the zimbabwe national budget 2017 - kpmg · pdf filethe zimbabwe national budget 2017 . ......

The Zimbabwe National Budget 2017

Tax Highlights and Tax Summary

8th December 2016

Summary The honourable Patrick A. Chinamasa, Minister of Finance and Economic Development, presented the 2017 National Budget on Thursday, 8 December 2016.

The theme of the 2017 National Budget is “Pushing Production Frontiers Across All Sectors of the Economy”.

The proposals are still to be promulgated.

We have incorporated the main provisions of the 2017 National Budget Statement and their effects on taxpayers.

Proposed changes

■ The key proposed changes are covered on pages 2 – 9. These include:

■ Clarification of tax incentives to be provided to Special EconomicZone entities.

■ Exemption of 15% withholding non-resident tax on fees, in respect of fees already subjected to 20% withholding taxes as non-executivedirectors fees.

■ Reduction of presumptive taxes but the requirement to nowadminister these monthly as opposed to quarterly.

■ Restricted deductibility of management fees now to includearrangements between associated entities, and not only limited toparent / subsidiary relationships.

■ Expansion of the definition of specified assets to be subjected toCapital Gains Tax.

■ Housing units donated to local communities or share ownership andcommunity schemes to be exempt from Capital Gains Tax.

■ Removal of additional goods from the open general license.■ Amendment of certain goods and services to standard rated as

opposed to zero rated.

■ Moratorium on SME’s with regards to potential VAT penalties.

Other proposed changes

■ Introduction of minimum indigenisation and empowerment quotas,including empowerment credits, to the Indigenisation and EconomicEmpowerment Act and the provision for revised plans to besubmitted considering the proposed changes to the Act.

Key provisions ■ Significant provisions, which are currently in practice are noted onpages 10 to 19, these need to be considered in conjunction with theproposed changes covered on pages 2 – 9.

The information contained herein is of a general nature and is not intended to address the circumstances of any

particular individual or entity. Although we endeavour to provide accurate and timely information, there can be

no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate

in the future. No-one should act on such information without appropriate professional advice after a thorough

examination of the particular situation.

Contents – 2017 National Budget Highlights

The contacts at KPMG in connection with this report are:

Vinay Ramabhai Tax Partner, Harare, Zimbabwe

Tel: + 263 4 302 600 [email protected]

Steve Matoushaya Tax Director, Harare, Zimbabwe


Virginia Mutsago Tax Manager, Harare, Zimbabwe


1

mailto:[email protected]



Changes Effective date

General administration and management fees

■ The restrictions applicable for the tax deductibility of general and administrative fees between parent companies and their subsidiaries will now be extended to cover such fees between associated companies.

01/01/2017

Exemption of dividends from local companies from income tax

■ It is proposed to exclude deemed dividends arising from disallowed interest expenses from theincome tax exemption. 01/01/2017

Payment of tax where dividend deemed to have been paid

■ Payment of tax where dividends are deemed to have been paid in terms of section 26 (2) ”by thedeletion of “for that dividend upon written notification by the Commissioner of the tax due” and thesubstitution of “for that deemed dividend in accordance with the provisions on self-assessment asprovided for in section 37A”.

01/01/2017

Permanent Establishment

■ The definition of permanent establishment will be introduced into the Income Tax Act to capturetaxation of attributable profits from businesses conducted by non-residents in Zimbabwe, where this is not already captured by an existing Double Taxation Agreement.

01/01/2017

Non-resident non-executive directors

■ Payment of fees to non-resident directors currently attracts withholdings taxes, at 20% inaccordance with the 33rd Schedule (Tax on Non-Executive Director’s Fees), and at 15% in accordance with the 17th Schedule (Non-Residents’ Tax on Fees). In order to eliminate double taxation of the same income, it has been proposed to exempt board fees accruing to non-executive directors from non-residents tax on fees. As such their board fees would then only be subject to the 20% withholding tax in accordance withthe 33rd Schedule.

01/01/2017

Income Tax – proposed changes

2

Special Economic Zones

■ To enhance the attractiveness of the Special Economic Zones (“SEZ”), the Minister has proposedthe following tax incentives for entities designated as SEZ’s

Tax Head Proposed Incentive

Corporate Tax Exemption from Corporate Income Tax for the first 5 years, thereafter 15%.

