kudenga- 2009 tax bulletin 4 pdf

7/29/2019 Kudenga- 2009 Tax Bulletin 4 PDF

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CONTENTS1 INTRODUCTION ................................................................ 2

2 RATES OF TAX: EMPLOYMENT INCOME....................... 3

3 HIGHLIGHTS OF THE 2009 BUDGET ............................... 4

4 TAXATION IN ZIMBABWE...21

5 TAXATION OF INDIVIDUALS............................................21Benefits.........................................................................22

Exempt income ............................................................23

Deductions ...................................................................24

Prohibited Deductions...24

Credits...........................................................................24

Tax computation example: Individual........................25

6 TAXATION OF COMPANIES .............................................26

7 CAPITAL ALLOWANCES...................................................288 WITHHOLDING TAXES.....................................................31

9 CAPITAL GAINS TAX.........................................................34

10 VALUE ADDED TAX ..........................................................36

11 PAYROLL TAXES...............................................................38

12 ESTATE DUTY....................................................................39

13 STAMP DUTY .....................................................................39

14 CUSTOMS DUTY..39

15 CONVERSION OF SPECIFIED AMOUNTS INTOFOREIGN CURRENCY40

16 TAX RATES.........................................................................43

17 DOUBLE TAXATION AGREEMENTS ...............................45

18 TAX RATES IN SELECTED COUNTRIES.46


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2 Tax and your business

1. INTRODUCTIONThe most important change brought in by the 2009 budget is therequirement to pay all taxes in foreign currency. This will invariablyplace a significant demand on the companys cash resources particularlyin the current climate of an economy downturn.

We at BDO Kudenga & Co. are geared towards offering tax planningstrategies and policies that minimize your tax burden during thesedifficult times and ensure the success of your business.

We can also help to protect you from the risk of non-compliance againstthe backdrop of intense levels of scrutiny from the tax authorities.

This booklet is intended to give brief guidelines on how to compute taxon your business or personal income.

We advice that you seek professional advice from the firm before makingany decision regarding the contents of this booklet.

2. 2009 BUDGET: - TAXATION PROPOSALSThe Finance Act 2009 was promulgated on the 23

rdApril 2009 after the

presentation of the original 2009 budget proposals on the 29th

January2009 by the Acting Minister of Finance Honorable Chinamasa and arevised budget which was tabled on 18

thMarch 2009 by Finance Minister,

the Honorable, Tendai Biti.

The Zimbabwe currency was revaluated on 1st

August 2008 by theremoval of ten zeros. A further revaluation was carried out on 2

nd

February 2009 by the removal of twelve zeros. All the Zimbabwean dollarfigures in this bulletin reflect the above currency revaluations.

Salient features of the taxation proposals in the budget are summarizedbelow:-

2.1 RATES OF TAX: EMPLOYMENT INCOMEWith effect from 1

stFebruary 2009, separate foreign currency PAYE

tables for employees remunerated in foreign currency areintroduced.


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Tax and your business 3

ANNUAL P.A.Y.E TABLE (USD$)1

STFEBRUARY 2009 31

STDECEMBER 2009 (USD)

Band of TaxableIncome

US$

Amount

US$

TaxRate

%

Tax

US$

Cumulative TaxUS$

1 1 650 1 650 Nil Nil Nil

1 651 5 500 3 850 20 770 7705 501 11 000 5 500 25 1 375 2 145

11 001 16 500 5 500 30 1 650 3 795

16 501 33 000 16 500 35 5 775 9 570

33 001 and above 37,5

Aids levy of 3% of tax is payable

MONTHLY P.A.Y.E TABLE (USD$)

1ST

FEBRUARY 2009 31ST

DECEMBER 2009 (USD)

Band of TaxableIncome

US$

TaxRate

%

Cumulative TaxUS$

1 150 Multiply by Nil Nil Nil

151 500 Multiply by 20 Less 30

501 1 000 Multiply by 25 Less 55

1 001 1 500 Multiply by 30 Less 105

1 501 3 000 Multiply by 35 Less 180

3 001 and above Multiply by 37,5 Less 255

Aids levy of 3% of tax is payable


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3. HIGHLIGHTS OF THE 2009 BUDGET3.1 INCOME TAX INDIVIDUALS

PERSONAL TAX RATESSeparate foreign currency tables are introduced with effectfrom 1

stFebruary 2009.The minimum tax threshold is US$150

per month.

The marginal tax rate of 38.625% (including 3% aids levy) isapplicable to taxable income above US$3,000 per month.

RETRENCHMENT PACKAGESWith effect from 1

stFebruary 2009, the tax-free portion of a

retrenchment package is pegged at the greater of US$1,000 or onethird of the retrenchment package provided it does not exceedUS$9,000.

PENSION CONTRIBUTIONSWith effect from 1

stFebruary 2009, the monthly maximum

amount allowable for employer and employee pension fundcontributions is USD$300 per month.

RENTAL/INTEREST INCOME TO ELDERLYWith effect from 1

stFebruary 2009, the tax-exempt amount of

income accruing to persons aged over 55 years by way of rentalincome or interest from discounted instruments is reviewed toUS$250 per month.


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TAX CREDITSThese are revised from 1

stFebruary 2009 as follows: -

US$

Mentally/Physically disabled person.................. $900Blind Person ................... $900Elderly persons credit .................... $900

When the tax chargeable is payable in local currency, the amountof the credit shall be converted to Zimbabwean dollars using therate as may be prescribed by the Minister of Finance.

MOTOR VEHICLE BENEFITSWith effect from 1

stFebruary 2009, the deemed motoring benefit

is revised as follows:

Engine Capacity 2009

1 500cc or less US$ 50 per month

1 501cc to 2 000cc US$ 60 per month

2 000cc to 3 000cc US$ 80 per month

Above 3 000cc US$100 per month

Where the fringe benefit accrues to a taxpayer earning a salaryin local currency, the deemed income will be converted to localcurrency using a rate prescribed by the Minister of Finance.

PAYE REMITTANCE PERIODWith effect from 1

stFebruary 2009, PAYE should be remitted on

or before the third day of the month following that of deduction.

