Navigating the tax landscape in Zimbabwe is critical for individuals, businesses, organizations, and investors alike. A well-informed understanding of the country’s tax system helps ensure legal compliance, financial planning, and operational efficiency. This article offers a detailed overview of the core taxes applicable in Zimbabwe under the current legal framework, including applicable rates, exemptions, and the obligations of taxpayers in 2025.
The Legal Foundation of Zimbabwe’s Tax System
Zimbabwe operates a source-based tax system, meaning that tax is imposed on income that arises from or is deemed to arise within Zimbabwe—regardless of the taxpayer’s residence status. This means that income earned from services rendered, goods sold, or business activities conducted within Zimbabwe is subject to local tax.
The Zimbabwean government is, however, considering a transition to a residence-based system as part of ongoing tax reforms, which would significantly alter the framework for taxing foreign income and cross-border transactions.
The core tax legislation in Zimbabwe includes:
- Income Tax Act [Chapter 23:06]
- Capital Gains Tax Act [Chapter 23:01]
- Value Added Tax Act [Chapter 23:12]
- Stamp Duties Act [Chapter 23:09]
- Finance Act [Chapter 23:04]
All taxes are administered and collected by the Zimbabwe Revenue Authority (ZIMRA), established under the Revenue Authority Act [Chapter 23:11].
Key Taxes and Current Rates (2025)
1. Corporate Income Tax (CIT)
Zimbabwean companies and branches of foreign companies are required to pay income tax on profits derived from local business activities.
- Standard CIT Rate: 24%
- AIDS Levy: 3% on tax liability
- Effective Rate: 24.72% including AIDS levy
Concessionary Rates:
- Manufacturers Exporting 30–40% of output: 20%
- Exporting 41–50% of output: 17.5%
- Exporting over 51% of output: 15%
- Special Mining Lease Holders: 15%
Approved BOT/BOOT Projects:
- 0% tax for first 5 years
- 15% for the next 5 years
Industrial Park Developers:
- 0% tax for first 5 years
- 24% thereafter
2. Personal Income Tax (PIT)
PIT is imposed on individual earnings from employment, investments, pensions, and other income sources.
- Top Effective Rate: 41.2% for employment income (includes AIDS levy)
- Other Income Effective Rate: 24.72%
- Tax-free Thresholds and bracket adjustments are updated annually to account for inflation.
3. Capital Gains Tax (CGT)
CGT is payable on gains from the disposal of specified assets sourced in Zimbabwe. These include:
- Immovable property (land/buildings)
- Marketable securities (shares, bonds, debentures)
- Business rights under specified statutes
CGT for Non-Residents:
- Taxable on gains from Zimbabwe-sourced assets.
- Exemptions may apply under applicable Double Taxation Agreements (DTAs).
CGT Exemptions:
- Transfer between spouses or as part of divorce settlement.
- Sale of a principal private residence by a person over 55 years.
- Use of all proceeds from a home sale to purchase a new residence.
- Transfer by deceased estates.
- Donation to local authorities or community trusts.
- Transfer of business property to a company under one’s control (where used for trade).
4. Value Added Tax (VAT)
VAT is a consumption tax charged on the supply of taxable goods and services in Zimbabwe, governed by the VAT Act [Chapter 23:12].
- Standard Rate: 14.5%
- Zero-Rated Supplies: 0% VAT
Includes exports, mealie-meal, sugar, milk, meat, bread, fertilizers, seeds, pesticides, animal feed, agricultural equipment, and some health and educational materials.
Exempt Supplies:
Medical services, educational services, domestic electricity and water, residential rentals, public transport, tourism products sold to locals, and fuel.
VAT Registration Threshold:
Businesses with taxable supplies exceeding ZWL$1,000,000 annually must register with ZIMRA.
5. Withholding Tax (WHT)
WHT applies to various payments made to non-residents, including royalties, dividends, and fees.
- General Rate for Non-Residents: 15%
- Dividends:
- 10% for listed companies
- 15% for others
- Fees, Royalties, Management Fees: 15%
- Head Office Charges: 15% (for foreign branch offices)
WHT rates may be reduced under DTAs, which Zimbabwe has signed with several countries, including South Africa, the United Kingdom, and Germany.
WHT Compliance:
- Tax must be withheld at the time of payment and remitted to ZIMRA within 10 days.
- Failure to remit WHT attracts a 100% penalty and 10% interest on unpaid tax.
6. Stamp Duties
Stamp duty is levied on various legal and financial instruments, including:
- Sale or transfer of immovable property
- Registration of property transfers in the Deeds Registry
- Brokers’ notes and marketable security transactions
- Mortgage bond registrations
Stamp duty rates vary based on transaction value and are typically withheld by legal practitioners or the Registrar of Deeds during the registration process.
7. Taxation of Foreign Companies and Service Providers
Foreign entities are taxed on income derived from Zimbabwean sources. This includes:
- Branches: Treated as resident taxpayers and taxed on local profits.
- Permanent Establishments: Offices, construction sites, or fixed places of business fall under this category and are taxed accordingly.
- Service Providers: Non-residents offering services within Zimbabwe are subject to a 15% WHT unless exempted under a DTA.
- No WHT applies to payments from Zimbabwean branches to their foreign head offices unless otherwise provided in a treaty.
Staying Compliant with ZIMRA
All entities and individuals conducting taxable business in Zimbabwe must:
- Register with ZIMRA
- File returns on time (monthly, quarterly, or annually depending on the tax type)
- Remit tax payments promptly
- Maintain accurate records and tax invoices
- Keep abreast of regulatory changes
Non-compliance can result in heavy penalties, business disruptions, and reputational damage.
Conclusion
Taxation in Zimbabwe is governed by a robust legal framework that emphasizes source-based taxation while providing various incentives and exemptions to encourage investment, exports, and compliance. As the tax reform agenda progresses, especially the anticipated shift toward a residence-based system, both local and foreign stakeholders must stay informed and engage tax professionals when necessary.
