The Minister of Finance reinstates capital gains tax relief on sale of main home


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. 

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