📊 Accounting for the Intermediated Money Transfer Tax (IMTT) Post-January 1, 2026
The Finance Act No. 7 of 2025 marks a significant shift in the tax landscape by making the Intermediated Money Transfer Tax (IMTT) an allowable deduction for corporate income tax purposes, effective January 1, 2026.
Previously, IMTT was treated as a non-deductible expense, often capitalised to the cost of assets or simply treated as an unallowable expense, which inflated the effective tax rate for businesses. The new provision treats IMTT as an ordinary business expense, fundamentally changing the accounting treatment for purchases of assets, stock, and general expenses.
Below is a breakdown of how the deductibility of IMTT will affect your accounting records for major categories of business expenditure.
1. Accounting for IMTT on Assets (Property, Plant, and Equipment – PPE)
The key question for asset purchases is whether the IMTT should be capitalised (added to the cost of the asset) or expensed (treated as a deductible cost in the Profit & Loss statement).
| Accounting Treatment | Pre-Jan 1, 2026 (Non-Deductible) | Post-Jan 1, 2026 (Deductible) |
| IMTT Cost | Capitalised to the cost of the asset. | Expensed as an allowable deduction. |
| Journal Entry |
Debit: Asset Account (e.g., Motor Vehicle) $XX Debit: IMTT Expense (Non-Allowable) $Y$ Credit: Bank $X+Y$ |
Debit: Asset Account (e.g., Motor Vehicle) $X Debit: IMTT Expense (Allowable) $Y Credit: Bank $X+Y$ |
| Impact on Tax | Higher Asset Cost, leading to Higher Capital Allowances (Wear and Tear) over the asset’s useful life. | Lower Asset Cost. The IMTT is claimed as a full deduction in the year of payment. This typically provides a faster tax benefit. |
Principle: Since the IMTT is now an allowable deduction, the tax benefit is realised faster by expensing it immediately, rather than capitalising it and claiming it over the asset’s life through wear and tear. IMTT no longer meets the criteria under International Financial Reporting Standards (IFRS) to be included in the cost of an asset for the purpose of bringing it to its working condition.
2. Accounting for IMTT on Stock/Inventory
For stock purchases, the accounting will follow a similar principle to assets, focusing on whether IMTT forms part of the “cost of purchase” for inventory.
| Accounting Treatment | Pre-Jan 1, 2026 (Non-Deductible) | Post-Jan 1, 2026 (Deductible) |
| IMTT Cost | Capitalised to the cost of inventory. | Expensed as an allowable deduction. |
| Journal Entry |
Debit: Inventory Account $X Debit: IMTT Expense (Non-Allowable) $Y Credit: Bank $X+$Y |
Debit: Inventory Account $X Debit: IMTT Expense (Allowable) $Y Credit: Bank $X+$Y |
| Impact on P&L | IMTT affects the Cost of Goods Sold (COGS) when the stock is sold. | The IMTT expense is claimed immediately, lowering the Operating Expenses for tax computation. |
Principle: Post-2026, the cost of inventory for financial reporting purposes should generally exclude the IMTT, as the IMTT will be directly claimed as a deduction against taxable income. The focus is on segregating the deductible tax from the inventory value.
3. Accounting for IMTT on General Expenses
General operating expenses (e.g., rent, utilities, consultation fees) paid via electronic transfer will also attract IMTT.
| Accounting Treatment | Pre-Jan 1, 2026 (Non-Deductible) | Post-Jan 1, 2026 (Deductible) |
| IMTT Cost | The IMTT was often lumped with the underlying expense, making the expense account partially non-allowable, or booked to a separate non-allowable IMTT expense account. | The IMTT is recorded to a separate, dedicated IMTT Expense account that is fully allowable. |
| Journal Entry (Example: Paying Rent) |
Debit: Rent Expense (Non-Allowable Portion) $Y Debit: Rent Expense (Allowable Portion) $X Credit: Bank $X+$Y |
Debit: Rent Expense $X Debit: IMTT Expense (Allowable) $Y Credit: Bank $X+$Y |
| Impact on Tax | The IMTT portion increased the effective expense but was not tax-efficient. | Both the underlying expense and the IMTT are fully deductible, reducing the final corporate income tax liability. |
🔑 Action Points for Businesses
To fully benefit from the new legislation and ensure compliance, your accounting systems and processes must be updated:
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Create a Dedicated Account: Open a new general ledger account, titled “IMTT Expense – Allowable,” to capture all IMTT deductions from January 1, 2026.
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System Automation: Ensure your Enterprise Resource Planning (ERP) or accounting software is configured to split the transaction upon payment: the value of the goods/service goes to the Asset/Inventory/Expense account, and the IMTT portion (e.g., 1.5% for ZiG, 2% for USD) goes to the new dedicated IMTT Expense account.
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Documentation: Maintain clear bank statements and transaction records that confirm the IMTT amount on each electronic transfer. This documentation is critical for ZIMRA when claiming the deduction during tax computation.
By treating IMTT as an allowable deduction, businesses will see an overall reduction in their taxable income, providing much-needed relief to high-volume electronic transactions.
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