Employers in Zimbabwe are obligated to register with the Zimbabwe Revenue Authority (ZIMRA) for tax purposes. This registration is a crucial step in fulfilling employer tax responsibilities.

Taxes to Deduct and Remit

Employers are required to deduct income tax from employee salaries/wages under the Pay As You Earn (PAYE) system. The tax rates are based on prescribed tax tables provided by ZIMRA. In addition to PAYE, employers must also deduct a mandatory AIDS Levy, calculated as 3% of an employee's taxable income.

Employers also have a responsibility towards the National Social Security Authority (NSSA). They must contribute 3.5% of an employee's earnings (up to a ceiling) to this pension scheme, while also deducting 3.5% from the employee's salary.

Additional Employer Obligations

Beyond the standard tax deductions, employers generally contribute 0.5% of their quarterly gross wage bill to the Standards Development Fund (SDF).

Filing and Payment Deadlines

For PAYE, AIDS Levy, and NSSA contributions, employers must generally file returns and remit payments to ZIMRA by the 10th of the month following the month in which the deductions were made.

Record Keeping

Maintaining meticulous payroll records is another important responsibility for employers. These records support calculations, deductions, and remittances and are crucial for tax purposes.

Penalties

Employers should be aware that failure to comply with tax obligations can result in significant penalties and interest charges. It's important to stay informed about these potential penalties to avoid any unexpected costs.

In Zimbabwe, a progressive income tax system is in operation, meaning the more you earn, the higher percentage of tax you pay. This tax, known as Pay As You Earn (PAYE), is deducted directly from employees' salaries by their employers.

Tax Rates and Credits

The current tax rates and tables are available on the ZIMRA website. Employees may also be eligible for tax credits, such as the elderly, blind, or disabled persons tax credit. Further details can be found on the ZIMRA website.

National Social Security Authority (NSSA)

NSSA is a mandatory social security scheme for employees in Zimbabwe. Employees are required to contribute 3.5% of their gross salary.

AIDS Levy

The AIDS Levy is calculated at 3% of an employee's taxable income.

Pension Fund Contributions

Contributions to approved pension funds are generally tax-deductible up to certain limits. For the latest limits, consult the ZIMRA website or a tax advisor.

Benefits in Kind

If an employer provides benefits such as housing, company cars, or school fees, these may be considered taxable income for the employee.

Value-Added Tax (VAT) is a significant source of revenue for the Zimbabwean government, levied on the consumption of most goods and services in the country.

VAT Rates

Zimbabwe operates two main VAT rates:

• Standard Rate: Currently at 15% (previously 14.5%). This rate applies to most supplies of goods and services within Zimbabwe.
• Zero Rate (0%): Certain essential goods and services are zero-rated for VAT. This includes basic foodstuffs, specific medical services, and educational services.

VAT on Imported Services

• Liability: Anyone importing services into Zimbabwe may be liable for VAT on those services, known as VAT on imported services. This applies even if the services would be zero-rated or exempt if supplied locally.
• Calculation: VAT on imported services is calculated at the standard rate (currently 15%) based on the value of the service.

VAT Registration

• When to Register: Businesses exceeding the VAT registration threshold must register for VAT. Voluntary registration may be possible in certain cases.
• Consequences of Not Registering: Failure to register when required can result in penalties and interest charges.

VAT Returns and Payments

• Filing and Payment: Registered businesses must file VAT returns and make associated payments on a regular basis (usually monthly or quarterly, depending on business turnover).

Input Tax vs. Output Tax

• Input Tax: VAT paid on business purchases can be claimed as input tax.
• Output Tax: VAT charged on sales is referred to as output tax.
• Net VAT Payable: The difference between output tax and input tax determines the net VAT payable (or potentially refundable to the business).

Key Points for Service Providers

• Determine VAT Liability on Services: Know whether the services you provide fall under the standard rate or zero-rate.
• Charge and Collect VAT Accurately: Ensure invoices include the correct VAT amount, if applicable.
• Keep Accurate Records: Maintain proper records of purchases, sales, input tax, and output tax for accurate VAT reporting.

Businesses operating within designated Special Economic Zones (SEZs) enjoy significant benefits. These include zero-rated Corporate Income Tax for the first 5 years, a 15% Corporate Tax Rate thereafter, duty-free importation of capital equipment, and a special Initial Allowance of 50% cost in the first year, then 25% over the next two years. They are also exempt from various withholding taxes, have zero-rated Capital Gains Tax, and can import raw materials duty-free.

Build-Own-Operate-Transfer (BOOT) and Build-Operate-Transfer (BOT) Arrangements

Income from these projects may be eligible for tax holidays or reduced tax rates.

Industry Specific Incentives

Manufacturing Sector

Companies in the manufacturing sector benefit from wear and tear allowances on capital equipment and duty-free importation under certain circumstances.

Mining Sector

Companies in the mining sector enjoy generous capital expenditure deductions, duty-free importation of various mining equipment, and other sector-specific benefits may apply.

Agro-processing and Farming

Farmers and agro-processors have special deductions and Value Added Tax (VAT) at 0% for specific farming inputs and equipment.