PAYMENT IN KINDWhere an employee earns any part of their remuneration in theform of a coupon, or an instrument or token that isexchangeable whether directly or indirectly for foreign currency,any P.A.Y.E payable shall be paid in foreign currency calculatedon a fair valuation of that coupon, instrument or token.


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PART PAYMENT IN FOREIGN CURRENCYWhere only part of the taxable incomes from employment ispaid in a foreign currency, the amounts of any tax due on suchincome shall be calculated separately and paid in theappropriate currency relative to each part.

LOAN BENEFITA loan benefit accrues when the interest payable is less than the

Libor rate plus five percent.

EMPLOYEE SHARE OPTIONSA flat rate of 5% on gross sale proceeds will apply to calculate taxon the exercise of share options granted before 1 February 2009


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3.2 INCOME TAX: - COMPANIES, TRUSTS, INDIVIDUALTRADE OR INVESTMENTCORPORATE TAXWith effect from 1

stof January 2009, corporate tax will be remitted

in the currency in which the business is conducted.

The corporate tax rate remains at 30,9%.

INCOME FROM TRADE OR INVESTMENTSWith effect from 1

stJanuary 2009, taxable income from trade or

investment earned in foreign currency is payable in foreigncurrency.

The tax rate for income from trade or investment remains atat 30,9%.

CAPITAL ALLOWANCESPASSENGER MOTOR ALLOWANCESWith effect from 1

st

January 2009, the maximum amountallowable on the purchase of a passenger motor vehicle isUS$10,000.

STAFF HOUSINGWith effect from 1

stJanuary 2009, the ranking cost of a residential

unit will be US$25,000.

DONATIONS TO SCHOOLS, HOSPITALS ANDCLINICSWith effect from 1

stJanuary 2009, the maximum amount allowed

for approved donations to schools, hospitals and clinics is to bereviewed to US$100,000 per annum.

RESEARCH AND DEVELOPMENTWith effect from 1

stJanuary 2009, the maximum amount allowed

as a deduction to a research institute approved by the Minister ofHigher or Tertiary Education is US$100 000 per annum.


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TRADE CONVENTIONSWith effect from 1

stJanuary 2009, the maximum amount

allowable for attending a trade convention is US$2,500 perannum.

CONVERSION OF FINAL BALANCESWith effect from 1

stJanuary 2009, for all accounting and taxation

purposes, any final balances denominated in Zimbabweancurrency shall be converted to United States dollars at such rateof exchange as the Commissioner may approve.

WITHHOLDING TAX ON TENDERSWith effect from 1 February 2009, the threshold for the value ofthe withholding tax on tenders is reviewed to US$250 pertransaction where the contract is denominated in foreigncurrency.

EXPEDITED PROCEDURES FOR RECOVERY OFOUTSTANDING TAXZIMRA may recover any outstanding tax or stamp duty includingany interest and penalty thereon by making an assessment andthereupon serve a provisional attachment order authorizing theattachment of any movable property (including foreign currency)of the tax payer.

The provisional attachment order may be issued in the followingcircumstances:-

(i) Where the tax payer fails to pay any tax.(ii) Where the tax payer fails to furnish any return or

Information

(iii)Where ZIMRA is not satisfied with the return orInformation

(iv)Where the tax payer is about to leave Zimbabwe.


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PRESUMPTIVE TAXESWith effect from 1

stJanuary 2009, the following revised

presumptive taxes will apply: -

Operators of goods vehicles having a carrying capacity Of more than ten tonnes but less than twenty tonnes,

US$1,000 per quarter year;

Of ten tonnes or less but which is driving one or moretrailers resulting in a combined carrying capacity of morethan fifteen tonnes but less than twenty tonnes,US$2,500 per quarter year;

Of twenty tonnes or more, US$2,500 per quarter year. Operators of driving schools providing driving tuition

For class 4 vehicles only; US$500 per quarter year; For class 1 and 2 vehicles (whether or not in addition to

providing driving tuition for other classes of vehicles),US$600 per quarter year.

Taxi-cab Operators US$100 per quarter

Commuter Omnibus Operators of carrying capacity of:- 8-14 passengers - US$150 per vehicle per quarter. 15-24 passengers - US$200 per vehicle per quarter. 25-36 passengers - US$400 per vehicle per quarter. 37 or more passengers - US$650 per vehicle per quarter.

Hair Saloons US$1,500 or 10% of gross income per quarter whichever is

greater.


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RENTALS PAYABLE IN RESPECT OF MODEL A2 FARMS

With effect from 1st

January 2009, rentals paid on model A2 farmsare:-

Rentals payable by a lessee of an A2 farm

Region Rental Fee Per Ha/Annum

1

2

2a

2b

3

4

5

US$3.00

US$3.00

US$3.00

US$3.00

US$2.00

US$2.00

US$1.00

Rentals payable by holders of model A2 farms offer letters

Region Rental Fee Per Ha/Annum

1

2

2a

2b

3

4

5

US$2.00

US$2.00

US$2.00

US$2.00

US$1.50

US$1.00

US$1.00


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3.3 VALUE ADDED TAXVAT REGISTRATION THRESHOLDWith effect from 30

thJanuary 2009, the VAT registration threshold

is reviewed to US$60 000 per annum.

This measure does not apply to operators who are alreadyregistered for VAT purposes.

VAT PAYABLE BY MOBILE PHONE OPERATORSWith effect from 1

stFebruary 2009, VAT on the supply of cellular

telecommunications services is reduced from 22,5% to 15%.

VAT REMITTANCEWith effect from 30 January 2009, a mid term tax payment ofVAT will be made on the fifteenth day during the tax period.

Mid term tax refers to the amount of VAT which is collected oraccrued to the registered operator from the first to thefourteenth day of the tax period.

A VAT return will be furnished by the fifth day of the followingmonth after the end of the tax period and after excluding midterm tax paid, the registered operator will pay the tax payable orcalculate the refund due.


August 2009, the mid term tax isdiscontinued. The VAT remittance date remains the fifth day ofthe first month commencing after the end of a tax period.

IMPORT VATWith effect from 30

thJanuary 2009, import VAT will be payable in

foreign currency on the value of all imports.

