Reviewing of to 100% Retention of Foreign Currency Domestic Sale Proceeds
Reference is made to Exchange Control Directive RY002 dated 03 February 2023, Exchange Control Clarification Notes 1 & 2 of 17 February 2023 and 23 April 2023 respectively, and the Press Statement on Measures to stabilise the Exchange Rate and Macro Economy announced by the Minister of Finance and Economic Development on 11 May 2023. In order to operationalise the policy measures contained in the Press Statement, Authorised Dealers are advised as follows:
100% Retention of Foreign Currency Domestic Sale Proceeds.
With effect from 15 May 2023, corporates can now retain 100% of foreign currency receipts from domestic sales for an indefinite period.These foreign currency receipts may be used to cater for both local and external requirements in line with existing Exchange Control regulations and guidelines.
Any provision regarding the administration of surrender requirements on domestic sales, as contained in any previously issued Exchange Control Directive(s) or Circular(s), is hereby set aside and superseded by this Circular.
The Reserve Bank of Zimbabwe (RBZ) announced on May 12, 2023 that corporates can now retain 100% of foreign currency receipts from domestic sales for an indefinite period. This is a significant change from the previous policy, which required corporates to surrender 15% of their foreign currency earnings to the RBZ.
The new policy is expected to boost investment and economic growth in Zimbabwe. It will make it easier for businesses to access foreign currency and invest in their operations. This is expected to lead to increased production and job creation.
The new policy also allows corporates to use their foreign currency earnings to meet both local and external requirements. This means that businesses can use their foreign currency earnings to import raw materials, pay for exports, and invest in new projects.
The RBZ has said that the new policy is in line with its efforts to liberalize the foreign exchange market and make it easier for businesses to access foreign currency. The RBZ has also said that the new policy is expected to boost investment and economic growth in Zimbabwe. The new policy is a positive step for the Zimbabwean economy. It is expected to lead to increased investment, economic growth, and job creation.
Impact on the Income Tax.
The Finance Act [Chapter 23:04] is amended in section 4A (“Payment of certain taxes in foreign currency”) by the insertion of the following subsections after subsection (9)—
“(10) Where any person liable to pay tax on income from trade or investment—
(a) earns any part of such income in foreign currency; and
(b) has any part of such income liquidated and paid in local currency upon transfer to a nostro account, pursuant to a retention scheme operated by the Reserve Bank of Zimbabwe;any tax due on such part that is liquidated shall be calculated on the basis that it was earned in local currency:
It means companies should take note of retention for the period January 2023 to May 15, 2023 when computing their 2023 Income tax returns in 2024.