Special Initial Allowance (SIA) SIA on capital equipment at the rate of 50% of cost in year one and thereafter 25% in each of the subsequent two years.

Employee Tax Specialised expatriate staff taxed at flat rate 15%

Non- Residents Withholding Tax on Fees (NRTF) Exemption on NRTF

Non- Residents Withholding Tax on Royalties (NRTR) Exemption on NRTR

Non- Residents Shareholders Tax on Dividends (NRTS) Exemption on NRTS

Customs Duty on Capital Equipment Duty free on imported capital equipment for SEZ

Customs Duty on Raw Materials

Duty free on inputs that include raw materials and intermediate products imported for SEZ. The duty will become payable if raw materials are produced locally.

01/01/2017

Income Tax – proposed changes

3


VAT exemption on Banking services

■ Banking and payment solutions offered by any person registered under the National PaymentsSystems Act will become exempt from VAT.

01/01/2017

Fiscalisation and fiscal devices

■ It is proposed that the number of authorised suppliers of fiscal devices is increased and given thatmost of the initial devices are now outdated, to authorise such suppliers to procure advanced fiscal devices.

■ Category C operators that do not connect to the Zimbabwe Revenue Authority (“ZIMRA”) Serverswill not be issued Tax Clearance Certificates for 2017 and will be subject to a penalty.

01/01/2017

Zero rated goods now standard rated

■ The evaluation of goods and services under standard, zero rated and exempt categories isongoing. However it is proposed to amend the following goods and services, from zero rated to standard rated goods and services: - Rice; - Margarine; - Cereals; - Maheu; - Pork; - Beef; - Fish; - Chicken; and - Potatoes, fresh or chilled.

01/01/2017

Value Added Tax – proposed changes

4


Removal from the open general license

■ It is proposed that the following be removed from the open general license (Statutory Instrument64 of 2016): - Wheat flour - Dairy products such as yoghurts, flavoured milk, ice-cream, cheese - School uniforms - Luggage ware including bags and suit cases

01/01/2017

Increase in customs duty rate

■ On selected fabric used by clothing and furniture manufacturers.

■ On raw materials manufactured locally used for printing and packaging.01/01/2017

Reduction in customs duty rate

■ On raw materials such as acids, palm stearine and palm kernel oil imported by soapmanufacturers.

01/01/2017

Suspension of customs duty

■ On importation of 30 000 litres of raw wine under a ring fenced facility for approved winemanufacturers. 01/01/2017

Rebates on customs duty

■ On raw materials such as pulp, glue and virgin tissue by sanitary wear manufacturers. 01/01/2017

Other changes

■ Preferential customs duty rates on the origin of flour to be revised to apply to flour milled fromwheat grown in the country of export.

■ Importation of Milk products to be ring fenced.

■ Ring fencing of importation of 30 luxury buses by reducing the duty rate to 5% from 40% for a 12month period whilst maintaining the VAT rate at 15%. The incentive is limited to a list ofbeneficiaries approved by Minister of Transport and Infrastructure Development

■ An additional special excise duty of five cents on the selling price of air time, for GovernmentHospitals and clinics.

■ Reduction in the maximum period of temporary import permits for motor vehicle imported byvisitors and non-Zimbabwean residents from 12 months to 3 months.

■ Reduction of NOZIM debt redemption levy by 1 US cent.

01/01/2017

Customs Duty and Excise – proposed

changes

5


VAT Registration

■ Small to Medium Enterprises (“SMEs”) with annual revenues that do not exceed $240 000 areencouraged to voluntarily register. Voluntary registration undertaken between 1 January and 30 June 2017 will not be backdated to the time the SMEs qualified to register.

■ However, those who are compelled to register after a ZIMRA audit will not benefit from the abovedispensation.

01/01/2017

Income Tax

■ The provisional tax payable by such SMEs in the first year will be deferred to the fourth QuarterlyPayment Date (“QPD”)

01/01/2017

Presumptive tax

■ It is proposed to reduce presumptive taxes, but make them payable on a monthly basis.Presumptive taxes collected from SMEs will be ring fenced for capitalization of the Small and Medium Enterprises Development Corporation (“SMEDCO”).

