MAJOR DEVELOPMENTS
In the 1997/1998 Budget, it was proposed to:
q Change the tax year from March 31 to December 31;
q Tax pension funds at 15%;
q Reduce both corporate and individual tax rates;
q Tax income earned by individuals from sources other than
employment at 35%;
q Tax contractors under approved BOOT?(built-own-operate-and-
transfer) arrangements at reduced rates of tax for a period of ten years;
q Introduce an informal trader tax;
q Allow a refund of sales tax on bad debts that are
irrecoverable;
q Introduce a value-added tax in 1998;
q Permit the Commissioner of Taxes to issue additional
assessments without any time limit in cases of fraud.
Also see items 8 and 14.
INCOME TAXES ON CORPORATIONS
1.Rates
Corporations are assessed income tax at the rate of 39.375% (see item 8) of their ordinary taxable income. The rate is reduced to 10% for approved manufacturing projects, and to 15% for specified civil works, in growth areas for a period of five years. The taxable income of licensed investors derived from operations in export processing zones is exempt from corporation tax for the first five years and is taxed at
15% thereafter.
Foreign dividends are taxed at 20%, but relief is given for tax withheld at source. Dividends from local companies are excluded from taxable income.
Local interest from banks and building societies is taxed at a flat rate of 30%.
2.Local Income Taxes
None.
3.Capital Gains Taxes
There is a tax of 20% on capital gains (aggregating more than $5,000) on sales of immovable property (real estate) and marketable securities (shares, stocks, bonds, and debentures) only, and on the redemption or maturing of stocks. The rate is reduced to 10% on capital gains realized on the disposal of securities listed on the Zimbabwe Stock Exchange. In calculating the gain, the deduction of the original cost
(plus cost of additions or alterations) is increased by 15% for each year since the expenditure was incurred. Overall capital losses exceeding $1,000 are carried forward for use in future years. This tax does not apply to sales of assets acquired for the purpose of resale (see item 26).
Relief is available for capital gains realized on the
substitution of immovable property in specified circumstances. Such relief also is available for capital gains realized where assets are transferred between companies under the same control in a reconstruction or merger.
Licensed investors are exempt from capital gains tax on capital gains derived from the disposal of assets forming part of their export processing zone operations.
4.Branch Profits Tax
Corporations registered under the law of a foreign country are subject to a branch profits tax of 15% of 56% (i.e., 8.4%) of their taxable income. This is in addition to the regular corporate tax rates (however, see item 15). The total effective rate of combined income and branch profits tax is, therefore, 47.775% (39.375% + 8.4%). The taxable income earned by licensed investors from operations in export processing zones and by holders of a special mining lease is exempt from this tax, as is the taxable income earned by holders of a special mining lease.
5.Foreign Tax Reliefs
Unilateral relief is given for foreign taxes paid on foreign income deemed to be from a Zimbabwe source (see item 33).
6.Classification of Corporations
For tax purposes, there is no difference between public and private corporations.
7.Payment of Taxes
See item 32.
8.Other Matters
In the 1997/1998 Budget it was proposed to reduce the corporate rate of tax from 39.375% to 36.75% effective as of the fiscal year beginning January 1, 1999. Effective as of the same year, the rate of tax for contractors under approved BOOT?(built-own-operate-and-transfer) arrangements will be zero for the first five years, 15% for the next five years, and 35% thereafter. Effective as of the fiscal year beginning January 1, 1998, pension funds will be taxed at 15%.
Trusts. Trusts are taxed on the same basis and at the same rates as corporations.
INCOME TAXES ON INDIVIDUALS
9.Rates
The basic rates (however, see item 14), before tax credits, of both married and single persons are:
Taxable Income
Tax on Percentage
Over Not Over Lower Amount on Excess
$ 9,360 $ 15,000 $
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