A quick look at Zimbabwean employment tax rules


Globalization has made it easier for people to work and live in any country of their choice.  It is therefore common for employers to send employees on short-term assignments or for training and development. Some employees, known as frontier workers cross the border every day to go and work in another country. Additionally, others may migrate to live and work permanently in a foreign land, thereby terminating their fiscal link with their country of residence. This is the category in which a majority of Zimbabweans who are in diaspora fall into. There are tax and immigration implications of moving abroad which employees and employers should acquit themselves with. Each host country may have its own tax laws, rates and treaties which will influence the employee’s particular situation. This article provides an overview of the employment tax rules from the Zimbabwean perspective, focusing on Zimbabweans that have moved abroad and nonresident persons coming to work and live in Zimbabwe.

The general rule on taxation of employment income

Countries assert their right to tax on income and capital either on source or residence basis. Zimbabwe applies the source based tax system. The celebrated tax case of CIR v Lever Brothers and Unilever Ltd 14 SATC 1, explains the term source is in two parts, namely, determining the originating cause of the income and the location of the originating cause. In other words, it looks into the activities that give rise to the income in question and the country where those activities took place. In Commissioner of Taxes vs. Shein 22 SATC 12 it was held that the source of income for services rendered is the place where the services were rendered or performed. It ruled that services can be rendered merely by accepting responsibility, and that responsibility is undertaken at the place where the business is situated.  Facts such as the residence status of the person, where the contract is made or the place of payment or the residence of the payer are all immaterial. The recent South Africa court case no 14218 (Mr X v the Commissioner for the South African Revenue Service) which appears to be challenging the status quo by declaring that the source of employment income is “the place the contract is concluded” cannot be ignored. The brief facts were that Mr X who was employed by a South African branch of a company incorporated in the United States of America earned part of his income for services rendered in United States, whereupon the court ruled that that the originating cause of such income was South Africa, the place the contract of employment was entered into and not the place the services were rendered by Mr X. The judgment creates tax loopholes whereby people could avoid tax by choosing the place of contract outside the place where services are actually rendered. Zimbabwe is however not bound by the decisions of a South African court on a particular aspect but the cases may be of persuasive value to our courts.

Zimbabwean working abroad

A resident who renders services outside Zimbabwe during a period(s) of temporary absence in Zimbabwe is assumed working in the country during that period. A period of temporary absence is a period whose aggregation duration does not exceed 183 days in any tax year. This means that income earned by directors and employees for services rendered outside Zimbabwe for a period or periods not exceeding 183 days in aggregate in a year of assessment must be declared and tax paid to the Zimbabwean Revenue Authority. Employers must therefore retain employees on short term assignment on their payrolls for purposes of remitting tax on the foreign income earned to the ZIMRA. Beyond the 183 days, the person shall be assumed to have cut the fiscal link with the country of Zimbabwe.

Civil servants (government employee)working abroad

A person in civil service and working abroad is deemed at any time working in Zimbabwe no matter the duration of the assignment. This however does not apply to a non-resident person rendering services for the Zimbabwean government in his home country e.g. a South African resident who renders services for a Zimbabwean Embassy in South Africa. In other words, the person must be an ordinary resident of Zimbabwe for him/her to be subject to the Zimbabwean tax rules.