01/01/2017

Presumptive tax changes in rates It is proposed that certain presumptive taxes be remitted monthly as opposed to the current being quarterly and the rates be reduced thereon. The following is a summary of the changes:

Category Current Rate remitted quarterly Proposed rate remitted per month

Omnibus

8 to 14 Passengers 150 40



Above 36 Passengers 450 100

Taxi Cabs 100 25

Driving School

Class 4 Vehicles 500 100

Class 1 and 2 600 130

Greater than 10 tonnes but less than 20 tonnes

1 000 200

Greater than 20 tonnes 2 500 500

Hair Salon Operator 1 500 10 per chair

01/01/2017

Small to Medium Enterprises and

Presumptive Tax – proposed changes

6

$ $


Capital Gains Tax on Intangible property

■ The definition of specified assets is proposed to be expanded, to include any right or title toproperty whether tangible or intangible that is registered or required to be registered in— - the Mines and Minerals Act [Chapter 21:05]. or - the Patents Act [Chapter 26:03]; or - the Trade Marks Act [Chapter 26:04]; or - the Industrial Designs Act [Chapter 26:02]; or - the Copyright and Neighbouring Rights [Chapter 26:05]; - the Brands Act [Chapter 19:05]; or - the Geographical Indications Act [Chapter 26:06]; or - the Integrated Circuit Layout-Designs Act [Chapter 26:07] Act (No. 18 of 2001);”.

01/01/2017

Capital Gains Tax on Donated property

■ Certain companies have been donating housing units to local authorities and communities andsuffered capital gains tax on such transactions as deemed disposals at the related market value of such housing units. It is proposed that donations of housing units to any local authority, approved employee share ownership trust or community share ownership trust or scheme be exempt from Capital Gains Tax.

01/01/2017

Capital Gains Tax – proposed changes

7


The following points were noted in the speech presented by the Honourable Minster of Finance and Economic Development although they are currently not included in the draft Finance Act, 2017

Penalty loading model

■ The Minister proposed to publish through a gazette, a penalty loading model which informstaxpayers on the level of penalties.

01/01/2017

Investors Protection Fund

■ Income tax exemption for the Investor Protection Fund, which no longer falls under the Securitiesand Exchange Commission Act;

To be confirmed

Zimbabwe Asset Management Company

■ Tax Exemption for Zimbabwe Asset Management Company with effect from 15 July 2014 insteadof 1 January 2016;

14/07/2014

Export of unbeneficiated platinum

■ VAT paid on the export of the unbeneficiated chrome, platinum, rough diamonds and raw hides isclaimable as input tax (Export tax on unbeneficiated platinum deferred to 01/01/2018).

Proposals in the speech but not in the Bill

8


Proposed administrative matters

■ The approval of applications by ZIMRA of clearing agents will be subject to such agents havingminimum academic qualifications.

■ Introduction of electronic duty free certificates on imports by the government. The electronic dutyfree certificate must be lodged into ZIMRA Ascycuda System.

■ The authority of the Commissioner General is extended to report any unethical conduct by ataxpayer or tax practitioner to their controlling association.

■ In addition it is proposed that all tax practitioners be registered with a recognised controlling bodyor association regulating their conduct, as well as ZIMRA. Registration with ZIMRA will be subjectto attainment of specified minimum educational qualifications among other requirements.

■ The ZIMRA Board to appoint the Commissioner General of ZIMRA with the approval of the Minister

■ The tenure of office for the Commissioner General be fixed to a maximum of two, five year terms.

■ The ZIMRA Board appoints, such Commissioners, as maybe deemed necessary, for a fixed tenureof office not exceeding three, four year terms.

01/01/2017

Administrative Matters – proposed changes

9

Proposed tax rates

Corporate Income Tax Rates

Note 2017 2016

Individuals: Income from trade and investment (1) 25% 25% Companies and Trusts (1) 25% 25% Approved BOOT and BOT arrangement (2) (3) (4) 0% 0% Industrial park developer (2) (4) 0% 0% Licensed investor (2) (4) 0% 0% Special mining lease (1) 15% 15% Mining companies and mining trusts (1) 25% 25% Pension funds 15% 15% Operator of a tourist facility in approved tourist development zone (2) (4) 0% 0% Exporting manufacturing companies (1) (5) 15% 15%

Notes: (1) Plus 3% AIDS levy (The Standard Rate and 3% AIDS levy also apply to a Trust (excluding estate, insolvent estate or the estate of an individual under legal disability).

