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Author: Tax Matrix Team

The much awaited Finance Act No 1 of 2019 was gazetted in a Government Gazette Extraordinary dated 20th February 2019, but almost all its clauses have been back dated to take effect from the 1st of January 2019. The Act ratifies Statutory Instrument 205 of 2018 which revised intermediated money transfer tax from 5 cents per transaction to 2 cents per transaction value, revises VAT on imported service rules, introduces the law on payment of VAT in currency of trade, provides for the payment of income tax in Zimbabwe by non-resident broadcasters and suppliers of e-commerce products etc. In this article we cherry pick and demystify some of the contents of the Finance Act no. 1 of 2019. 

Payment of VAT in foreign currency   

The new law provides for remitting VAT in foreign currency to the Zimbabwe Revenue Authority (ZIMRA) for taxpayers trading in foreign currency, or in either legal tender or foreign currency where the person has traded in legal tender that is not foreign currency. A “legal tender other than foreign currency” means bond notes and coins, or money paid by means of an electronic transfer of funds through an account (other than a nostro foreign currency account) with a banking institution; (means bond notes and coins, or RTGS). Whereas “nostro foreign currency account” means any account designated in terms of Exchange Control Directive RT/120 of 2018, held with a financial institution in Zimbabwe, in which money in the form of foreign currency is deposited from offshore or domestic sources. There are penalty implications for not remitting VAT in foreign currency as stipulated of equal to the amount of tax payable (100%) in the foreign currency plus other miscellaneous penalties.

VAT on imported services

VAT registered operators should brace up for new VAT on imported services because the Finance Act has changed the definition of imported services to make it apply to all importers of services. The implication is that any person who imports services and consume them in Zimbabwe is liable to 15% VAT on imported services no matter what the services have been used for. However services that are ordinarily exempted or zero rated if the supplier was ordinarily resident are outside the scope of VAT on imported services.  This presents a major shift from the current rules where only imported services which are used or consumed in the production of non-taxable supplies are subject to 15% VAT on imported services.  VAT registered operators were therefore exempted from this tax as long they used the services to produce taxable supplies, which is no longer the case now. Additionally, such services may also be subject to non-resident tax on fees or royalties in terms of the Income Tax Act whose general rate is 15%, subject to exemption or reduced rate which may apply in terms of double taxation agreement standing between Zimbabwe and the non-resident’s country of residence.

Time of supply rules expanded 

Output VAT is generally triggered when an invoice is issued by the supplier or recipient upon the supply of goods or services or when any payment of consideration is received by the supplier upon supply of goods or services, whichever occurs first.  This has been amended to include the time goods are delivered or services are made available to the recipient. It entails that movables supplied in the absence of an invoice will be deemed to be supplied at the time they are dispatched and for immovable goods, when the recipient takes possession and for services, at the time the services are performed.  Therefore taxpayers who have neither issued an invoice nor received any payment for the supply cannot avoid output tax if they have delivered movable goods, let out possession of immovable property or performed services.

Intermediated Money Transfer Tax (IMTT)

The Statutory Instrument (SI) 205 of 2018 which revised the rate of tax on transfer of money mediated by a financial institution from 5 cents per transaction to 2 cents per value of transaction with effect from the 13th of October 2018 has been confirmed.  The effect of this provision is that the nullity in the law previously made through S I 205 of 2018 is sort of regularised through the enactment of this provision. The effect is that whatever IMTT that was collected since October 2018, albeit without sufficient legal authority to do so is ratified.  Meanwhile this tax has been disallowed as a deduction for income tax purposes. However, the provision of the deductibility of IMTT is silent on the commencement date. All the other provisions are clear in so far as their commencement of operation into law is concerned. In terms of section 132 of the Constitution “an Act of parliament comes into operation at the beginning of the day on which it is published in the Gazette, or at the beginning of any other day that may be specified in the Act or some other enactment.” Given the silence of the provision on the disallowance of the IMTT as a deduction on the commencement of the provision, it appears that the provision will commence beginning the 20th of February 2019 which is when the Finance Act 1 of 2019 was gazetted. Furthermore, there are number of exemptions which you will need to consult your tax advisor for detail.

Penalties for violation transfer pricing rules

Multinational companies and local entities engaged in intercompany transactions should brace up for penalties for violating transfer pricing rules. A 100% penalty on the shortfall tax is levied for deliberately avoiding, reducing, postponing or evading tax through use of transfer pricing. Taxpayers who have not kept contemporaneous transfer pricing documentation to support the transaction giving rise to the amended assessment there is 30% penalty on the shortfall tax and the same penalty if a taxpayer has not complied with transfer pricing guidelines. In the absence of fraud or tax evasion and the taxpayer has kept contemporaneous transfer pricing documentation and complied with transfer pricing guidelines, but nevertheless there is understatement of tax, a penalty of 10% of understated tax applies.