PAYMENT IN KINDWith effect from 30 January 2009, where the registered operatorreceives consideration in the form of a coupon, or any instrumentor token that is exchangeable whether directly or indirectly forforeign currency, that operator shall pay the VAT applicable inforeign currency based on the fair valuation of that coupon,instrument or token.


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3.4 CAPITAL GAINS TAXPAYMENTS OF CGT IN FOREIGN CURRENCY

With effect from 30th

January 2009, where capital gains arereceived or accrued in foreign currency, the capital gains taxthereon will be payable in foreign currency on so much of thegains as are received or accrued in foreign currency.

Where the capital gains is received in the form of a coupon or anyinstrument or token, which is exchangeable whether directly orindirectly for foreign currency then capital gains tax is payable inforeign currency on a fair valuation of that coupon, instrument ortoken.

When computing the capital gains tax payable in foreigncurrency, the cost of acquisition and additions to the specifiedasset are deductible.

In addition an inflation allowance equal to, 2 % of the cost ofacquisition and additions in respect of each year or part of a yearof assessment is allowable as a deduction against the net saleproceeds.

CGT WITHHOLDING TAXWith effect from the year of assessment beginning on 1

stJanuary

2009, the capital gains withholding tax should be submitted toZIMRA not later than the third working day from the date whenthe payment was made.

The rate of CGT withholding tax on immovable propertypurchased prior to 1

stFebruary 2009 is 5% of the selling price.

The rate of withholding tax on listed shares is reduced from 10%to 1% with effect from 1

stAugust 2009.

15% withholding tax is payable on sale of immovableproperty acquired after 1 February 2009.


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CGT CALCULATIONImmovable property purchased in Zimbabwe dollars prior to1

stFebruary 2009 will be subject to a deemed capital gain tax of

5% on the capital amount.

With effect from 1stAugust2009 listed shares are exempt from

CGT; the 1% withholding tax becomes a final tax.

3.5 ESTATE DUTYWith effect from 1

stFebruary 2009, estate duty will be imposed

when the dutiable amount exceeds US$50,000.

3.6 CUSTOMS DUTYCUSTOMS DUTY SUSPENSION ON BASICCOMMODITIESThe suspension of duty on basic commodities is extended to31

stDecember 2009.

FLAT RATE OF DUTYWith effect from 30

thJanuary 2009, customs duty on other goods

is reduced from 65% to 40%.

TRAVELLERS REBATEIndividuals are allowed to import under rebate of duty, goodsvalued up to US$300 once in a calendar month.

The rebate will be restricted to goods imported for personalconsumption.

CARBON TAX AND NOCZIM DEBT REDEMPTIONLEVY ON FUELCarbon tax and Noczim Debt redemption levy on fuel will belevied in foreign currency with effect from 30

thJanuary 2009. The

rates of customs duty on fuel, carbon tax and Noczim redemptionlevy, will be reviewed with effect from 30

thJanuary 2009 a follows:


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CUSTOMS DUTY:Petrol: 55% of CIF value or US22,5 cents per litre whichever isgreater.Diesel: 25% of CIF value or US12,5 cents per litre whichever isgreater.

With effect from 17th

July 2009, customs duty on fuel is replacedwith a specific excise duty of US20 cents for petrol and US16

cents for diesel.

CARBON TAX:Petrol : US2,4 cents per liter or 6% of CIF value.Diesel: US1,0 cent per liter or 2% of CIF value.

NOCZIM LEVYPetrol: US4,0 cents per liter or 10%Diesel: US1,0 cents per liter or 2%


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CUSTOMS DUTY IN FOREIGN CURRENCYWith effect from 30

thJanuary 2009, customs duty will be paid in

foreign currency on all imported goods.

In order to reduce the cost of importation, customs dutyrates on listed products will be reduced.

The 15% surtax will be removed on all products.

Product Current rates:customs duty

Proposed rates30

thJune 2009

Raw material 0% - 25% 0% - 15%Intermediate goods 10% - 25% 10% - 15%Finished goodsClothing and textiles 40% -

60%+US$10/kg

40% + US$5/kg

Clothing and textiles(school uniforms)

60% + US$5per pair 60%

25%

Footwear 60% 40% + US$5/pairElectrical goods 60% 40%

Alcohol & alcoholicbeverages

60% 40%

Cigarettes and tobacco 60% 40% + US$5/1000Motor vehicles 40% - 80% 25% - 60%Handbags and otherarticles of leather,plastic or textilematerial

60% +US$5/KG

40% + US$5/kg

Fruits and vegetables 40% 25%


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August 2009 the following customs duty ratesapply:-

Product Category Currentrates:

Proposedrates:

Raw materials 0-15% 0-10%Intermediate goods 10-15% 10%Capital goods 0-5% 0%

Commuter omnibus(15-20 passengers)

20-25% 15%

Single cab trucks 25% 20%


Proposedrates:

Newspapers 40% 0%Line telephone setswith cordless handsets

25% 5%

Cellular telephonehandsets

25% 0%

Computers and printers 5% 0%


Proposedrates:

Powdered milk 40% 0%Butter oil 40% 0%Leather in slabs, sheets orstrip

40% 10%

Palm stearine 40% 10%Waste leather 40% 10%

Wadding textile fibres 40% 10%Binding and baler twine ofsisal

40% 10%

Twine of synthetic fibres:sisal, baler twine andmanila hemp

40% 10%


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CUSTOMS DUTY CREDIT FACILITYIn order to facilitate movements of goods, a customs creditfacility valid up to seven days will be granted to approvedimporters with effect from 18

thMarch 2009.

COMMERCIAL IMPORTS BY UNREGISTEREDOPERATORSWith effect from 30

th

January 2009, the presumptive tax of 10% onthe value for duty purposes of the commercial goods importedby unregistered traders is payable in foreign currency.

REBATE OF DUTY ON IMPORTATIONS BYTOURIST OPERATORSWith effect from 1

stMarch 2009, a rebate of duty is granted on

new capital equipment for;a) expansion, modernisation and renovations of hotels and

restaurants andb) boat equipment and other goods used by registered tourist

service providers that include tour operators, safari, boat

operators and car hire operators.