(2) Applicable for first five years. (3) Thereafter 15% for the next five years. (4) Thereafter 25% for the next five years. (5) Exporting thresholds 30% - 40%: taxed at 20%; 41% - 50% taxed at 17.5% above 51% taxed at 15%.

Source: Finance Act Chapter (23:04)

Exemptions

■ The following income is exempt from income tax:- Mortgage finance income (building societies and other financial institutions).- Accruals to Investor Protection Fund.- Receipts of Insurance and Pensions Housing Company.- Interest on loans to small scale gold miners.

Charitable institutions

■ The receipts and accruals of income from trade and investment not being applied in promoting the objects of anecclesiastical, charitable or educational institution will be taxable with effect from 1 January 2016. Under the third schedule of the Income Tax Act to exempt income from ecclesiastical, charitable or educational institutions, they must register under section 26 of the Companies Act.

Corporate Income Tax – current key

provisions

11

Provision

Capital Allowances

Capital Allowance Rates (%)

Asset Note Special Initial Allowance (SIA) Wear & Tear

Farm improvements (1) 25% 5% Industrial buildings (1) 25% 5% Railway lines (1) 25% 5% Staff housing (2) (3) 25% 5 %Articles, implements, machinery (2) (3) (4) 25% 10% Motor vehicles (5) (1) 25% 20 to 33.33% Commercial buildings (1) 25% 2.5% Computer software (5) 25% - Mining equipment and related capital expenditure (6) 100% - Pre production mining expenditure (6) 100% - Environmental restoration / mining rehabilitation costs (6) 100% -

Notes: (1) 25% SIA in year of purchase in respect of movables and 25% SIA in year of construction in respect of immovables. In subsequent years

accelerated wear and tear of 25% on original cost. (2) Includes permanent schools, nursing homes, hospitals and clinics. Cost of each school, nursing home, hospital and clinic no longer restricted. (3) From 1 January 2009 a unit of staff housing costing not more than US$25 000 and a building comprising units, none of which costs more than

US$25 000, qualify for capital allowance of US$10 000 per unit. (4) Allowances for passenger motor vehicles limited to US$10 000 in respect of the asset purchased after 1 January 2009. (5) Computer software acquisition and development costs are now capitalised over 4 year period. (6) Presented assuming the allowances are claimed under the New Mines Method.

Source: Income Tax Act (Chapter 23:06).

Transfer pricing

■ The 35th schedule which was effective from 1 January 2016, outlines the preferred methods of determining the arm’slength basis of transactions.

■ The 35th Schedule specifically acknowledges the relevance of the Organisation for Economic Cooperation andDevelopment (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrators as a source ofinterpretation for the transfer pricing regulations. Other relevant sources of interpretation are also acceptable.

Thin capitalization

■ Deduction of interest on borrowings is restricted to the interest on the portion of debt up to the point where the debtequity ratio is 3:1. The excess interest would be deemed to be a dividend and subjected to the dividend withholding tax of 10% or 15% for companies listed and unlisted on the Zimbabwe Stock Exchange respectively.

Management fees

■ Local branch or foreign subsidiary administration and management fees allowable tax expenditure deduction restrictedto 1% of the total deductions available before including the management fee. The excess management fees may be deemed dividends to parent company and subject withholding tax on non-resident shareholders.

Export Market Development Expenditure

■ A double deduction is available for export market development expenditure, which is incurred wholly or exclusivelyfor the purpose of seeking opportunities for the export of goods from Zimbabwe or for creating or increasing the demand for such exports,

■ Foreign agents fees not exceeding 5% of the value of the exports based on FOB (Free on Board) will be exemptfrom WHT.


provisions

12

Provision

Mining Royalty rates

16%

14%

12%

10%

8%

6%

4%

2%

0% Gold small Gold other Platinum Diamonds Precious Other Base metals Industrial Coalbed Coal

scale miners miners stones precious (1) metals methane metals

2016 2017

Source: Finance Act Chapter 23:04

■ Mining royalties are not tax deductible expenditure.

■ The royalty rate on gold produced by primary producers was reduced from 7% to 5%, with effect from 1 October 2014.■ Using the 2014 production as a base year incremental output of gold is subject to a reduced to 3% royalty rate.

■ Intermediary Money Transfer Tax is charged at 5 cents per transaction.