Non-resident suppliers of satellite broadcasting and e-commerce services 

With effect from 1 January 2019, satellite broadcasting and e-commerce platform service providers domiciled outside Zimbabwe who receives or accrues income from persons resident in Zimbabwe for services rendered in Zimbabwe shall be liable to tax in Zimbabwe if they receive revenues in excess of $500 000,00) in any year of assessment. The income shall be taxed at a flat rate of 5% without deduction of expenses from such income.

Directors of wound companies liable to tax debts

Directors of companies that are wound up voluntarily or deliberately put into liquidation with the intention of avoiding tax are made jointly and severally personally liable for tax debts of those companies if such directors open a similar entity under the same directorship operating the same business or if the whole or a substantial part of the old company  business and property wherever situate is transferred to another company or entity which will be or has been formed, incorporated or registered under any law.  It does not matter that some of the directors did not join to form or start new companies or no longer act in similar positions. 


Besides widening the tax base, the current Finance Act is putting screws on tax administration through imposing stiff penalties for failing to comply with the law. It is also unique in that the government has expressed its preference to be paid in foreign currency and we wait to see how this inter play with the recent pronouncements made by the Governor of Reserve Bank of Zimbabwe, Dr John Mangudya in his Monetary Policy Statement.


Employers endeavor to remunerate their employees to motivate them to work harder by giving them employment benefits in addition to cash pay. The benefits may include  occupation of company house, right of use company motor vehicle, cellphone, security services, fuel coupons, school fees, passage benefit, medical cover, holiday allowance, entertainment, clothing allowance among others. Unknown to some employers is that when they are VAT registered and grant fringe benefits to their employees there are PAYE and VAT implications. The law defines a fringe benefit as an amount equal to 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. Fringes benefits are taxable in the eyes of the law. Under income tax, a benefit is part of earnings of an employee and hence it is subject to employee’s tax. The same benefits may have VAT implications and this what we unpack in this article.

Benefits subject to VAT

The VAT Act outlines the circumstances under which the provision of benefits in kind to employees must be characterized as constituting a taxable supply for a consideration. In this context, employee benefits in kind are defined as goods and services provided by employers to their employees in the framework of a contract of employment and/or under conditions that are not necessarily at arm’s length. It implies that when employers give fringe benefits to their employees, these are deemed to consist of a supply of goods or services and hence are viewed as a supply of goods or services made by a registered operator in the course of a trade carried on by him. Examples of supplies (fringe benefits) on which output tax must be accounted for include; the right of use by an employee of employer motor vehicle, the supply directly or in directly of security benefit, the cost of non-business local travel by air (air ticket for an employee a holiday or personal business) etc.

Excluded fringe benefits

VAT is inapplicable where a benefit has come about as a result of any supply of goods or services which is ordinarily exempt or zero-rated supply in terms of the VAT Act or a supply of entertainment. Additionally, if a benefit arises in the course of making exempt supplies by a person, namely supplies made by non VAT registered employers such as banks, insurance companies, registered educational institutions etc, no VAT is payable. For example a supply by any of these entities of a motor vehicle to an employee is not subject to VAT. The provision of a fringe benefit not constituting either goods or services is also not subject to VAT e.g. the granting of cash benefit. As a matter of emphasis, VAT on fringe benefits is collected only when an employer is registered for VAT, subject to exceptions stated above. The fringe benefits which are exempt in terms of the law include the supply of accommodation, the provision of free or subsidised loan, the supply of educational services, provision of fuel and fuel products other than gas, cost of travel by road or rail etc.  Supplies  which are deemed to be entertainment include the provision of canteen services, subscriptions for DSTV and subscriptions to golf clubs, free or subsidised meals, gym subscriptions etc. excluding professional subscriptions. Entertainment is defined in the VAT Act as “the provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a registered operator whether directly or indirectly to anyone in connection with a trade carried on by him”.

Amount on which VAT is chargeable 

It is important to note that the taxation of fringe benefits under the VAT Act derives its values from the Income Tax Act. Therefore the consideration for the supply of fringe benefits for purposes of VAT Act is determined in accordance with provisions set out in the Income Tax Act. The Income Tax Act stipulates that value of fringe benefits other than a payment by way of an allowance, shall be determined in the case of right of use of accommodation (board or quarters) by reference to open market rental of the accommodation and the cost to the employer for any other benefit. The cost to the employer is the amount of any expense incurred by the employer in connection with the provision of the benefit. This is what the employer has paid or incurred in order to provide the benefit to the employee. The Income Tax Act also provides specific valuation rules for certain benefits like the right of use of employer motor vehicle which is based on the engine capacity of the motor vehicle granted. The fringe benefits are deemed VAT inclusive and in order to compute output tax employers must multiply the consideration for the supply by the tax fraction (15/115). 


