Taking a quick dive into Key Proposed Changes in 2025 Finance Bill

Major Tax Proposals in 2025 Finance Bill.

On Thursday 28th November, 2024 the Minister of Finance, Economic Development and Investment Promotion presented the 2025 budget statement in the National Assembly. The budget has a number of new tax proposals. Most will increase taxes, but there are tax reductions in some sectors to spur economic activity and promote a green environment. Above all the statement lays out an aggressive tax collection stance in the new year as the tax base shrinks.

Income Tax Proposed changes.

• Mineral royalties-To introduce limit on allowable deduction of royalties paid to 1,5% of turnover in year of assessment .However refers to section that does
  not exist Section 15 (2) a iii.
• In the case of a dispute regarding collection of royalties the liability must still be paid pending decision.
• Royalty rate – extended to specifically include
  • Coal 2%
  • Black Granite 2%
  • Other Cut and uncut dimensional 0,5%
• Proposal Impact-This proposal introduces a limit on the amount a taxpayer can deduct for income tax purposes on royalty fees for use of resources protected through trademarks and patents. Miners of quarry stones will be charged a royalty of 0.5%. The royalty rates for all types of coal will be increased to 2% from 1% while other cut and uncut dimensional stones will decrease from 2% to 0.5%. The royalty on Black Granite will remain at 2%.
• Mining Title acquisition- Requirement to register for employment taxes, corporate taxes and value added tax for Mining titles to be acquired.
• Proposal Impact-The proposal introduces a restriction whereby only individuals or entities that are registered with ZIMRA will be eligible to purchase mining titles in Zimbabwe.
• Deemed Date of Sale of Minerals – To fully realize the gains from sales contracts of minerals entered with the MMCZ, the Minister propose that all minerals, with the exception of Platinum Group Minerals (PGMs) and gold, be deemed as sold at the value determined on the date on which any sales contract is entered or the date on which the purchaser receives the product, whichever is higher.
• Proposal Impact-This proposal clarifies the sales value to be used for the sale of minerals, stating that, with the exception of Platinum Group Minerals (PGMs) and gold, the value will be the higher of either the sales contract price or the value on the date the product is received by the purchaser.
• Rental Income Tax: Change of Principal Purpose – To widen his tax revenue, the Minister proposes that all properties that have been converted from
  residential to business properties be subject to Rental Income Tax at a rate of 25% and accounted separately by the ZIMRA.
• TARMS Disclosure of Property Owners Details: In addition, the Minister proposes that any company or organization using rented premises be compelled to disclose to the Commissioner the rental expense, the location and owner of the property for purposes of Rental Income Tax.
• Deductibility of Rental Expense: The Minister also proposes that any company or  organization that fails to declare the owner of the rented property be prohibited from claiming the rental expense.
• Proposal Impact- This one is really a tough proposal by the Minister, Property owners renting out their residential properties for commercial purposes will be required to register in TaRMS, remit Rental Income Tax and file the rental income tax returns.
• New section 60A access to credit from Financial institution for persons with valid tax certificates Effective 01 January 2025- Minister proposes that no corporate or legal person be allowed to access, on an annual cumulative basis, any loan from a financial institution above US$20,000 without registration for Corporate Income Tax. A penalty of 5% of the credit or the total credit advanced by any financial institution which contravene with this provision.
• This access to credit include, loans, guarantee, overdraft facilities and other means.
• Proposal Impact-The proposal promotes compliance by ensuring that every corporate and legal person applying for a loan is registered for Corporate Income Tax and is in possession of a valid tax clearance.
• Exemptions of Building Societies and Financial Institutions from Income Tax-The Minister proposes that, with effect from the 1st January 2025, Building Societies be registered for income tax where their activities start to fall outside the scope of mortgage financing.
• Proposal Impact- Building Societies are exempting all the income they receive from Corporate Income Tax regardless of the source of such income. However, the new proposal limits the Corporate Income Tax exemption on the receipts and accruals of Building Societies to the extent that such earnings are only attributable to mortgage financing, as it is the principal purpose of the building societies. Income of the Building Societies from a source other than mortgage financing will be subjected to Corporate Income Tax.
• Withholding tax on Betting Effective 01 January 2025 – To introduce a 10 % on gross winnings of Sports betting punters applicable to inhouse and online sports betting managed by land-based Bookmarkers.
• Proposal Impact-Sport Betting Shops will have to adjust their business models to comply with the new Betters Tax.
• Surcharge on Plastics Effective 01 January 2025-To introduce 20% of the sales value of the disposable plastic bag used to carry goods made of plastic or other non- biodegradable material produced from non renewable resources.
• Proposal Impact-This will provide support for climate friendly practices by reducing the use of non- biodegradable plastics.
• Withholding tax on contracts- The Minister has proposed to exempt the first US$5,000 on the payment to any person who is in the business of collecting waste plastic products for the purpose of recycling.
• Proposal Impact- Beneficial to taxpayers who are in the business of collecting waste plastic products for recycling are exempted from withholding tax on contracts provided that they sale waste products which do not exceed the value of US$ 5,000.
• Proposal to introduce of surcharge on sale value of certain fast foods– The Minister is proposing, with effect from the 1st of January, 2025, the Minister proposes a 0,5% surcharge to be accounted for by Retail Outlets and Restaurants on the following food items:
  • • • Burger and Hotdog
      • Chicken
      • Pizza
      • Shawarma
      • Doughnuts and similar products
      • Tacos
      • French fries
• Proposal Impact- Apart from increasing the prices of the above mentioned food staff, this proposal will promote healthy living and reduce non-communicable diseases and obesity.
• Virtual Fiscalisation System: Micro and Small Enterprises-The Minister proposes to extend the Virtual Fiscalisation System for the recording of VAT taxable transactions to Micro and Small Enterprises whose turnover falls below the VAT registration threshold of US$25,000 per annum for the purposes of monitoring sales, during the first quarter of 2025.
• Proposal Impact-Enhanced tax compliance.
• Non-Resident Tax on Fees-Effective January 2017 Non-resident person” means—
  • an individual who is not ordinarily resident in Zimbabwe;
  • a trust whose trustee or the majority of whose trustees are not ordinarily resident or domiciled in Zimbabwe;
  • a partnership or syndicate, half or the majority of whose partners or members are not ordinarily resident or domiciled in Zimbabwe;
  • a company or other corporate entity incorporated or domiciled outside Zimbabwe (even if registered as a foreign company in Zimbabwe), or a subsidiary of such a company or entity incorporated in Zimbabwe.
  • a licensed investor, in whatever legal form he, she or it operates, or however he, she or it is constituted, incorporated or registered;
• Proposal Impact-the proposal has extended the definition of non-residents persons to include an individual, a trust, a partnership or syndicate, a company and a licensed investor.
• Proposal to Review of Special Economic Zone Incentives-The Minister proposes to repeal and amend the following definitions in section 14 (1) of the
  Finance Act—
  • “licensed investor” has the meaning given to that phrase by section 2(1) of the Taxes Act;”
  • “special economic zone” means any part of Zimbabwe declared in terms of the Zimbabwe Investment and Development Agency Act
• Proposal Impact-For the purpose of Income Tax Act and the Finance Act, petroleum operators and miners have been excluded from the definition of licensed investors which means they no longer qualify for the tax incentives available to other operators. For the purpose of Non-Resident Tax on Fees and Non-Resident Tax on Remittances, the definition includes petroleum operators and miners.
• Proposal of levying Non-residents’ tax on fees on licensed investors shall be charged at 10%.
• Non-residents’ tax on remittances on licensed investors shall be charged at 10%.
• Currently, taxpayers operating under special economic zone are exempted from Corporate Income Tax for the first 5 years, however, the proposal by the Minister subjects these taxpayers to a 15% corporate income tax during the first 5 years, effective 1 January 2025. Their withholding taxes will be limited to 10%, from which they are currently exempted.