■ Automated Financial Transaction tax is charged at 5 cents per transaction.

■ The 10% Withholding tax on tenders, is applicable to all contracts aggregating to $1 000 or more per year ofassessment, with effect from 1 January 2015. Retrospectively companies can recover the principle tax that shouldhave initially been withheld in accordance with Section 80 of the Income Tax Act, from the payee where the payerhas subsequently paid such tax to the Zimbabwe Revenue Authority.


provisions

13

Withholding Tax Rates (%)

Statutory South Africa Mauritius UK

Non residents payments Dividends - ZSE listed companies 10% 15% (10) 10%/20% (11) 5% (2)

- Other companies 15% 15% (10) 10%/20% (11) 10% Fees 15% 15% (10) 15% 10% Royalties 15% 15% (10) 15% 5% (2)

Residents payments Dividends - ZSE listed companies 10% - Other companies 15%

Interest – Banks and Building Societies 15% (5) (6) (9)

Capital gains: Listed securities 1% (5) (7)

Unlisted securities 5% Immovable property 15%

Other Rent payable by informal traders 10% Commission on property or insurance 20% Contracts (ITF 263) 10% Non-executive director’s fees 20% Entertainers / Artists Tobacco levy

15% (8)

0.75c per $ (12)

Notes: (1) There are also double taxation agreements with: Sweden, Norway, Germany, Bulgaria, Netherlands, Canada, Poland, France, Malaysia and China. (2) Provided recipient is a company which controls directly or indirectly at least 25% of the voting power in the company paying the dividends. (3) Must be paid to a company and 25% of capital in paying company must be directly and beneficially held by the beneficiary. (4) Subject to the provisions of any existing double taxation agreement. (5) This is a final tax. (6) Persons over 55 years exempt on the first US$250 per month. (7) Capital Gains Withholding Tax (CGWHT) need not be withheld where the amount is exempt. CGWHT shall not be withheld or paid on the sale of

marketable security by a unit trust but shall be withheld and paid on redemption of any unit by an investor in the unit trust. (8) Applicable to visiting performing artists and entertainers. (9) Effective from 1/1/2016 Interest earned from deposits with a tenure of greater than twelve months is exempt from income tax under the Third Schedule, interest earned from a

tenure greater than 90 days and less than twelve months is subject to residents tax on interest at 5% and interest earned from a tenure less than 90 days is taxed at 15%. (10) A new Double Tax Agreement has been gazetted however it has not been announced as to when the DTA will be effected. Under the new DTA, tax on technical fees will be at

the rate of 5%, tax on royalties at 10% and dividends will be taxed at 10% and a lower rate of 5% for companies holding at least 25% of capital. (11) The lower rate is applicable to Companies holding at least 25% of capital. (12) The auction tobacco levy (payable by buyers and sellers) is 0.75 US cents for each US dollar of the transaction price.

Source: Finance Act Chapter (23:04).

Individual Income Tax – current key

provisions

14

Provision

Employment income

■ The income tax bands, by which rates of tax are charged, in respect of income from employment are presentedbelow.

- The tax free band remains at US$3 600 per annum or US$300 per month.

- The upper income tax bands remains at US$240 000 per annum or US$20 000 per month. The effective maximum rate of tax (including AIDS levy) is 51.75%

Rate bands from 01.01.2016 to 31.12.2016

US$ US$ US$ % US$ 0 - 3 600 0% - -

3 601 - 18 000 20% of excess over 3 600 18 001 - 36 000 2 880 + 25% of excess over 18 000 36 001 - 60 000 7 380 + 30% of excess over 36 000 60 001 - 120 000 14 580 + 35% of excess over 60 000

120 001 - 180 000 35 580 + 40% of excess over 120 000 180 001 - 240 000 59 580 + 45% of excess over 180 000 240 001 - and over 86 580 + 50% of excess over 240 000

Notes: (a) There is a 3% AIDS levy on tax – effective top rate of 51.50% (b) The table above applies to tax payable by individuals, deceased or insolvent estates and estates of individuals

under legal disability.


■ The maximum tax free bonus remains at US$1 000

■ The tax free commutation in respect of a severance package will be the higher of US$10 000 or 1/3 of the severancepackage, up to a maximum of 1/3 of an amount of US$60 000.

