The law defines a benefit or advantage in relation to employment as the value of an advantage or benefit in respect of employment, service, office or other gainful occupation or in connection with the taking up or termination of employment, service, office or other gainful occupation. It implies anything that has saved an employee from taking out of his or her own pocket. Common employment benefits in Zimbabwe include housing, use of furniture, motor vehicle, loan, telephone or cellphone, domestic worker or gardener, security services, fuel coupons, school fees, passage benefit, medical cover, pension cover, holiday, airtime and entertainment allowance. A benefit does not however includes any such amount consumed, occupied, used or enjoyed for the benefit of employer business. Fringe benefits reduce expenses of employees and at times they are an agent for motivation. However some employers are not aware that they are supposed to be taxed if they are for the benefit of the employee or his/her family. Sometimes the reason for not declaring them is often due to conflict of interest. This is because personnel who are tasked with implementing the remuneration strategy are also employees who seek to maximize their earnings.  This article considers how some of these benefits are treated for tax purposes below:

Right of use of company car

Motor car benefit arises when an employee is granted the right of private use of an employer’s vehicle. Private usage includes travelling between home and place of work, the use of the vehicle during weekends and holidays. It does not matter that the vehicle is parked at the employee’s residence for the convenience of the employer. The benefit to the employee depends on the engine capacity of the vehicle granted to the employee. The practical consideration is that people such as sale representatives who take employer’s motor vehicles home would still be liable to tax on the motoring benefit notwithstanding the motor vehicle may be viewed a tool of trade.

Purchase of a car from employer

Where an employee acquires a motor vehicle from the employer or an associate of the employer, a taxable benefit arises if the market value of the vehicle at the point of acquisition by an employee exceeds the amount which the employee paid to the employer to acquire the vehicle. The market value of the car should be verifiable. The practical consideration is that the ZIMRA will require as evidence at least three quotations of the market value from reputable motor dealers. The benefit is exempt if the acquisition is by an employee who has attained an age of 55 years on the date of sale of the car to him/her.

Use of personal car at work

A taxable benefit arises when an employee receives an allowance in the form of repairs and maintenance, fuel or other cash allowance for using his/her car etc. Where the employee uses his/her car to deliver employer’s duties that part of the business mileage should be claimed using Automobile Association of Zimbabwe rates (AA rates). If the employee claims mileage allowance in respect of private errands this constitute taxable benefit. When instead an employer repairs or maintains an employee‘s personal vehicle as compensation for use on company business, cost of such repairs or maintenance must not exceed the mileage claim computed on the basis of AA rates. If it does exceeds the extra represents a taxable benefit.  

Occupation of an employer’s house

An employee who occupies quarters or a house belonging to or sponsored by an employer enjoys a taxable benefit.  The benefit is the open market rent reduced by any rent which the employee pays to the employer.   The practical consideration is that any person who occupies a company house including caretakers, because they have been saved from taking money out of their pockets the rentals, are subject to tax on the housing benefit.

Airtime or data use

Airtime or data paid to staff for private usage constitute a taxable benefit to the employee, but excluding that portion of data or airtime expended on employer’s business.  The practical consideration is that the employer must make an analysis of the airtime usage by the employee to have a clear picture of what proportion is taxable. The employer can thus utilise that analysis to bail out an employee from bearing high employment tax by creating an airtime policy document which clearly specifies the proportion of the airtime utilised for business purposes and that which is utilised for personal purposes by the employee. The business usage of the airtime or data should be proved or justified. In practice it is difficult to prove business usage unless the company has a system that ensures that cellphone usage is analysed for private and business usage and the private usage accounted through employees’ payroll.


Entertainment allowance in money or in kind given to an employee by an employer constitutes a taxable benefit to the employee, unless the benefit has been expended on the business of the employer. Entertainment is expended on business of employer when expended on or enjoyed with business clients. Entertainment means hospitality or amusement of any form and includes a banquet, a meal, refreshments of any kind and hospitable provisions.

Canteen meals or refreshments

Meals, refreshments or vouchers entitling an employee to a meal or refreshment provided by an employer at a subsidized price or for free, gives rise to a taxable benefit. No taxable benefit arise when an employee is required to work extended working hours or travelled out of town on employer’s business.

Concessionary loans

Where an employer or associated employer grants an employee a loan or credit, a taxable benefit arises if the interest rate so charged to the employee is below the statutory interest rate. The statutory rate is London Inter-Bank Offer Rate (LIBOR) plus 5%. Interest on loans for the purpose of the education or technical training or medical treatment of an employee, spouse or child is tax exempt. 


Omitting benefits from the payroll is disastrous. Should the Zimbabwe Revenue Authority pick up this omission they will penalize the employer. However the employer is empowered to recover the principal tax from the employee, but not penalty and interest. Managing fringe benefits therefore requires that an employer understands the intricacies of fringe benefits and establishes a fringe benefit policy which requires approval by ZIMRA.