In conclusion it is important to keep in mind that VAT is designed as a tax on final consumption, regardless of the manner in which final consumers acquire the goods or services. Hence the reason for charging VAT on fringe benefits supplied to employees by their employers. But some of the fringe benefits are disqualified from being subject to VAT by certain reasons as stated above. Failure to take this into consideration can result in the understatement of the VAT returns which then attracts penalties from the Zimbabwe Revenue Authority. This will thus have a negative impact on the business. Failure to also consider the exemption of some fringe benefits from VAT can result in the overstatement of VAT and this can pose an unnecessary tax burden on the taxpayer. Employers should reconcile the PAYROLL and VAT returns for the fringe benefits that are taxable, the two records must be the same in so far as the consideration for the supply is concerned.


The 2019 National Budget presented by the Minister of Finance and Economic Development Honourable Mthuli Ncube on the 22nd November 2018 contains a lot of pertinent issues that require unpacking. Firstly there are alternative views regarding application of intermediated money transfer tax on point of sale transactions (POS), whether the government is correct in demanding payment of tax in foreign currency in light of the law that provides that the bond notes and coins are at par with the United States Dollar, how to prepare and file tax returns when one is trading in multiple currencies, among other issues. This article however is about clause 5 of the Finance Bill 2019: “the taxation of non-resident satellite broadcasting and e-commerce service providers.” It provides that a satellite broadcasting and e-commerce platform service provider domiciled outside Zimbabwe will be subject to income tax in Zimbabwe to the extent that its income is received from persons resident in Zimbabwe for services rendered in Zimbabwe, commencing 1 January 2019.  This appears an extra tax burden for resident consumers of such services because non-resident suppliers of satellite broadcasting and e-commerce services are likely to pass on the tax. The article further unpacks the proposal, discusses the VAT rules and international development regarding the same matter.

The new tax measure

Non-resident satellite broadcasting

The law is amended to strengthen the taxation in Zimbabwe of a satellite broadcasting service domiciled outside Zimbabwe providing television or radio services to subscribers in Zimbabwe. A “Satellite broadcasting service” is defined in clause 5 of the draft Finance Bill 2019 as “a service which by means of a satellite (whether or not in combination with cable optical fibre or any other means of delivery) delivers television or radio programmes to persons having equipment appropriate for receiving that service.” This proposal is meantto also impose a compliance burden on the part of the non-resident satellite broadcasting service providers. It must be pointed out that these suppliers are already captured by s 12(4) (b) of the Income Tax Act Chapter 23:06 which  deems income to be from a Zimbabwean source if it is receivableby person by virtue of the use in Zimbabwe of or the grant of permission to use in Zimbabwe, or the imparting of or the undertaking to impart any knowledge directly or indirectly connected with the use in Zimbabwe of—(b) any motion picture film or television film or any sound recording or advertising matter used or intended to be used in connection with such film” , a position the recent High Court case MA Limited vs. ZIMRA HH 316-16  has also confirmed. The court ruled that MA as the agent in Zimbabwe of foreign producer of satellite broadcasting service was certainly the one authorized to use the motion picture films and television films in Zimbabwe by the producers of these items and not the subscribers, and therefore liable to income tax on the subscriptions paid by the Zimbabwean subscribers.   

Electronic commerce platform

Foreign suppliers of electronically supplied products (e.g. downloaded music, games, books, and software etc.) are not spared either. The Minister has proposed that amount receivable by or on behalf of an electronic commerce platform domiciled outside Zimbabwe from persons resident in Zimbabwe in respect of the provision or delivery of goods or services to such residents shall also be subject to income tax in Zimbabwe. Clause 5 of the draft Finance Bill 2019 defines “electronic commerce platform” as “a service which by the use of a telecommunications service or electronic means (and whether mediated by computers, mobile telephones or other devices) sells and delivers goods and services to customers”. Broadly this will cover incomes such as roaming fees, international connection, VOIPs (voice over internet protocols), OTTs (over the top services), music and software downloads etc. of a non-resident.

Administration of tax

Administratively a satellite broadcasting service provider or electronic commerce platform with certain sales threshold (not specified yet) will be under an obligation to appoint a public officer in Zimbabwe or an agent responsible for its income tax obligation in Zimbabwe. Such public officer or agent shall on behalf of the non-resident be required to register for income tax and settle its income tax liability on a quarterly basis in advance of year end as follows: 25 March- 10%; 25 June – 25%; 25 September – 30% and 20 December – 35%. Additionally, to file income tax return by the 30th of April following the December year end. For purposes of repatriating the income to the non-resident, a public officer or agent must avail a valid tax clearance to the authorized forex dealer in terms of the Exchange Control Act as evidence of complying with the income tax rules.