Non-resident persons or expatriates working in Zimbabwe

Non-residents or expatriates must first obtain work permits for them to legally render services in Zimbabwe. An application for a work permit is lodged with the department of immigration in Zimbabwe and takes about 14 working days to process. An expatriate or a non-resident person who renders services in Zimbabwe should declare employees’ tax in Zimbabwe on his/her income earned in Zimbabwe, but not in respect of services performed by him/her wholly outside Zimbabwe. Critical to any expatriate or nonresident person’s circumstances is the existence of a Double Taxation Agreement (“DTA”) between his/her home country and Zimbabwe, as such the DTA overrides the provisions of the Act. Where such double taxation agreement exists and the duration of the person’s contract in Zimbabwe does not exceed 183 days, no tax liability would arise in Zimbabwe as long as the remuneration of the person is not paid by or on behalf of an employer who is in Zimbabwe or borne by a permanent establishment (fixed place of business) of the employer (nonresident person) situated in Zimbabwe. In other words, where all salary payments are made to the expatriates through an employer’s foreign payroll system, and the expatriates’ remuneration was not paid from the profits of a Zimbabwean base or branch, any remuneration paid to any expatriates who perform services in Zimbabwe for less than 183 days per year in aggregate will not be taxed in Zimbabwe. However the specific terms as per double taxation agreements must be consulted. Among the countries Zimbabwe has concluded double taxation agreements (tax treaties) include Botswana, Bulgaria, Canada, China, France, Germany, Malaysia, Mauritius, Netherlands, Norway, Poland, South Africa, Sweden and United Kingdom,

Employees of foreign governments

Foreign diplomats or consular mission staff is exempt from employee’s tax in Zimbabwe as long as they are stationed in Zimbabwe for the sole purpose of holding office in Zimbabwe as an official of foreign government.  The exemption falls away when the person obtains a permit for permanent residence in Zimbabwe. There are also specific agreements between Zimbabwe and foreign government agencies or world organisations, which must be consulted for purposes of exemption of employees of those bodies. 

Other considerations

Permanent establishment

Zimbabwe recently enacted permanent establishment rules which create an income tax nexus for a nonresident company which actively engaged in trading activities in country despite not incorporated in Zimbabwe. According to the rules, a nonresident company is actively trading in Zimbabwe if it has a fixed place of business or identifiable activities of a continuous nature in Zimbabwe or when it has an agent who habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the company. Hence besides PAYE issues, expatriates and nonresidents have the potential to create a business of a nonresident company in Zimbabwe if they have powers of concluding business contract for the nonresident in Zimbabwe.

Double Taxation relief

Migration may expose a person to tax and immigration of laws of more than one jurisdiction. By extension this may result in him being taxed by both the home and the host country, which could give rise to double taxation. In order to eliminate such double taxation countries often enter into tax treaties and where a tax treaty is not in place have unilateral provisions in their domestic legislation to deal with the matter. In line with this, Zimbabwe has a handful tax treaties and section 93 of the Income Tax Act (unilateral provisions) to resolve the matter of double taxation of its residents using the foreign credit method. Under the foreign credit method, the tax paid in the foreign country is deducted from the tax due in Zimbabwe on the applicable foreign income but such tax shall not exceed the tax due in Zimbabwe on the said foreign income. 

Exchange controls

Zimbabwe has no exchange-control implications regarding services rendered by an individual in the diaspora and physically present in the diaspora. However, if an individual renders service to a non-resident whilst in Zimbabwe, then upon remittance of the funds by the non-resident to the individual for the service rendered, the individual must complete a JD form with his bank in order to receive the funds. Regarding an expatriate working in Zimbabwe, the Exchange Control General Order, 1996 (Chapter 22:05) authorises him to remit up to one-third of his gross monthly salary, allowances and bonus  subject to approval by the Reserve Bank. The significance of these rules is that a non-resident person should be paid in country for services rendered in Zimbabwe.


Employment tax rules are dynamic and complex so much that employers and their employees should critically evaluate the rules in order to avoid tax traps. It is important to understand that the source concept constitutes the corner stone of the Zimbabwean tax system and the residence concept is only used in exceptional circumstances or as a secondary matter. Such exceptional cases relate to cases where a resident of Zimbabwe has rendered services outside Zimbabwe under a short term assignment or where a resident of Zimbabwe renders services for the government, wherever rendered. Further, where a nonresident person provides services for a period less than 183 days in terms of a tax treaty between Zimbabwe and his country of residence, the taxing rights shall be assigned to his country of residence. Understanding the employee’s status is therefore critical in knowing whether a person has a tax nexus with the Zimbabwe, but tax is not the only matter. There are exchange controls and immigrations issues of cross border services which employers and employees ought to deal with.

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