SUSPENSION OF DUTY ON MOTOR VEHICLESIMPORTED BY TOURIST OPERATORSDuty on specified motor vehicles for the transport of passengersby tourist operators is suspended from 1 March 2009 to28 February 2011.

3.7 STAMP DUTYPAYMENT OF STAMP DUTYWith effect from 30

th

January 2009, stamp duty will be payable inforeign currency where an asset is disposed of in foreigncurrency.

RATES OF STAMP DUTY(i) For registration in the deeds registry of the acquisition of

immovable property in Zimbabwe dollars.


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VALUE OF PROPERTY (ZIM $) RATE

Up to $ 5,000 0.7%

5,001 -$ 15,000 ....................3.0%

15,001 -$ 100,000 ....................5.0%

Over $ 100,000 ....................6.0%

(ii) For registration in the Deeds Registry of anyacquisitions of property that has beenacquired with foreign currency-

VALUE OF PROPERTY (USD) ............RATE

Up to - US$ 5,000 ....................1.0%

5,001 - US$ 20,000 ....................2.0%

20,001- US$ 100,000 ....................3.0%

Above US$ 100,000 ....................4.0%

BONDSMortgages bond or notarial .....................0.4%bond or any cession or substitutionof debt.

BROKERS NOTESPurchase of any marketable security ..................0.25%

Purchase or a sale of movable property .............0.1%

Purchase or a sale of immovable property .........1.0%

STAMP DUTYOff market share transfers US$2.00

Cheques US$0.05


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INSURANCE POLICIESWhere policy does not exceed 31 days ............... 0.5%

Where policy exceeds 31 days .................. 2.0%

Crop insurance .................... 5.0%

Interim policy not exceeding four months......... 3.0%

Policy of marine insurance .....................5.0%

3.8 EXCISE DUTYWith effect from 30

thJanuary 2009, excise duty on locally produced

or imported clear beer, alcoholic beverages, cigarettes andtobacco will be payable in foreign currency.

3.9 SPECIAL EXCISE DUTYWith effect from 30

thJanuary 2009, excise tax on second hand

motor vehicles will be collected in foreign currency. The CentralVehicle Registry will allow upon change of ownership, the samealpha numeric number plates to be transferred to the new owner.

3.10 TOLLGATESWith effect from 1

stAugust 2009, ZIMRA will facilitate the

collection of toll fees along major highways using the followingrates.

Passenger vehicle & light trucks .......US$ 1.00 Minibuses ....................US$ 2.00 Buses ....................US$ 3.00 Heavy Trucks ....................US$ 4.00 Haulage Trucks ....................US$ 5.00


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3.11 INTEREST FOR LATE PAYMENT OF TAXThe interest rate for late payment of tax is 5% above the London

Interbank Offered Rate (LIBOR) rate.

3.12 ROYALTY PAYMENTS ON GOLDWith effect from 1

stAugust 2009, the royalty remittance on gold is

reintroduced.


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4. TAXATION IN ZIMBABWE: GENERAL OVERVIEWThe following direct and indirect taxes are levied in Zimbabwe: -

Income tax which is levied on the annual income of individuals,companies, partnerships, trusts and estates.

Capital gains tax which is imposed on the disposal of immovableproperty and marketable securities.

Value added tax levied on the supply of goods and services.Various levies such as manpower development levy, standards

development levy, NSSA and workers compensation insurance.

Estate duties on deceased estates.Stamp duty on certain documents.Stamp duties on transfer of immovable property.Customs duties on the importation of goods.Excise duties on certain products.

5. TAXATION OF INDIVIDUALSIndividuals, wherever resident, are subject to income tax on incomederived from an actual or deemed Zimbabwean source. Remuneration forservices rendered in Zimbabwe is taxable in Zimbabwe regardless ofwhere payment is made.

TAXATION OF EXPATRIATESExpatriates are taxable on their Zimbabwean source income irrespective

of where payment is made. Where expatriates are paid wholly or partly inforeign currency, their P.A.Y.E must also be paid over to ZIMRA in theforeign currency in which they receive their remuneration.

Every non-resident employer is required to appoint a local resident agentfor P.A.Y.E purposes. Work permits for expatriate staff will only be grantedon condition that the employer is registered for P.A.Y.E through a residentagent.


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Expatriates may be exempt from tax under the terms applicable underdouble taxation agreements. The usual condition is that the expatriateshould be in Zimbabwe for less than 183 days in the tax year and paymentis made offshore.

BENEFITSThe Income Tax Act provides for the taxation of fringe benefits granted byan employer in respect of services rendered. The value of the benefit is thecost to the employer except for use of furniture or quarters where the

benefit is the value to the employee.

DEEMED MOTORING BENEFITSThe deemed motoring benefits with effect from 1

stFebruary 2009 are:

Engine Capacity Value

1500cc or less US$ 50 Per month1501cc to 2000cc US$ 60 Per month2001cc to 3000cc US$ 80 Per monthAbove 3000cc US$100 Per month

HOUSING AND ACCOMMODATIONThe benefit is based on the value to the employee, which is usually themarket value of the accommodation. The value could, however, be lesswhere the employee is forced by work circumstances to stay in a houseabove his standard.

MEDICAL AID EXPENSESThe employee is not taxed on employer contributions or refund ofmedical expenses by an employer.


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BENEFITS TO EXPORT PROCESSING ZONE (EPZ)EMPLOYEESBenefits accruing to employees employed in an EPZ area are exemptfrom income tax but the exemption shall not exceed 50% of the totalremuneration received from such employment in EPZ before applyingthe limitation provision.

APPROVED EMPLOYEE SHARE OWNERSHIP TRUSTSWhere an employee participates in an approved employee shareownership trust then any amount received or accrued on the sale ordisposal of an employees shares are exempt from income tax andcapital gains tax. The purchase or sale of the shares must be done bythe trust.

In order to enjoy the benefits, the trust arrangements have to benotarised in a deed and approved by the Commissioner.

RING FENCING OF TAX LOSSESIncome from employment may not be set off against losses incurred onbusiness activities.