VAT rules on the same

Non-resident suppliers of satellite broadcasting and e-commerce platform with no fixed place of business in Zimbabwe are under no obligation to declare and pay VAT in Zimbabwe. This obligation is placed on the Zimbabwean recipient of the imported services. Imported services are defined in s2 (1) of the VAT Act as “…..a supply of services that is made by a supplier who is resident or carries on business outside Zimbabwe to a recipient who is a resident of Zimbabwe to the extent that such services are utilized or consumed in Zimbabwe otherwise than for the purpose of making taxable supplies”.. It implies services supplied by a foreign supplier and used by a resident person to produce exempted or other non-taxable supplies e.g. services imported by Banks, insurance companies, pension funds, schools, private individuals etc. Enforcing compliance amongst private individuals has been one of the biggest challenge of this tax.

International developments

The tax challenges of e-commerce is a matter which the world is currently seized with. The matter was identified by the G20 and OCED  as one of the causes of  Base Erosion and Profit Shifting (BEPS), leading to the 2015 BEPS Action 1 Report. The Finance Ministers of the G20, through the Inclusive Framework on BEPS then tasked OCED to deliver an interim report on the implications of digitalisation for taxation. The report was delivered in April 2018 and endorsed by more than 110 members of the Inclusive Framework. Unfortunately they did not agree on the recommendations made resulting in the committee asked to work on the project with the goal of producing an interim and final reports in 2019 and 2020, respectively. Some countries however have since adopted some of the interim measures in the form of an excise tax and withholding tax on the supply of certain e-services within their jurisdiction.


The new measure seeks to widen the tax base but the Minister must be wary of the potential double taxation of cross border e-services contrary to provision of the Melbourne Treaty of 1988 to which Zimbabwe is a party to. Neverthess non-resident suppliers of the e-services ought to familiarise themselves with the new law in order to avoid high penalties associated with non-compliance with the tax laws particularly with Zimbabwe as it is leading amongst high penalty jurisdictions.


People often sell their homes in order to upgrade, obtain cash to pay off debts or start a business, upon divorce in order to satisfy the terms of a property sharing order, when they migrate to another country, etc. Whatever the reason, there may be capital gains tax upon such a disposal or sale. Capital gains tax is chargeable and collected in terms of the Capital Gains Tax Act (Chapter 23:01) on sale or disposal of marketable securities, immovable properties and certain intangible properties (collectively known as “specified assets”). An immovable property includes land, dam, road, a building (of any kind) or structure with foundations in the soil. A marketable security is any security, stock, debenture, share or any other interest capable of being sold in a share market or exchange. Movable assets, like cars, plant and machinery, equipment, boats are not subject to capital gains tax. The property should be situated in Zimbabwe to attract capital gains tax and in respect of marketable securities, the person must be carrying on his investment activities in Zimbabwe.

Computation of capital gain tax liability

The key information for determining gain or loss is the gross capital amount and the cost base. Gross capital amount is the proceeds received from sale or disposal the specified asset. It includes money or other debts assumed as part of the sale. Gross capital amount can also arise from donation, redemption/maturity of specified assets, compensation for expropriated property, involuntary disposal such as sale by the court to recover a debt, cession or transfer of rights in condominium property etc. If a home is foreclosed or repossessed or one receives a compensation for damaged or destroyed specified assets the law deems a sale in respect of the specified asset. If one contracts to have a house built on land owned by him/her, the basis is the cost of the land plus the amount it cost to complete the house and if otherwise one uses other means. This amount includes the cost of labour and materials, or the amounts paid to the contractor, and any architect’s fees, building permit charges, utility meter and connection charges, and legal fees directly connected with building the home. If the acquisition was through inheritance, cost basis is equal to the value established in the estate of the deceased. Inflation allowance is granted on cost acquisition/construction and cost of improving the asset.  The tax is levied on the gain at the rate of 20% for a home acquired or constructed by the seller after 1st of February 2009 and at 5% of the proceeds if acquired or constructed prior to this date.

Records of the home’s purchase price or construction cost, cost of improvements, additions, and other items that affect the cost base of the home should be kept. The records are required to prove the costs to ZIMRA. Title deeds and receipts for expenditure incurred on the house can be lodged with the bank or lawyer for safe keeping.

Minimising capital gains on sale of your home 

Rollover relief when you replace your main home

A PPR is one’s sole or main residence (main home), land which he/she owns or an undeveloped stand. One should have been staying in that house prior to its sale throughout the period owned or for at least 4 years. Any other shorter period is acceptable especially when one was denied occupation of the house because of work commitments or other similar circumstances.

The law allows one to defer capital gain tax accruing on sale of the main home if one reinvests the proceeds of sale to purchase or construct another home or purchase a residential stand in Zimbabwe. If one has more than one home, only the sale of the main home qualifies for rollover relief. If the home is used for business it ceases to qualify as the main home, but if used for both purposes one has to apportion the capital gain for rollover purposes. If the home is registered in the company name the rollover relief is not applicable since the owner of the property is the company.

Sale of principal private residence by an elderly person

If one is 55 years old or above, the law exempts him or her from capital gains tax on disposal of his or her main home.   

