Understanding Pay As You Earn (PAYE) System in Zimbabwe.
Pay As You Earn, mainly known as PAYE is tax levied on income of an individual from employment.The PAYE system is a method of paying Income Tax on remuneration. The employer is mandated to deduct tax from salary or pension earnings before paying out the net salary or pension.
Who is liable to register for Pay As You Earn (PAYE)
Persons who becomes an employer is required to apply to ZIMRA for registration within 14 days of becoming an employer.
What are the Obligations of the Employer?
- Calculation and deduction of PAYE in accordance with the tax deduction tables.
- Submit P2 return online.
- Remittance of PAYE to ZIMRA within 10 days after the end of the month during which the amount was withheld.
- Submission of the ITF 16 within 30 days after the end of the year.
- Keeping accounting records for a period of at least six (6) years.
How to compute PAYE.
The Income Tax Act [Chapter 23:06] specifies what elements of an employee’s remuneration or earnings are subject to tax and at what rate of tax. It also deals with what income is exempt from tax and what deductions are allowed from these earnings, prior to tax being calculated.The employer will be given the relevant tax deduction tables and informed of his/her obligations as an employer.
PAYE is calculated as follows:
- Determine gross income for the day/week/month/year.
- Deduct exempt income, for instance bonus: You get => Income
- Deduct allowable deductions, e.g. pension: You get => Taxable Income.
- Please refer to https://www.zimra.co.zw/domestic-taxes/tax-tables for tax tables. You get => Tax on Taxable Income. NB for salaries with both local and USD currency components use the USD tax tables.
- Deduct tax credits e.g. elderly, blind or disabled persons (ZWL117 000.00 p.a or US$900.00 p.a effective 1 January 2022) and medical credit $1.00 of every $2.00 paid: You get => Tax after credits.
- Calculate 3% Aids Levy and add to tax after credits: You get actual tax payable.