CALCULATION OF TAXTaxable income of the individual is computed after considering amountsexempt from income tax and deductions allowable in terms of theIncome Tax Act. While taxable income from employment is subject to taxat various rates, income from trade or investment is subject to tax at aflat rate of 30%.

The amount of tax chargeable is then further reduced by credits, whichare dependent on the taxpayers circumstances.

EXEMPT INCOMEIncome exempt from tax includes the following:

Interest received from a financial institution when tax has beenwithheld at source.

Dividends paid by locally incorporated companies.


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The greater of US$1, 000 or one third of US$9,000 of anyretrenchment package received in terms of an approvedretrenchment scheme.

Contributions paid to a medical aid society by an employer onbehalf of his employees and the value of medical treatmentprovided by an employer for an employee.

Alimony received.DEDUCTIONSAlthough fairly limited for employees, these include:

Expenses incurred in the production of income or for the purposesof trade.

Subscriptions to business/professional organizations. Pension fund contributions by individuals to approved funds

including N.S.S.A. are allowed against income up to a maximumamount of US$300 per month.

PROHIBITED DEDUCTIONSThe Income Tax Act specifically prohibits certain deductions. The list

includes the following:

Tax payable and interest thereon. All domestic and private expenditure. Provisions for anticipated or contingent losses or expenditure. Entertainment expenditure. Expenditure incurred in earning foreign dividends. Assessed losses, other than losses arising from mining operations,

brought forward for more than six years.

CREDITSThe credits to which an individual is entitled to are:

2009Mentally/physically disabled person US$900Blind person US$900Elderly persons credit US$900Medical expenses $1 for every $2 paid


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The elderly persons credit is reduced proportionately when the period ofassessment is less than twelve months.

EMPLOYEES TAX (PAYE)Employers are required to deduct employees tax (PAYE) on allremuneration paid to employees.

Executive directors are deemed to be employees and PAYE should bededucted from their salaries.

FINAL DEDUCTION SYSTEM(FDS)Under the final deduction system, an employer is directed to withholdPAYE from each employees remuneration in such a way as to ensurethat the amount withheld in any year of assessment is equal to theincome tax payable by the employee concerned.

An employee whose remuneration is subject to FDS is not required tocomplete an income tax return.

THE CALCULATION OF TAX PAYABLE - INDIVIDUALS

Gross Income

Less: Pension & NSSA ...

TAXABLE INCOME

Tax on Taxable Income per Tables

Less: Tax Credits

NORMAL TAX PAYABLE

Less:

Foreign tax credit PAYE paid

TAX DUE


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6. TAXATION OF COMPANIES: INCOME SUBJECT TO TAX Companies and trusts, like individuals, are taxed on income derived

from an actual or deemed Zimbabwean source.Foreign interest and dividends are deemed to be from aZimbabwean source.

Business income is subject to tax at an effective tax rate of 30,9%(30% plus 3% Aids Levy).

Local company dividends accruing to local companies are exemptfrom income tax.

Foreign dividends accruing to local companies are taxed at a flatrate of 20% with relief being granted on any foreign tax suffered.

Local interest derived from financial institutions is exempt fromincome tax, but is subject to a final withholding tax of 20%.

Tax Returns FilingThe tax year for all taxpayers is 31

stDecember. Taxpayers who are on the

self assessment scheme are required to submit their tax returns not laterthan four months after the end of the tax year.

Specified taxpayers who are required to be on self assessment includethose registered or are required to be registered under Category C forVAT as at 31

stDecember 2007 or thereafter, or are registered under the

Banking Act (Chapter 24:20) or under the Insurance Act (Chapter 24:07).

LOSS CARRYOVERSAssessed losses may be carried forward for a period of 6 years. No losscarry backs are allowed.


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TREATMENT OF GROUP COMPANIESEach group company is treated as a separate taxpayer and losses maynot be transferred between the different companies. Provision is madefor assets to be transferred between group companies at income taxvalues during the course of a merger or reconstruction without sufferingany tax recoupment. On sale of the assets, outside the group, theallowances are then subject to a recoupment.

THIN CAPITALISATIONAny interest, finance charge or other consideration payable by a localbranch or subsidiary which exceeds a debt to equity ratio of three to oneis not allowable for tax.

TRANSFER PRICINGTax avoidance provisions are available which adjust the prices of goodsand services in terms of certain transactions conducted between relatedparties to reflect an arms length price which would have been appliedhad the transactions been concluded on normal commercial groundsbetween unrelated parties.

PROVISIONAL TAXThe provisional payment dates for the year ended 31

stDecember 2009

are:

25th

March 2009..10%

25th

June 2009.25%

25th

September 2009..30%

20th

December 2009.35%

100%


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7. CAPITAL ALLOWANCESIn calculating taxable income, expenditure and losses (other than that of acapital nature) are allowed to the extent to which they are incurred for thepurposes of trade or in the production of income liable to tax.

Capital expenditure is allowed in the form of special initial allowance,wear and tear and investment allowance. The applicable rates differaccording to the nature and category of the asset.

It should be noted that where S.I.A. is claimed, an accelerated rate of 25%wear and tear is applicable.

Immovable assets can only qualify for S.I.A. if they are constructed by thetaxpayer.

Donated or inherited assets can only qualify for the lower wear and tearrates.

Asset

Commercial Building

Industrial Building

Farm Building andImprovements

Staff Housing

Movable Assets

SpecialInitial

allowance

%

-

50

50

50

50

Wear andTear

%

2,5

5

5

5

25

Investmentallowance

%

15

15

-

15

15

NOTE:

The investment allowance is granted to growth point area operators only.



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SPECIAL INITIAL ALLOWANCE (SIA)The rate of SIA in respect of allowable capital expenditure is 50 %.

There is no apportionment of SIA.

The tax payer may elect to claim SIA on capital expenditure incurred onthe following:-

the construction of farm improvements, industrial buildings,railway lines, staff housing and tobacco barns.

additions or alterations to existing farm improvements,industrial buildings, railway lines, staff housing and tobaccobarns.

the purchase of new or second hand articles, implements,machinery or utensils.

