26.Capital Gains
Capital gains (i.e., the excess of sales proceeds over original cost) are not subject to income tax, unless the seller is held to have acquired the asset for the purpose of resale. Recoveries of capital allowances (see item 27) previously granted are included in taxable income. For the special tax on capital gains, see items 3 and 11.
27.Depreciation and Depletion
A special initial allowance of 25% is claimable on industrial buildings (constructed by the taxpayer), plant, machinery, vehicles, etc., in the year the asset is first used. In subsequent years, allowances of 25% of cost will be granted. If the special initial allowance is not claimed, wear and tear allowances are granted for capital assets used for the
purposes of a trade. They range from 2.5% for new commercial buildings (e.g., blocks of offices or flats), 5% for industrial buildings, to 10%-20% for plant, machinery, vehicles, etc. In the case of mining concerns, 100% of capital expenditures may be deducted in the year in which incurred. An investment allowance of 15% is granted in respect of capital expenditure on new items in gazetted growth points, and 50% for equipment and buildings used in training (see item 33 for petroleum
operators).
28.Treatment of Dividends
Dividends received from Zimbabwean companies, which are liable to income tax on their profits, are excluded from taxable income.
Dividends received by individuals will have already had a 20% or 15% withholding tax deducted at source (see item 9). Foreign dividends are included in taxable income but are assessed at a special rate (see item 9).
29.Loss Carryovers
As indicated in item 33, losses can arise only if the aggregate
permitted deductions exceed the aggregate gross income. In general, loss carryovers are restricted to six years, except for mining operations where losses may be carried forward indefinitely.
30.Transactions Between Related Parties
There are specific provisions relating to transactions not at armlength, which enable the authorities to ignore such transactions. There is also authority to adjust the taxable sales proceeds of items sold for less than market value, and vice versa. Subventions and similar payments are not recognized.
31.Consolidation of Income
Every corporation and individual is treated as a separate taxpayer. Minor children are separately assessed provided their income does not arise from gifts made by their parents.
32.Tax Periods
A corporation (or any other taxpayer producing financial accounts) may apply to adopt an accounting year ending on any date. This will be regarded for all purposes as forming the basis of assessment to the following March 31, which is the fiscal year-end (i.e., the current year basis of assessment applies). Returns of income must be filed in August in respect of the fiscal year ended on the preceding March 31, although extensions beyond the filing date generally are granted if
financial accounts have to be prepared. Assessments then are issued at any time during the ensuing 12 months, and the tax is payable within 30 days of assessment unless specific payment dates have been fixed. Three fixed payment dates generally are assigned to all self-employed individuals and to corporations. On each of these dates, part of the estimated (or assessed) tax for the preceding year must be paid. The first date is May 31 for all such taxpayers. The second date is set by the Commissioner of Taxes and may be any day between August 1 and
December 31. The third date is four months after the second date. Half of the estimated (or assessed) tax for the preceding year must be paid on the first date (May 31), and the rest must be paid in two equal installments on the second and third dates determined by the Commissioner of Taxes.
It is proposed to change the tax year from March 31 to December 31. The Years of assessment?will be the nine-month period from April 1, 1997, to December 31, 1997, and the years ending December 31 thereafter. Tax returns will have to be filed in February in respect of the fiscal year ended on the preceding December 31, although limited extensions beyond the filing date (30 days after the date of issue) will be granted if financial accounts must be prepared. Assessments
will then be issued at any time during the ensuing 12 months, and the tax is payable within 30 days of the assessment, unless specific payment dates have been fixed. Details of how the change in the tax year-end will affect the three fixed payment dates have not yet been made public.
33.Other Significant Matters
Inventory Valuation. Inventory may be valued at cost, replacement cost, or market value. Cost normally is determined on an actual, FIFO, or average basis. LIFO is not accepted.
Concept of Source. Basically, only income arising from sources within Zimbabwe is taxed. In most cases this presents no diffic
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