Spouse and Children

If one sales or transfers the home to the spouse, or former spouse incident to divorce, one generally has no gain or loss, even if one were to receive cash or other consideration for the home. If one owned the home jointly with a spouse and transferred interest in the home to a spouse or former spouse incident to divorce, the same rule applies. A marriage certificate is a prerequisite to qualify for the benefit. However a disposal of the home or any other specified asset to one’s child, capital gains tax applies.

Estate duty

Capital gains tax and estate duty do not interact on the same asset. A specified asset that is sold, realized or distributed by the executor of a deceased estate of a specified asset forming part of such estate is exempt from capital gains tax. However estate duty tax is applicable.


Property held in a trust does not form part of the estate of a deceased person. A trust never dies; it continues in perpetuity and therefore is never liable to pay estate duty.  A trust can also save the person on executors fees, stamp duty, or conveyance fees, that could be payable by the estate or heirs. Thus, assets that are transferred into a trust before death are protected from estate duty as long as the donor survives the donation by 5 years. However, a donation of specified asset made to a trust is subject to capital gains tax. In order to avoid both capital gains tax and estate duty one may consider purchasing a property out of a trust.


It is often misleading to think that selling a house is just about exchanging money with title deeds. The excitement, emotions and expectations can blind people from reality. In fact there is more to this than what meets the eye. A valuation has to be sought on of the property, property agent fees, legal fees for change of ownership on the part of the buyer and even capital gains tax is not excluded in this transaction. The capital gains tax however depends on who you are selling to and when. Not knowing that properties are subject to capital gains tax can disappoint the seller as you can either gain or lose money from the transaction. Also the source of disappointment can be your failure to keep records resulting in your gain being overstated. So next time you sell your house you are now aware of the dos and don’ts.


In the current economic environment there are not so many people willing to part with their property despite the pressure coming from those holding RTGs or bond notes balances which they are looking to offload in case they fall prey to currency risk. It is so uncertain that sellers are only accepting to be paid in United States dollars or else there is no sale. This is notwithstanding the government’s position that the bond note is at par with the United States dollar. However in case one manages to sale his/her property, whether business or private property there are capital gains tax implications. In fact capital gains tax is chargeable on gains realized from the sale or deemed disposal of a specified asset. A specified means an immovable property, marketable securities and certain intangible assets. Only gains from a source within Zimbabwe are taxable. Thus when one sells his/her home including a residential stand he/she is liable to pay capital gains tax.

Computation of capital gains tax

Capital gains is the difference between the proceeds from sale or disposal of a specified asset and the sum of its costs. The sum of cost is the aggregate of cost of acquiring the property plus cost of improving it, allowance for inflation on acquisition cost and cost of improvement, selling costs etc. The resultant gain is then subject to tax currently at the rate of 20%. If the result is a capital loss, no capital gains tax shall arise but such a loss shall be carried forward and be deducted against future capital gains of the person. In order to allow deduction of costs, the Zimbabwe Revenue Authority (ZIMRA) would need evidence such as receipts and invoices etc. It is advisable for taxpayers to maintain such records if ever they are to entertain any hope of claiming their costs. In case the specified asset was acquired or constructed by the person prior to 1 February 2009, capital gains tax is simply 5% of the proceeds from sale. Under such circumstances record of costs becomes irrelevant.

Principal Private Residence

A home which is proved to be the person’s sole or main residence is called a Principal Private Residence (PPR).  This is a dwelling which is proved to the satisfaction of the Commissioner to have been that individual’s sole or main residence throughout the period that he/she owned it or for at least 4 years immediately before the date of its sale. A shorter holding period is accepted as long as the Commissioner considers reasonable in all the circumstances that it is the individual’s sole or main residence despite the person being prevented from residing in it in consequence of his employment or for such other justifiable cause. It includes “any land, whether or not it is a piece of land registered as a separate entity in a Deeds Registry which surrounds or is adjacent to the dwelling. Such a land must be used primarily for private or domestic purposes in association with the dwelling. A garage, storeroom or other building or structure used together with the dwelling or forming part of the dwelling also constitute a PPR.  It implies all other homes owned by a person where he/she does not stay in do not constitute PPRs. A PPR as explained below is tax favoured. 

Rollover Relief on PPR reinstated

A person who sales a PPR is entitled to a rollover of capital gains that would be chargeable if he/she expends proceeds from sale or disposal of a PPR to purchase or construct another PPR. A rollover relief implies none payment of capital gains tax immediately but this will be postponed to a future date. If the proceeds are not fully expended only capital gains applicable to the amount not expended shall be taxable.  This relief is also granted upon sale or disposal of a residential stand to purchase another residential. However the law drafters had erroneously removed the relief in respect of a PPR when they inserted a provision for a rollover relief in respect of a sale or disposal of residential stand sometime in 2006.  This error carried on since then and only to be discovered and corrected during the recent budget presentation by Minister of Finance Professor Mthuli Ncube.  Through the Finance (No.3) Bill of 2018, the Minister has reinstated the rollover relief on sale or disposal of a PPR. This means that both residential stand and PPR qualify for a rollover relief.  Capital tax shall only be chargeable if the amount received from the sale of the old PPR or old residential stand exceeds the amount expended. This is a tax benefit for those selling their homes or residential stands which they replace with another home or residential stand. They can avoid capital gains tax as long as they have used the proceeds fully to purchase or construct another home or residential stand.  Where proceeds are partially expended, only capital gains applicable to the amount not expended shall be taxed. Meanwhile, the law does not limit the number of times one can qualify for rollover relief, implying a person can successively replace his/her PPR or residential stand and still qualify for the benefit.