SIA is available only in the year in which the asset is used by thetaxpayer for the purposes of trade.

WEAR AND TEAR ALLOWANCE (W&T)The allowance is available on commercial buildings, farm improvements,industrial buildings, railway lines, staff housing, tobacco barns, articles,implement, machinery and utensils.

SCRAPPING ALLOWANCEThe scrapping allowance is available when the income tax value of theasset exceeds any proceeds on the sale of the asset.

RECOUPMENTA taxable recoupment arises when the sale proceeds of an asset exceed

the income tax value of the asset.

The recoupment is restricted to the original cost of the asset where thesale proceeds exceed cost.


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INVESTMENT ALLOWANCEA 15% investment allowance is available over and above the normalcapital allowances on new or unused articles, machinery excludingmotor vehicles used in a growth point area or on the construction of oradditions to commercial or industrial buildings or staff housing.

Special initial allowance can be claimed on commercial buildingsconstructed at gazetted growth point areas.

The following restrictions apply when claiming capital allowances.

MOTOR VEHICLESThe maximum amount allowable on the purchase of a passenger motorvehicle is USD$10 000.

STAFF HOUSINGThe ranking cost of staff housing is USD$25,000.

SCHOOLS, HOSPITALS, NURSING HOMES OR CLINICSWith effect from 1 January 2009 the deductible limit on capitalexpenditure on schools, hospitals, nursing homes or clinics isUS$100 000 per annum.


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8. WITHHOLDING TAXES: RESIDENTS / NON RESIDENTSRESIDENT SHAREHOLDERS TAX [R.S.T.]Dividends from Zimbabwean resident companies which are distributedto locally resident individuals, trusts and partnerships are subject to awithholding tax of 20%. This rate is reduced to 15% for distributionsmade by companies quoted on the Zimbabwe Stock Exchange.

No tax is however withheld on dividends distributed by one Zimbabwean

resident company to another.

RESIDENTS TAX ON INTEREST (RTI)Financial institutions are required to withhold a 20% residents tax frominterest paid from a Zimbabwean source on any loans or deposits to aperson who is ordinarily resident in Zimbabwe.


January 2009, there is a tax free portion of USD$250per month on interest accruing on any deposit with a financialinstitution including interest on bankers acceptances and otherdiscounted instruments to a taxpayer aged 55 years and above.

NON-RESIDENTS TAX ON INTEREST (NRTI)Interest paid from a source within Zimbabwe or payable by a person whois ordinarily resident or who carries on business in Zimbabwe to a non-resident is subject to a 10% withholding tax.

The 10% NRTI will be repealed with effect from 1st

August 2009.

NON-RESIDENT SHAREHOLDERS TAX ON DIVIDENDS(NRST)A 20% NRST is deductible from dividends distributed by Zimbabweancompanies including private business corporations to non-residents. The

rate is 15% on dividends distributed by companies listed on theZimbabwe Stock Exchange.


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NON-RESIDENTS TAX ON FEES (NRTF)A withholding tax of 20% is imposed on fees paid to non-residents inrespect of technical, managerial, administrative or consultative services.This includes directors fees.

The withholding tax does not apply to fees paid by licensed investors.

NON-RESIDENTS TAX ON ROYALTIES (NRTROY)A 20% withholding tax is chargeable on royalties paid to non-residentsfor the use of patents, trade marks, formulae, equipment, motion pictureetc. Again Licensed investors are exempt.

NON-RESIDENTS TAX ON REMITTANCES (NRTR)A 20% tax is levied on amounts remitted outside Zimbabwe in respect ofallocable expenditure, being expenditure of a technical, managerial,administrative, or consultative nature incurred by non-residents outsideZimbabwe but in connection with their trade in Zimbabwe. This does notapply to licensed investors.

BANKING INSTITUTION LEVYThis was introduced with effect from the tax assessment year ended31

stDecember 2001. The levy is imposed on any banking institution

registered or required to be registered in terms of the Banking Act(Chapter 24:02).

The levy due is 5% of a banks net profit at the end of its accounting yearin the year of assessment concerned. The levy can be reduced by theproportion that loans to small and medium term enterprises have tothe total loan portfolio.

The levy is payable not later than 3 months after the end of the banksaccounting year.

WITHHOLDING TAX ON NON EXECUTIVE DIRECTORS FEESDirectors fees payable to non executive directors are subject to a 20%withholding tax payable to ZIMRA within 15 days from the date that theyare paid out to the director.


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9. PRESUMPTIVE TAXESThe following presumptive taxes apply:

SMALL SCALE MINERSA presumptive tax of 5% based on the gross value of the mineral,precious metals and stones is charged to small scale miners.

Taxi Cab OperatorsThe presumptive tax is USD$100 per quarter year for each taxicab sooperated.

Commuter Transport OperatorsThe presumptive tax of each omnibus per quarter year is:-

USD$150 per bus of a carrying capacity of 8-14 passengers; USD$200 per bus of a carrying capacity of 15 24 passengers

per quarter;

USD$400 per bus of a carrying capacity of 25 36 passengersper quarter;

USD$650 per bus of a carrying capacity of 37 passengers andabove per quarter.

Payment for each Quarter must be made by 20th

January, 20th

April, 20th

July and 20th

October of each year of assessment.

Informal TradersThe presumptive tax is 10% of the rent paid by the informal trader.

Hair SaloonsThe presumptive tax is USD$1,500 per quarter.

Cross Boarder TradersThe presumptive tax is 10% of the value for duty purposes of thecommercial goods imported.


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10. CAPITAL GAINS TAXA capital gains tax of 20 per cent is chargeable on gains arising from thesale of immovable property and marketable securities.


January 2005 persons over 59 years are not taxed oncapital gains arising from the sale of a principal private residence.

Gains from marketable securities listed on the Zimbabwe StockExchange are liable to tax with effect from 1

stSeptember 2005.

Allowable deductions in the determination of a capital gain are the costof the asset, additions thereto, and an inflation allowance.

Mortgage bond interest or any other interest which was incurred infinancing the purchase of a specified asset can also be claimed if theamount is not allowable for income tax purposes.

