Zimbabwe Key Tax for 2022 and 2023 Highlights from Budget Statement and Finance Act 8 of 2022.

On Thursday 24 November 2022,  the Honourable Minister Mthuli Ncube presented the 2023 budget. The budget theme was “Accelerating Economic Transformation.”The article hinges on pronouncements from the Finance Act No. 8 of 2022 promulgated on the 24th of October 2022.

The 2023 National Budget Statement and draft Finance Bill proposals are yet to be promulgated into law, and are therefore subject to changes.The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.

Key Tax Highlights in the Finance Bill.

The following amendments have been proposed.

• Expenditure incurred through suppliers who qualify for VAT Registration , will only be deductible for income tax purpose if supported by fiscal tax invoices. Effective date will be 1 January 2023.
• IMTT to be reduced from 4% to 2% on Nostro US$ transfers to align with local ZWL transfers.Effective date will be 1 January 2023.
• VAT rate to increase to 15%. This includes supply of imported services, importation of goods and motor vehicles sold by persons who are motor dealers.Effective date will be 1 January 2023.
• Failure by banks and financial institutions to remit taxes within stipulated 48 hour period will result in penalties of 15% for US$ and 200% for ZWL payments. Effective date is the time of Promulgation of Act.
• The tax tables for the period August 2022 to December 2022 have been annualized for 2023. The monthly tax free threshold remains at ZWL75,000.There are no changes to US$ tax tables.
• Introduction of Section 25A-25D in the Income Tax Act (Registrable Taxpayer). Subject to notification by the Minister to register such traders as tax payers based on turnover, average employees, average assets or a combination of the above in the last quarter of the calendar month.Effective date is the time of Promulgation of Act.
• Defination of “Licenced Investor” means the holder of an investment licence, other than the holder of such licence whose licensed activity is mining.Effective date is the time of Promulgation of Act.
• To qualify for REIT exemption certain conditions regarding form,ownership,governance and sectors to develop must be adhered to.Effective date is the time of Promulgation of Act.
• Payment of Minig royalties in respect of Gold, Diamonds,Platinum,PGM and lithium to be paid as follows.
  • 50% in kind in the form,purity,or quality prescribed by RBZ through Statutory Instrument.
  • 10% in foreign currency (Cash)
  • 40% in Zimbabwean Dollar
  • Effective date will be 1 October 2022

Key Highlights not in Finance Bill.

• Rebasing of Capital allowances
  • Rebasing of unredeemed capital allowances as at 1 January 2023 to local currency equivalent of outstanding foreign currency invoice value at the beginning of each financial year.
• Interest on outstanding taxes
  • To align with bank policy it is proposed to increase interest on outstanding tax obligations to the Bank Policy Rate which is currently 200%.
  • To convert all ZWL outstanding tax debt to foreign currency at time debt is incurred, however payment can be made in ZWL at prevailing inter bank rate at time of payment.
• Penalty of late submission of tax returns.
  • Penalty to be pegged at US$30 payable at local currency equivalent for each day return remains outstanding.
• Value Added Tax
  • VAT deferment threshold to be increased from US$500 000 to US$1 000 000 for importation of capital goods in specified Industries.
• Special economic zone status
  • Special economic zone tax incentives are not applicable to companies in mining sector due to the fact that minerals are exported and there is low levels of beneficial within the country.
  • Limit the rebate of duty on companies that qualify as special economic zones i.e. they export 100% of what they manufacture.
• Exports
  • Electronic sealing of excisable goods e.g. cigarettes.
  • Exports in bond be consigned to designated routes through loading ports of exit.
  • Penalties to be charged on transporters that deviate from designated routes.
  • Reduction of exporting period for goods under bond to 5 days from 10 days.
• Duties
  • Rebate of duty on capital equipment to be replaced with a suspension of duty on specified capital equipment in tourism sector and the minimum value to be pegged at US$25 000.
  • The legislation relating to suspension of duty on specific mining development operations will be not be renewed, however mining companies will continue to import until expiry of current legislation on 01 December 2022.
  • Review of flat of excise duty on energy drinks rate from US$0,05 to US$0.10 per litre, with effect from (“w.e.f.”) 1 January 2023.
  • To expand the list of capital equipment to be zero rated for Customs duty on importation in the agriculture, mining, energy, manufacturing and health sector.
  • The suspension of duty on basic commodities will not be extended, the SI expired on 16th of November.
  • To support local production it is proposed to  gradually reduce ringfenced milk powder and raw cheese imports under suspension of duty.
• Income tax exemption
  • Proposal to exempt POTRAZ from Income tax.
• Employment Tax
  • In the draft Finance Bill the tax tables from August 2022 to September 2022 have been annualized for the 2023 tax year.
  • The employment tax free monthly threshold remains ZWL 75 000.
  • The following changes were promulgated in Finance Act No. 8 of 2022 gazetted on 24th of October 2022:
  • The deemed motoring benefit remain unchanged from previous year.

Annual Pay AS You Earn (P.A.Y.E) income tax tables

Source: Finance Act No. 7 of 2021 US$ Annual Motoring benefits deemed value tables