Understanding Capital Gains Tax in Zimbabwe

Capital Gains Tax (CGT) is a critical component of Zimbabwe’s fiscal landscape, ensuring that value appreciation in significant assets contributes to the national treasury. Governed by the Capital Gains Tax Act [Chapter 23:01], this tax is triggered when a “specified asset” is sold or disposed of.

1. What is Capital Gains Tax?

Capital Gains Tax is a levy on the profit realized from the disposal of a specified asset. It is calculated based on the “gain”—the difference between the selling price and the original cost plus allowable expenses.

Definition of Specified Assets

The scope of assets subject to CGT has expanded over time. Currently, it includes:

• Immovable Property: Land and buildings.

• Marketable Securities: Debentures, shares, unit trusts, bonds, and stock.

• Cessions (Since 2014): Disposal of property where the seller does not yet hold title deeds (rights of occupation/cession).

• Intellectual & Mining Rights (Since 2017): Rights registered under the Mines and Minerals Act, Patents Act, Trade Marks Act, Industrial Designs Act, and Copyright Act.

   

2. Who is Liable to Pay or Remit CGT?

The primary liability falls on the Seller. However, “Depositaries” play a crucial role in the collection process.

Depositaries include:

• Conveyancers and Legal Practitioners.

• Estate Agents and Building Societies.

• The Sheriff or Master of the High Court.

• Stockbrokers and Financial Institutions.

• Registrars (Since 2017): Officials responsible for registering titles or mining rights must now withhold capital gains withholding tax if they hold monies related to a disposal.

   

3. Current Rates of Capital Gains Tax

The applicable rate is determined by the date the asset was originally acquired:

Note: Special Capital Gains Tax (SCGT) may apply to specific mining title transfers, often at 20% of the transaction value.

4. Disposals Exempt from Capital Gains Tax

Certain transactions are legally exempt from CGT to provide social relief or facilitate business restructuring:

• Spousal Transfers: Transfers between current spouses.

• Divorce Settlements: Transfer of a principal private residence (PPR) between former spouses via a court order.

• Deceased Estates: Disposal of assets by a deceased estate.

• Elderly Persons (55+): Sale of a PPR by an individual aged 55 or older.

• Principal Residence Roll-over: When an individual sells their PPR and uses all proceeds to acquire or construct a new PPR.

• Business Re-organization: Transfer of business property to a company under the same individual’s control.

• Charitable Donations: Donations of housing units to local authorities or approved employee/community share ownership schemes.

   

5. Valuation of Assets

ZIMRA typically accepts values declared by the parties. However, the Commissioner may intervene if the value appears to be outside fair market value.

The Commissioner may call for an official report from a registered valuer in cases of:

• Transactions between related parties.

• Suspected under-declaration to evade tax.

• Settlement of debt by private treaty.

   

6. Process of applying for a CGT Clearance Certificate

A Clearance Certificate is mandatory for the legal transfer of any specified asset. Both the buyer and seller must attend separate ZIMRA interviews.²⁴

Requirements for Property Under Cession:

• Cession Letter/Council Letter authorizing the sale.

• Cession Agreement and Proof of Payment (Bank Statement).

• Certified IDs of both parties.

• TaRMS application.

   

Requirements for Property With Title Deeds:

• Original Agreement of Sale and Title Deeds.

• Proof of Payment and National IDs.

• Utility bills (if claiming PPR exemptions).

• Power of Attorney (if a party is represented from outside the country).