An effective and multifaceted system of Withholding Taxes (WHT) is a cornerstone of Zimbabwe’s domestic revenue collection strategy. These taxes are an advance payment of income tax, collected at the source of the payment, which helps ensure compliance and improves the flow of revenue to the Zimbabwe Revenue Authority (ZIMRA).
The system is complex, differentiating rates and rules based on the residency status of the recipient, the nature of the income, and, crucially, the recipient’s possession of a valid Tax Clearance Certificate (ITF 263).
Types of Withholding Taxes in Zimbabwe
Withholding taxes in Zimbabwe can be broadly categorised into three main areas: payments to residents, payments to non-residents, and specialized levies like the VAT Withholding Tax.
1. Withholding Tax on Payments to Residents
These are typically applied to specific types of passive income or payments for services, and they often serve as an advance credit against the recipient’s final income tax liability.1
A. Withholding Tax on Amounts Payable Under Contract (Section 80)
This is arguably the most significant WHT mechanism for domestic business compliance. It mandates that any paying officer (e.g., government, parastatal, or large corporate buyer) must withhold a portion of a payment made for goods and services supplied under a contract or tender if the supplier does not furnish a valid Tax Clearance Certificate (ITF 263).
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Rate: 30% of the gross amount payable.
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Threshold: This WHT applies to aggregate payments exceeding a certain threshold (e.g., US$1,000 or the local currency equivalent) to a single supplier during the year of assessment.
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The Clearance Exemption: If the supplier provides a valid ITF 263, the paying officer must not withhold this 30% tax. This acts as a powerful incentive for businesses to remain compliant with their tax obligations.
B. Resident Taxes on Interest, Dividends, and Fees
| Payment Type | Tax Rate | Nature |
| Resident Interest | 15% | Applied to interest accruing to a resident from a registered banking institution or unit trust scheme. This is typically a final tax. A lower rate of 5% may apply to interest on fixed-term deposits of at least 90 days. |
| Resident Dividends | 15% | Applied to dividends from unlisted shares paid to a resident individual. The rate is 10% for shares listed on the Zimbabwe Stock Exchange (ZSE). Dividends to resident companies are generally exempt. |
| Non-Executive Director’s Fees | 20% | An advance tax deducted from fees paid to a resident non-executive director. |
| Commissions | 20% | Applied to property and insurance commissions paid to resident persons who are not employees. |
2. Withholding Tax on Payments to Non-Residents (NRWT)
These taxes are levied on payments made by a Zimbabwean resident to a non-resident for various classes of income sourced in Zimbabwe. These are generally considered final taxes in Zimbabwe.
| Payment Type (Non-Resident) | General WHT Rate | Notes & Payment Deadline |
| Royalties | 15% | For the use or right to use any patent, design, trademark, formula, process, or technical knowledge. Payable within 10 days of payment or crediting. |
| Fees (Technical, Mgmt, Consulting) | 15% | For technical, administrative, managerial, or consultative services provided in Zimbabwe. Payable within 10 days of payment or crediting. |
| Dividends | 15% | On dividends from unlisted shares. 10% for ZSE-listed, and 5% for Victoria Falls Stock Exchange (VFEX)-listed securities. Payable within 30 days of declaration. |
| Remittances of Allocable Expenditure | 15% | Applied to excessive remittances by a local branch to its non-resident parent or head office for general administrative services. |
| Interest | 0% (Exempt) | Non-resident investors are typically exempt from WHT on interest (a measure to attract foreign capital). |
Crucial Caveat: Double Taxation Agreements (DTAs)
If the non-resident recipient is a resident of a country with which Zimbabwe has a DTA, the rate specified in the treaty will generally override the domestic rate if it is lower.
3. Special Withholding Mechanisms
A. VAT Withholding Tax
This is a measure implemented to improve VAT compliance and collection.
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Appointed Agent: ZIMRA appoints certain registered operators (usually large corporates or government entities) as VAT Withholding Agents.
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Rate: The agent is required to withhold one-third (1/3) of the Output VAT charged by a supplier on a standard-rated supply.
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Process: The agent remits the withheld 1/3 to ZIMRA and pays the remaining amount (including the remaining 2/3 of the VAT) to the supplier. The supplier then claims the withheld 1/3 amount as a credit on their own VAT return using the certificate provided by the agent.
B. Capital Gains Withholding Tax (CGWT)
This tax applies to the disposal (sale) of specified assets, primarily immovable property (land and buildings) and marketable securities (shares and debentures).
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Immovable Property: The WHT is calculated on the gross proceeds of the sale and is collected by the conveyancer or legal practitioner handling the transfer.
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Marketable Securities: For securities listed on the ZSE, a 1% final WHT is applicable on the gross selling price (effective January 2025). The custodian/transfer agent is responsible for the deduction.
📜 Obligations and Penalties
The responsibility for deducting and remitting WHT lies with the payer (the withholding agent).
1. Withholding Agent’s Responsibilities
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Deduction: Correctly calculate and deduct the specified WHT rate from the gross payment.
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Remittance: Remit the withheld amount to ZIMRA by the prescribed due date (usually the 10th day of the month following the payment).
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Documentation: Issue a Withholding Tax Certificate to the payee, detailing the amount withheld. This certificate is essential for the payee to claim the tax credit on their final return (for residents) or as proof of final tax (for non-residents).
2. Penalties for Non-Compliance
Failure by a withholding agent to deduct or remit the tax correctly and on time can result in severe consequences:
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Personal Liability: The withholding agent becomes personally liable to ZIMRA for the uncollected tax.
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Penalties and Interest: ZIMRA can impose penalties (e.g., up to 100% of the unpaid tax) and charge interest on the outstanding amounts. The interest rate for unpaid foreign currency taxes is often a flat 10% per annum.
Disclaimer: Tax laws are subject to annual budgetary reviews and subsequent Finance Acts. The rates and thresholds mentioned herein are based on current ZIMRA regulations as of the 2025 fiscal year. Always consult the latest legislation and a professional tax advisor for specific advice.