The amendment brings about certainty and rectifies the law which seems incorrectly drafted by making the PPR eligible for a rollover relief which has been the original intention of lawmakers. It gives people who want to upgrade or downgrade to new PPRs an opportunity to avoid capital gains tax applicable on the amount used to purchase a new PPR.  Whilst we are still here it is important to that no capital gains tax shall be payable upon transfer or sale of disposal of PPR by a person to his or/her spouse whether such transfer or sale is in the ordinary course of life or in pursuit of a divorce order. The spouse is however required to make an election. Further a sale or disposal of a PPR by person who is of or above the age of 55 as at date of sale or transfer is exempt from capital gains tax.


Some employers give their employees fringe benefits in addition to the normal pay as a way of motivating them. As postulated by Dorstein on page 568 “a benefit is something that has saved an employee from taking out of his pocket” and should be brought into gross income of an employee in accordance with the provisions set out in s8 (1) (f) of the Income Tax (Chapter 23:06). According to this section benefits or advantages include board, cash allowance, the enjoyment of corporeal or incorporeal property, the occupation of quarters or of a residence,  the use of furniture or of a motor vehicle; including payment of an employee’s private journey (known as passage benefit) etc. A “Passage benefit” covers the cost borne by an employer for any journey undertaken by an employee, his spouse or child to take up employment, on termination of employment or any other journey in so far as it is not made for the purpose of a business transaction of the employer. In short it covers relocation benefit and holidays of employees and their families whose cost are borne by the employer. 

Law and Interpretation

Section 8 (1) (f) of the Income Tax Act has stated gross income  as including “an amount equal to 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: Provided that— (i)  an amount equal to the value of the grant of a passage benefit as defined in subparagraph (i) of paragraph (a) of the definition of that term in this paragraph shall not be included in the gross income of an employee if no other passage benefit as defined in that subparagraph has been granted to the employee by the same employer; (ii) an amount equal to the value of the grant of a passage benefit as defined in subparagraph (ii) of paragraph (a) of the definition of that term in this paragraph shall not be included in the gross income of an employee if no other passage benefit as defined in that subparagraph has been granted to the employee by the same employer.”. Essentially the section excludes from gross income of an employee the cost of the first journey undertaken by an employee on taking up employment and upon termination of employment with each employer, if such costs are borne by the employer or its associate. These are the cost of moving an employee and his family and their goods to their new location (for example, transportation of the employee, his family and their belongings to their new location). Settling expenses such as accommodation of the employee and family in a hotel or guest lodge upon arrival, but not a prolonged stay in the hotel or lodge, falls within the ambit of a passage benefit and so are repatriation expenses. The exemption is applicable to both resident and non-resident persons.

If the cost is borne by an employee and reimbursed to him, the exemption would still apply. Our view is that moving expenses are limited to the costs of moving the employee and his family, household goods and personal effects to the new residence (including in transit or foreign-move storage expenses) and travel and lodging costs during the move. Although this may be debatable in other forums, our view is that it does not include meal expenses, expenses incurred while searching for a new home after obtaining employment; costs of selling the old residence (or settling a lease) or purchasing (or acquiring a lease on) a new home and temporary lodging at the new location after obtaining employment. Where these are borne by the employer, they present taxable income in the hands of the employee. All private trips of an employee and his family member(s) when sponsored by his/her employer are taxed to him/her, but business related trips are non-taxable. If the employee is accompanied by his or her spouse on business trip, and the employers reimburse their travel expenses, that payment is a taxable benefit to the employee unless the spouse was engaged primarily in business activities on behalf of the employers during that trip. A business trip appears not to cover cases where an employee is required because of the nature of his work to stay in a place or a site for a prolonged period such that that place becomes his usual place of work for instance cases where buyers of tobacco are required to be at a certain place for a prolonged period. It is also trite at law that, where an employer pays or reimburses the personal expenses for an employee, the amount paid or reimbursed is to be treated as part of the employee’s remuneration and taxed accordingly.


