Explaining Pay As You Earn (PAYE) in Zimbabwe.
To understand Pay As You Earn (PAYE), we need to know what is remuneration?We also to ascertain if different types of income/remuneration received or receivable by an employee are taxable?
What is Remuneration when it comes to PAYE?
“Remuneration” means any amount of income which is paid or payable to any person by way of any salary, leave pay, allowance, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance, stipend or commutation of a pension or an annuity, whether in cash or otherwise and whether or not in respect of services rendered.
A variety of advantages and benefits granted by an employer or on behalf of an employer to an employee, spouse or child are also taxable.
What constitute an Advantage or benefit in relation to PAYE?
Advantage or benefit includes board, occupation of quarters or residence, or the use of furniture or motor vehicle. It also includes the use of or enjoyment of any other property whatsoever, corporeal or incorporeal, including a loan, an allowance, passage benefit and any other advantage or benefit whatsoever in lieu of or in the nature of remuneration as stated above.
The value for tax purposes of an advantage or benefit, other than a payment by way of an allowance, is determined as follows:
(i) in the case of the occupation or use of quarters, residence or furniture, by reference to its value to the employee; and
(ii) (ii) in the case of any other advantage or benefit, by reference to the cost to the employer
The following are some of the examples of the benefits/advantages normally granted to employees and how they should be taxed:
Use of motor vehicle
Where an employee enjoys the use of a company vehicle or is allocated a company vehicle, the value of the benefit is determined according to the engine capacity of the vehicle. The deemed motor vehicle benefits are as follows:
| Engine Capacity | ZWL Deemed Benefit | USD$ Deemed Benefit |
| 1500cc or less | ZWL54,000.00 | USD675.00 |
| 1501 to 2000cc | ZWL72,000.00 | USD900.00 |
| 2001 to 3000cc | ZWL108,000.00 | USD1,350.00 |
| Exceeding 3000cc | ZWL144,000.00 | USD9,800.00 |
The deemed cost should be reduced proportionately where the period of use for the motor vehicle is less than 12 months.
Passage benefit
The benefit covers the cost borne by an employer on travels by an employee, spouse or children, which are not for the purposes of the employer‟s business. This includes the cost on taking up of employment or termination of employment where such costs have been previously offered to the employee.
Occupation of residence
A benefit arises where the employer grants the employee free accommodation or pays subsidized rentals or rental charges which are below the open market rates applicable in that area.
Where the employee does not pay anything towards that accommodation , the whole amount determined on the basis of the open market value – is a benefit and subject to tax. Where an employee pays rentals less than the open market value of the house/accommodation, the difference between the amount paid and the market value constitutes a benefit.
School fees benefit
Where the employer pays school fees for the employee‟s children, the cost of the fees payable becomes taxable in the hands of the employee. In cases where the employer is a school and the employee‟s child is admitted/enrolled at the school without paying school fees or pays fees that are less than those paid by other students attending the same school, the foregone fees become a taxable benefit in the hands of the employee. In addition, any school fees discounts or reductions granted because of the employer-employee relationship become taxable benefits in the hands of the employee.
Loan
Where the Loan is USD$ excess of $100. There is a benefit if the interest rate payable is less than LIBOR rate plus 5%. For Zimbabwean dollar, a benefit will arise if the amount of the loan exceeds ZWL8,000.00 and the interest rate is less than 15%.
Allowances/ incentives
Allowances/incentives granted by the employer or on behalf of the employer to an employee, spouse or child form part of gross income and are liable to tax.
Other benefits
There are a number of benefits that can be granted to employees. Clients are, therefore, advised to contact their nearest office for guidance on tax treatment if needed.
