USD 100,000 to 1,000,000 qualifies for 90 days, USD 1,000,001 to 10,000,000 for 120 days, and USD 10,000,001 and above for 180 days.
• Liquefied Petroleum Gas (LPG): As of January 1, 2025, LPG is exempt from VAT.

Other Tax Incentives and Considerations

• Special Initial Allowance (SIA): A special initial allowance is available on capital equipment for licensed investors at a rate of 50% in the first year and 25% in the subsequent two years (effective from 2017).
• Withholding Tax: Dividends from listed securities are taxed at 10%, while unlisted dividends are taxed at 15%. Interest from Zimbabwean banks is taxed at 15%. Royalties paid to non-residents are subject to a 15% withholding tax, although tax treaties may reduce this rate. Withholding tax on capital gains for marketable securities is 1% as of January 1, 2025. A special capital gains tax is levied on the transfer of mining titles after December 31, 2023.
• Tax-Free Threshold: As of January 1, 2025, the tax-free threshold for local currency is ZWL 33,600 per annum.

This information is current as of February 5, 2025, and might change due to policy revisions and updates. It is advisable to consult with tax professionals or relevant authorities for the latest information.