Companies that wish to have passage benefit as part of an incentive that they give to employees must ensure that they have a passage benefit policy that is clearly defined in such a way that it does not constitute a taxable benefit to which the company must include on the payroll. They must ensure that the first trip in consideration of employment or upon termination of employment and not any other trip thereafter are clearly defined in its passage benefit policy manual. Any further benefit other than a passage benefit and business trips will be taxable in the hands of the employee and as the employer it has the mandate of ensuring that those amounts are included in the payroll. Care must be taken not to exempt trips where employees are required in terms of their contractual terms to be in certain places for a prolonged period such that such place can be regarded as the employee’s usual place of work.


Some companies in Zimbabwe have reduced the rate of employing people on a permanent basis opting to employ on contract basis. This is because of the nature of some businesses, the certainty of going concern and at times the availability of constant income. This means that a person works for a certain period of time for example one week or a year and their contract is renewed after that or terminated. This also applies to non- governmental organisations that do projects with a specific time period and after that embark on another. At times they employ the sufficient human resource for that period and after that start all over. Income for the services rendered is derived from the place services are performed regardless of where the contract is made, the place of payment or the residence of the payer. Where the services are rendered is the source which should be in Zimbabwe as the “source based system is used in this country”. The question that some employers ask is employee’s tax deducted on earnings of contract or casual workers.  The law addresses the issue otherwise.

Employee tax

Employees’ tax is computed on remuneration paid or payable in any year of assessment to an individual who is an employee in Zimbabwe. Whether it’s a written contract or a word of mouth what is important is there being an employer, employee and remuneration for tax to be charged. An employee is a person who performs services for an entity under the direction and control of that entity. The relationship of employee/employer exists when the person for whom services are performed controls remuneration and terms of employment. An employee may perform services on a temporary or less than full-time basis. The law does not exclude services from employment that are commonly referred to as day labour ,part-time help, short term fixed contract, casual labour ,temporary help or probationary. The Income Tax Act sets the environment for application of employees’ tax as that which contains or predicated by a relationship between an employer and employee.There is a stipulated threshold for taxable income in the Finance Act and this means that any person who does not earn that stipulated income is not an employee for the purpose of the Act. The type of contract is therefore irrelevant.

Services rendered at source

As long as a person renders a service that is part of gross income therefore will be subject to tax as long as it is within the stipulated threshold .Income from services rendered is derived from the place the services are performed regardless of where the contract is made or residence of the payer. The definition of gross income as stated in the Income Tax Act also includes: “any amount so received or accrued in respect of services rendered or to be rendered, whether due and payable under any contract of employment or service or not, and any amount so received or accrued by reason of the cessation of the employment or service of a person other than a benefit (not being a pension or gratuity) received or accrued by reason of contributions made to the Consolidated Revenue Fund, and any amount so received or accrued in commutation of amounts due under a contract of employment or service”. The service should be rendered in Zimbabwe for it to be taxed in Zimbabwe which is supported by a certain case whereby the taxpayer was employed to manage, on a salaried basis, a store in Bechuanaland. He sub-contracted, at own expense, a storekeeper to run the store on a day to day basis, while he lived in Bulawayo. He was personally to discharge the other duties as required by the contract. He spent the first four days of each month at the store and about ½ a day whilst in Bulawayo on store business. The Commissioner wanted to tax the ½ day’s remuneration but this was regarded as irrelevant as the taxpayer‘s source of income was mainly in Bechuanaland where he was employed and the greater part of his work was carried out there. An employee’s principal place of work is usually the place where he spends most of his/her working time.  


The employer is responsible for deducting and remitting PAYE to ZIMRA for all the employees who earn the minimum taxable income stipulated by law and above, every month regardless of the period worked. Failure to do so the employer will be guilty of an offence and  liable to a fine. It is also the duty of the employer to inform his/her workers about PAYE deduction so that those who do not have the adequate knowledge can be enlightened and understand why their remuneration will be lesser than the gross income. The employer should be able to differentiate between a contract worker and an independent contractor so as to deduct the correct amounts. In some instances a casual worker may supply their own tools but as long as the hirer provides the substantial investment in or assumes the substantial risk of undertaking he/she still remains an employee subject to payee. In the case that the employer fails to distinguish the employee relationship he/she can consult legal advisors .The source of the services rendered determines whether employee tax should be deducted or not. Hence if the source is in Zimbabwe i.e. where the services are carried out, PAYE should be deducted but if the service is rendered outside Zimbabwe that does not apply. This also applies to employees who work in Zimbabwe but are paid from abroad for example working for international firms or are donor funded; PAYE will be deducted from their incomes in Zimbabwe.


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.


The tough economic environment is taking a toll on most businesses albeit revelations that at least one company liquidates each day. Some are warming up for closure whilst others continuously post losses. Losses are not bad for tax purposes but what is key is for a business to stay afloat and hoping that one day fortunes will turn. The tax law recognises that loss represents an expenditure that can be used to reduce one’s future taxable income and consequently the tax bill. In the taxman’s language such loss is referred to as assessed loss and refers to a situation where one’s deductible expenditure exceeds income. It can be carried forward to be deducted against taxable income in any subsequent year of assessment. Hence creating a tax holiday for the business until the assessed loss is fully utilised. It is this turn of fortune that many struggling are hoping for. A loss making business is often a target for acquisition by a prospering business. Getting to utilise assessed loss is however not easy, there are conditions stipulated within the law that must be met.

