What is Non-resident shareholders tax (NRST)?
Non-resident shareholders tax is tax levied on dividend accruing to a person who is non-resident of Zimbabwe.
Who is a Non-resident?
A Non-Resident means – a person, other than a company, who; or a partnership or foreign company which is not ordinarily resident in Zimbabwe. This means the definition is met any time that a resident tax payer in Zimbabwe makes payments to a foreign resident entity or individual.
For the purpose of Non-resident shareholders tax, a dividend is income distributed by a company to its members as return of capital invested by them. Required to withheld tax is every company that distributes a dividend
to:
- A person, other than a company, a pension fund, a benefit fund or a medical aid society, who is not ordinarily resident in Zimbabwe; or
- A partnership which is not ordinarily resident in Zimbabwe; or
- A foreign company; or
- A foreign life insurance company, in respect of any shareholding determined by the Commissioner as having been acquired from funds other than those arising from the
life insurance business in Zimbabwe of that foreign life insurance company;
The Non-Resident Shareholder Tax is levied at a rate of 10% or 15% of gross dividend paid by a listed company or unlisted company respectively. A lower rate applies to a paying company, provided that there is a double taxation treaty (DTA) in place between Zimbabwe and the non-resident company‘s country of resident. Refer to our DTA agreement article.
The following distributions are however excluded from the definition of dividends:
- Any amount so distributed by a building society which is not distributed as a dividend in
respect of—–- In the case of the Central African Building Society, a paid-up permanent share class a‖; and
- In the case of the Founders Building Society, an ordinary permanent fully paid-up share; and
- In the case of the Beverley Building Society, a foundation fully paid-up share or class a‖ share an
- Any bonus shares; and
- Any amount so distributed which, in the opinion of the Commissioner, is a return of the amount received by the company for its shares; and
- Any amount so distributed by the Industrial Development Corporation of Zimbabwe, Limited, in respect of its issued share capital; and.
- Any amount so distributed by the Zimbabwe Development Bank established by section 3 of the Zimbabwe Development Bank Act [Chapter 24:14]; and
- Any amount so distributed to the International Finance Corporation referred to in the International Financial Organizations Act [Chapter 22:09]; and
- Any amount so distributed by a licensed investor which arises from his operations in an export processing zone; and
- Any amount so distributed which, in the opinion of the Commissioner, is a return of an amount contributed to the capital of a private business corporation by a member;
- Any amount so distributed by an industrial park developer which arises from the operation of his industrial park.
A dividend is deemed to have been distributed to when it is paid to shareholder, credited to his account or so dealt with that he becomes entitled to the dividend, whichever comes first.
Once NRST is withheld, the payer must give the shareholder a withholding tax certificate showing:
- the gross amount of the dividend; and
- any reduction of dividend for the purpose of computing NRST.
- the amount of the non-resident shareholders‘ tax withheld.