Where a specified asset is sold under a suspensive sale, an allowance isgranted for installments not yet due. The allowance is normally claimedon immovable property sold under deed of sale agreements.


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CAPITAL GAINS TAX ELECTIONSLegislation allows for the transfer of immovable property or marketablesecurities without imposing tax on the seller in certain circumstances.Such circumstances are as follows: -

sale of a principal private residence where proceeds are usedto acquire another principal private residence;

transfer between spouses; transfers in a reconstruction scheme or merger and is between

companies under the same control;

transfer by a branch of a foreign company to a companyincorporated in Zimbabwe;

transfer of shares in exchange for a marketable security for nocash consideration in a scheme of reconstruction or merger;

transfer by an individual to a company controlled by him if theasset continues to be used for purposes of trade by thecompany;

when immovable property used for trade purposes is disposedof and is replaced by another immovable property used fortrade purposes as well, then any gain on the disposal can bepostponed to the extent that the sale amount is used topurchase the new property.

transfers by a company to a private business corporation intowhich the company has been converted into or vice versa, inthe course of or in furtherance of that conversion.

Notes

Capital gains tax is not levied on transfer by the executor of adeceased estate or on gains by a licensed investor if the assetformed the whole or part of the investment to which thelicence relates.


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11. VALUE ADDED TAX (VAT)VAT is an indirect tax levied at 15% on the supply of goods and services.VAT is also levied on the importation of goods and services in certaincircumstances.

EXEMPT SUPPLIES:Exempt supplies are supplies that are exempt from VAT.

Common examples of exempt supplies are: -

supply of financial services supply of educational services supply of health services renting of residential accommodation

TAXABLE SUPPLIESTaxable supplies are charged to tax at either the zero rate or the standardrate of 15%.

ZERO RATED SUPPLIESZero rated supplies are charged to tax at the zero percent.

Common examples of zero rated supplies are:

Certain basic foodstuffs e.g. milk, bread, sugar, salt Certain goods used for farming purposes Exported good and services The sale of a going concern between two VAT traders.


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VAT ON IMPORTATION OF GOODSVAT is chargeable and payable on the importation of any goods intoZimbabwe.

Goods are deemed to be imported on the date the goods are cleared.VAT is paid at the same time as customs duty.

IMPORTED SERVICESVAT is payable on the supply of an imported service. An importedservice is one that is made by a supplier who is not a resident ofZimbabwe to a recipient who is a resident of Zimbabwe and who doesnot utilize the service for making taxable supplies.

The recipient of the services must within 30 days of the time ofimportation declare and pay the VAT to ZIMRA.

INPUT TAXNo credit for input VAT may be claimed in respect of the following: -

goods or services acquired exclusively for the making of exemptsupplies

sporting and social club fees and subscriptions entertainment expenditure.

Input tax credit may only be claimed upon production of a valid taxinvoice.


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12. PAYROLL TAXES12.1 P.A.Y.E.

Employers are required to withhold P.A.Y.E. from employeesremuneration according to the P.A.Y.E. tax deduction tablesunless otherwise instructed by a tax deduction directive fromthe Commissioner General.

P.A.Y.E. must be remitted to ZIMRA by the 3rd

day of the month

following the month in which the P.A.Y.E. was withheld.

12.2 SOCIAL SECURITYThe state operated pension scheme is known as the NationalSocial Security Authority (NSSA). Both the employer andemployee contribute 4%.

12.3 WORKERS COMPENSATION INSURANCEEmployers are required to insure their employees againstaccident at work that could result in disability or death.Employers are therefore required to pay monthly, to NSSA an

amount of workers compensation insurance.

The amount varies according to the sector of the industry.

12.4 STANDARDS DEVELOPMENT LEVYThis is a levy paid towards the Standards Association ofZimbabwe.

Payments are made every quarter at a rate of 0,25% of thequarterly wage bill.

12.5 ZIMDEF TRAINING EMPLOYEREvery employer is required to pay monthly a manpower levy of1% of the monthly wage bill to the Zimbabwe ManpowerDevelopment Fund.


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13. ESTATE DUTYEstate duty is chargeable on the net value of a deceased persons estate.The applicable rates vary on a sliding scale from 1.02% per $100 or partthereof, up to a maximum of 5% where the dutiable amount isUSD$50,000 or above.

EXEMPTIONSWhere there is a surviving spouse or minor child the value of a family

home as defined is not subject to estate duty.

Transfer duty is not chargeable where a property is transferred to abeneficiary who is a spouse or blood-relative or adopted child of thedeceased or to a trustee.

Donations may be exempt if they were made 5 years or more prior todeath.

Payments from policies specifically taken out to pay estate duty are nottaxable only to the extent of the duty payable.

14. STAMP DUTYStamp duty is imposed on bonds, brokers notes, cheques, policies ofinsurance and registration in a Deeds Registry on the acquisition ofimmovable property.

15. CUSTOMS DUTYCustoms duty is levied on all goods imported. The effective rates of dutyrange from 0% to 100%.Import tax is levied on most goods at the VATstandard rate of 15%. In general, Zimbabwe imposes restrictions on theimportations of a range of goods which require import permits orlicences e.g. agricultural products and explosives.


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16. CONVERSION OF SPECIFIED AMOUNTS INTO FOREIGNCURRENCYDescription of Item Proposed

amountsallowableannually(US$)

1. Arrear pension contributions: as a deduction 1 8001.1 Annuity, allowance or pension paid to former employee 5001.2 Annuity, allowance of pension paid to former partner 2001.3 Annuity, allowance or pension paid to a dependent of a

former employee or partner200

2. Payments to the Public Private Partnership Fund 50 0003. Payments to the Destitute Homeless Persons

Rehabilitation Fund50 000

4. Co-operative societies: Deductions allowed in respect ofincome derived by a co-operative, agricultural company orco-operative society

500

5. Expenditure allowed on maintenance of roads, buildings,bridges or water, public or sanitation works managed bythe local authority

50 000

6. Passenger motor vehicle (PMV): Maximum amountsallowable on leasing a passenger motor vehicle

10 000

7.1 Minimum amounts of tax not collectable by Commissioner 0.507.2 Minimum amounts of PAYE not refundable 0.508 Lump sum payments (Pensions) which shall not be

included in gross income.1 800

9. Valuation of farm trading stock (livestock):fixed standardvalues of livestock and stud livestock

150

10. Restricted capital expenditure on permanent building used 10 000


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as: dwelling of staff employed at a school, hospital,nursing home or clinic in connection with miningoperations

11. Capital expenditure on school, hospitals, nursing homesand clinics:

Expenditureincurred

12. Restriction on staff housing 5 000

13.1 Renewal or Replacement expenditure on buildings,works or equipment (mining)

10 000

13.2 Renewal or Replacement expenditure on buildings, worksor equipment: mine is owned, tributed, or leased by acompany under the control of not more than 4 individuals.