Limitation on carry forward of assessed loss

Our law provides for separate taxation of “persons” namely a “person” with a separate legal entity is separately taxed. That is, assessed loss is ring fenced to a taxpayer. It permits assessed loss to be carried forward and deductible against future taxable income of the same taxpayer for a maximum period of six years from end of year of assessment in which the assessed loss first occurred. Assessed loss incurred first is claimed first, i.e. on first in first out basis. A much better olive branch is extended to taxpayers engaged in mining operations as these are allowed to carry forward their assessed losses indefinitely. However there no provisions for carry back of an assessed loss; namely assessed loss cannot be used to reduce taxable income of earlier years.

Buying companies with assessed loss

Assessed loss is taxpayer specific but in rare circumstances the tax code has allowed assessed loss to be shared within a group of companies if it is as a result of a scheme of reconstruction. It provides that where there is a change in the shareholding of a company with assessed loss or which directly or indirectly controls any company with an assessed loss and the Commissioner is of the opinion that such change has been effected solely or mainly in pursuance of or in connection with any scheme for taking advantage of such assessed loss, no assessed loss incurred prior to that change shall be deductible.  In other words, the taxman can sanction inheritance of assessed loss of one company by another as long as they are in the same group unless the takeover or scheme’s main objective was to take advantage of assessed loss (see: CIR v Ocean Manufacturing Ltd 1990 (3) SA 610 (A), 52 SATC 15). A taxpayer must prove that the change in shareholding was not influenced by existence of assessed loss. In ITC 983, 25 SATC 55, a company engaged in clothing manufacture bought shares in a company also engaged in clothing manufacture got its inheritance of assessed loss approved after it was proved that the main purpose of buying the shares was to enable the purchasing company to obtain a productive manufacturing unit for purposes of supplementing its productive capacity. The story was different in New Urban Properties Ltd v SIR, 27 SATC 175 where shareholders in successful land dealing companies bought the shares of another land dealing company but which was hopelessly insolvent but with an enormous deficit and assessed loss. It was held that the obvious intention was to channel profits of the successful companies to the unsuccessful one and, thereby, take advantage of the assessed loss.

Assessed loss of a localised foreign company

Companies often set up a branch or permanent establishment (PE) when entering foreign markets. A branch or a PE is considered to be a taxpayer in Zimbabwe. A PE is an international term that refers to a fixed place of business or dependent agent of a foreign business situated in the host country. If such a business decides to incorporate under the Zimbabwean laws i.e. to become a Zimbabwean company it is permitted to inherit assessed loss of such a branch or PE.  Thus the law sanctions inheritance of assessed loss where a company formally incorporated outside Zimbabwe (non-resident company) and was carrying on its principal business within Zimbabwe is about to be wound up voluntarily in its country of incorporation for the purpose of the transfer of the whole of its business and property wherever situate to its successor, a Zimbabwean incorporated company. The new company should however have the same shareholders in the same proportion as the old company if the inheritance is to be sanctioned by the taxman.

A company converting into public business corporation or vice versa

A company incorporated under the Companies Act (Chapter 24:03) which is converted into a Private Business Corporation (PBC) or vice versa is permitted to carry forward assessed loss into the new entity unless the conversion has been motivated solely or mainly by the existence of an assessed loss.

Insolvent and assigned estates

A rehabilitated person and his/her insolvent estate are two different persons in the eyes of tax law. Therefore a person that has been declared insolvent or had his property or estate assigned for the benefit of creditors cannot carry forward his/her assessed loss. 

Ring fencing of assessed loss 

Our law operates separate capital gains tax and income tax systems .In other words capital loss is ring fenced to capital gains tax, meaning it cannot be set off against other tax heads. The same applies to assessed loss emanating from business, it can be offset against income from business of the taxpayer subject to the limitations stated above. Similarly a person in employment is prohibited from setting off his/her employment against business income or vice versa.


Your assessed loss today represents a tax treasure to be used in days of plenty. It’s important however to have in place plans for harvesting assessed loss such as new businesses initiatives that brings in income, deferring deductible expenditure, avoiding tax yields investment etc, bearing in mind that your assessed loss has 6 year life span. However, perpetual losses often get the taxman talking “why should a taxpayer remain in business when he continues making losses”. This often invites a tax audit for purposes of scrutinizing whether the assessed loss is genuine and not a result a tax avoidance scheme or operation. Judge Kudya in  CRS (PVT) LTD v the ZIMRA HH-728-17, FA 20/2014 said that the main objective of a private company is to make profit and when  content with the untenable situation and continues to make losses with no prospects of profit this an indication the company is engaged tax avoidance scheme or operation.



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.