Employment Tax proposed changes.

The ZWG tax tables have been changed, effective 1 January 2025. The US$ tax tables remain unchanged.

Value Added Tax.

• Collection of VAT-With effect from the 1st of January 2025, the date of submission of returns and payment of VAT shall be on the period ending on the 15th day (from the 25th day) of the first month commencing after the end of a tax period relating to such registered operator.
• Collection of VATIS-VAT on imported services shall be within 15 days (from 30 days) of the earlier of time an invoice is issued by the supplier or recipient or any time a payment is made by the recipient in respect of that supply with effect from 01 January 2025.
• VAT Deferment-Effective 01 January 2025, the definition of capital goods to include energy generation equipment needed in connection with energy generation projects as the Minister may, in consultation with the Minister responsible for energy prescribe.
• Automatic VAT Registration for Tenders above Threshold-The Minister proposes that any person who supplies, through a tender, taxable goods and services with a minimum value of US$25 000 be compelled to provide proof of registration for VAT. Any person, thus, with a minimum aggregate tender value of US$25 000 should include VAT in the purchase price.
• PRAZ and Government Ministries are required to submit a return to the Commissioner General by the 10th of every month, detailing the tenders awarded during the preceding
  month.
• Proposal Impact-Taxpayers will need to charge VAT for tenders with a minimum value of US$25,000. The proposal helps to create a level playing field among suppliers, as it ensures that all businesses operating above the tender threshold are subject to the same VAT Fiscalisation and FDMS regulations.