4 000

14.1 Allowable Benefit Fund contributions by employers 1 500

14.2 Allowable employee pension contributions 1 800

14.3 Allowable employer pension contributions 1 800

15. An amount paid by way of a wage to domestic worker. Theamount should not exceed a monthly minimum wage

150

16. Resident Shareholders Tax on dividends and interestincome refundable where taxpayer is over 55 years of age

600

17. Resident Shareholders Tax on dividends and interestincome refundable where taxpayer is below 55 years ofage

480

18. Presumptive Tax of 10% is charged in informal traders:An Informal trader is an individual who carries on trade forhis own account from which he derives a gross incomeless than

6 000

19. A company to be a small to medium enterprise (SME), itsassets should be less than

20 000

20. Fine for failure to register for banking Institution levy 1 000

21. Assessed loss that is written off in any year 100

22. Exemptions from CGT on marketable securities to personsover 55 years old

1 800

23 Amounts to be deducted where the final CGT is a small 50


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DEEMED LOAN BENEFITS

Description ofLoan Benefit

StatutoryInterest Rate

ProposedThreshold whereno interest isCharged (US$)

ProposedStatutory Rate

Loan benefitbelow ZW$35 000

12.5% 1 000 Differencebetween interest

charged by theemployer and theStatutory rate ofinterest of 5%above Libor

Loan benefitabove ZW$35 000

16% 1 000 Differencebetween interestcharged by theemployer and theStatutory rate ofinterest of 5%

above Libor


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17. TAX RATESSummary of Tax Rates 2007 2009

Income tax 2007 2008 2009Companies and Trusts % % %Basic Rate 30 30 30Aids Levy 3 3 3Effective rate 30,90 30,90 30,90

Capital Gains TaxListed securities 20 20 20/10Unlisted securities 20 20 20Immovable property 20 20 20Principal private residence (over 59 years) nil nil nil

Withholding TaxesResidents and non resident shareholders tax:-- Zimbabwe Stock Exchange listed company 15 15 15- Any other Company 20 20 20Residents Tax on Interest 20 20 20Non-Residents tax on Interest 10 10 10Fees and Royalties 20 20 20

Remittances 20 20 20

Capital gains withholding tax- Immovable property 15 15 15/1- Listed shares 5 5 5- Other shares 10 10 10

Tobacco Levy- Sellers nil nil nil- Buyers 1,5 1,5 1,5

Listed shares are subject to a final withholding tax of 1% with effect from1

stAugust 2009.


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Special Income Tax Rates

2007 2008 2009Foreign dividends 20 20 20Growth Point Areas:-New manufacturing project- first 5 years 10 10 10

New Infrastructure project- first 5 years 15 15 15

Licensed Investors: EPZ operations- first 5 years 0 0 0- thereafter 15 15 15

BOOT/BOT Arrangements- first 5 years 0 0 0- next 5 years 15 15 15- third 5 years 20 20 20- thereafter 30 30 30

Industrial Park, Developer- first 5 years 0 0 0- thereafter 10 10 15

Taxable income of a tourist facility in anApproved development zone- first 5 years 0 0 0- thereafter 15 15 15

Taxable income from operation of touristfacility 60% or more of turnover consist of 20 20 20foreign currency receipts

Taxable income from manufacturing orprocessing company which exports 50% or 20 20 20more of its outputs

Taxable income of pension fund trade 15 15 15or investment

Taxable income of individual from trade 30 30 30or investment

Taxable income of company or trust derived 15 15 15from mining operations

Taxable income of holder of special mining lease 15 15 15


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18. DOUBLE TAXATION AGREEMENTSThe following agreements are in force and the applicable withholdingtaxes are as follows: -

DIVIDENDS%

FEES%

ROYALTIES%

Botswana

Bulgaria

Canada

France

Germany

Iran

Malaysia

Mauritius

Namibia

Netherlands

Norway

Poland

South Africa

Sweden

UK

Normal rate

10

10/20

10

10

10/20

5

10

10

5/10

10/20

15/20

10

15/20

15/20

5/20

15/20

10

10

10

10

7,5

20

10

20

20

10

10

20

20

10

10

20

10

10

10

10

7,5

5

10

15

10

10

10

10

20

10

10

20

Reduced rate on non-residents shareholders tax applies to a dividenddeclared by Zimbabwean companies to non-resident companiescontrolling 25% or more of the voting power of the paying company.


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19. COMPARATIVE RATES OF TAXES PAYABLE IN CERTAINSOUTHERN AFRICAN STATES

Botswana Namibia SouthAfrica

Zimbabwe

INDIVIDUAL TAX

Maximum rate 25% 35% 40% 38,625%Level of taxable incomeat which maximum rateapplies

P120 000 N$200 000 R525 001 US$36 000

COMPANY TAXManufacturing 50% 15% 18% 28% 20%Normal non mining,local

25% 35% 28% 30,9%

Non-resident Branch 25% 35% 33% -

Mining and other 25% 55%diamond38% other

37%gold 15%

OTHER TAXESDistributed Profits Tax - - 10% -CGT 25% - 10%/14% 20%

VAT 10% 15% 14% 15%NRST 15% 5%/10% - 15%/20%

NRTI 15% - - 10%NRTF 15%/10% - - 20%Royalty Tax(withholding tax)

15% 10.5% 12% 20%

kudenga- 2009 tax bulletin 4 pdf

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