The Income Tax Self Assessment Return – Business for 2025: Deadline approaching

As the tax season reaches its peak, businesses in Zimbabwe are reminded that the Income Tax Self-Assessment Return (ITF 12C) for the 2025 tax year is due on April 30, 2026. (Note: While the 2024 returns were extended to May 2025, the statutory deadline for the 2025 tax year remains four months after the year-end).

With the transition to the Tax and Revenue Management System (TaRMS) and the continued use of the multi-currency framework, compliance requires more than just submitting figures; it requires a strategic understanding of currency rules.

1. Filing Obligations & Deadlines

Every person or entity earning income from trade or investment is required to submit an ITF 12C.

• The Deadline: April 30, 2026 (for December year-ends).

• TaRMS Submission: Returns must be filed online.

• Nil Returns: If your company was dormant or made no profit in 2025, you are not exempt from filing. You must submit a “Nil Return” to remain compliant.

• Financial Statements: Your return must be supported by signed financial statements (Statement of Profit or Loss and Statement of Financial Position).

2. The “50:50 Rule” and Currency Splits

Under Section 37AA of the Income Tax Act, taxpayers must account for tax in the currency in which the income was earned. However, ZIMRA often issues specific administrative guidelines (commonly known as the 50:50 rule) to simplify this for businesses with mixed income.

Key Rule for 2025:

• If your foreign currency (USD) income is more than 50% of your total revenue, you are generally required to pay your tax obligations in a 50:50 ratio (50% in USD and 50% in ZiG).

• If your foreign currency income is less than or equal to 50%, you pay tax proportionately based on the actual ratio of currencies earned.

Why this matters: Failing to split the payment correctly can lead to ZIMRA rejecting the payment for one currency and charging interest and penalties for “non-payment,” even if you paid the full amount in a different currency.

3. The 30% Export Retention Issue

For exporters, the 30% Mandatory Surrender Requirement remains a critical factor in tax planning. Under current Reserve Bank of Zimbabwe (RBZ) directives (FXD4/2025), exporters retain 70% of their proceeds in USD and surrender 30% to the central bank for liquidation into ZiG.

The Tax Impact:

1. Valuation: Even though 30% is liquidated into ZiG at the prevailing interbank rate, for income tax purposes, the gross export value is what counts.

2. Liquidity Management: Since 30% of your revenue is “forced” into ZiG, you must ensure you have enough USD liquidity from your remaining 70% to meet the USD portion of your tax bill (under the 50:50 rule).

3. Export Incentives: Remember that manufacturing companies that export a significant portion of their output qualify for lower corporate tax rates:

   • 30%–40% exported: 20% tax rate.

   • 41%–50% exported: 17.5% tax rate.

   • Above 51% exported: 15% tax rate.

4. Key Steps for a Successful Filing

To avoid the last-minute rush and the heavy penalties associated with TaRMS errors:

• Reconcile your QPDs: Ensure the Quarterly Provisional Tax Payments made during 2025 are correctly reflected in your ledger.

• Convert ZWL to ZiG: For any legacy transactions from early 2024, ensure the conversion to ZiG is done using the correct statutory rate ($1 \ZiG) = 2498.7242 \text{ ZWL}$).

• Add the AIDS Levy: The corporate tax rate is 25%, but you must add the 3% AIDS Levy, making the effective rate 25.75%.