■ Rental income and interest from discounted instruments and deposits earned by elderly persons is exempt fromincome tax up to a maximum of US$250 per month in respect of each class of income (rent; deposit interest;discounted instruments income).

■ With effect from 01/01/2016, the tax free portion in respect of pension commutation received from the ConsolidatedRevenue Fund or pension fund other than retirement annuity fund by a person below the age of fifty-five years willbe the higher of US$10 000 or one third of the commutation, up to the maximum of a third of US$60 000.

■ Pension income paid from a pension fund or Consolidated Revenue Fund to elderly taxpayers (who are 55 years oldor more) is exempt from income tax.


provisions

2016 and 2017 Annual Tax Tables

15

Provision

Employee benefits

■ Unless specifically provided for in the Income Tax Act, fringe benefits are taxed in the hands of the employee basedon the cost to the employer.

■ The deemed taxable amount of motoring benefits ranges from US$3 600 to US$9 600 per year, depending on theengine capacity of the motor vehicle.

Engine capacity 2016 2015 US$ per annum US$ per annum

Not exceeding - 1 500 cc 3 600 3 600

1 501 cc - 2 000 cc 4 800 4 800

2 001 cc - 3 000 cc 7 200 7 200

Exceeding - 3 001 cc 9 600 9 600


■ Where a loan or an advance is provided by employers, the employee taxable benefit is based on a deemed interestat LIBOR plus 5% per annum where the loan exceeds US$100. The taxable value is reduced by any interest paid bythe employee to the employer on the loan.

■ Interest on loans for education, technical training or medical treatment for the employee, their spouse or child is notsubject to income tax.

■ Where an employee has use of a ‘holiday home’ the benefit is calculated based on the open market rental that wouldhave been charged for the holiday accommodation.

■ 50% of teaching and non-teaching school staff incentives (specifically tuition fees, levies and boarding fees) areexempt from tax on fringe benefits (for up to 3 children).

Tax credits % / Amount

Medical expenses (individual and family)

■ Invalid appliances, including spectacles (Not allowable to non-residents). 50% of cost

■ Medical aid society contributions. 50% of cost

■ Other medical expenses, including drugs (Not allowable to non-residents). 50% of cost

Elderly persons (persons aged above 55 years or more) US$75 p/m

Incapacitated persons

■ Blind person (Not allowable to non-residents). US$75 p/m

■ Disabled person (Not allowable to non-residents and any portion of these credits not used by amarried person shall be allowed as a deduction from the income tax of his or her spouse). US$75 p/m

■ Disabled child (for each) (Not allowable to non-residents and any portion of these credits not used bya married person shall be allowed as a deduction from the income tax of his or her spouse). US$75 p/m


provisions

Engine Size $

$

16

Provisions

■ The threshold for registering for VAT is US$60 000 per annum.

■ The period within which the final VAT remittances and returns are to be filed is the 25th day of the month followingthe end of the tax period.

■ VAT on importation of goods will be calculated on the value for duty purposes plus any duty levied in respect of theimportation of such goods.

■ In addition to the normal penalties, civil penalties will be levied for contravention of regulations relating to theimportation of goods of a capital nature.

■ VAT on export of unbeneficiated chrome remains at 20%.

■ Export of unbeneficiated hides is subject to VAT at $0.75 per kg. In the Government Gazette in October 2016, theMinister exempted from export tax, the sale of raw hides accumulated during the period January to July 2016. Therelief granted shall not exceed the prescribed quantities for each individual exporter. The relief is only applicable toseven specified merchants.

■ VAT on the export of unbeneficiated platinum and rough diamonds will be subject to VAT at a rate of 15%. (Not to belevied on rough diamonds sold to firms licensed to cut on polished diamonds effective 01/01/2015).

■ VAT paid on the export of the unbeneficiated chrome, platinum, rough diamonds and raw hides is claimable as inputtax (Export tax on unbeneficiated platinum deferred to 01/01/2018).

■ VAT on importation of medical equipment can be deferred for up to 90 days.

■ VAT on foreign tourists introduced from 1 January 2015 all local tourism operators to levy 15% on foreign tourists.

■ Commission earned from the buying and selling of short term insurance policies by brokers and agents of insuranceand reinsurance firms is subject to VAT with effect from 1 September 2015. Short term insurance includes, but isnot limited to, business assets insurance, motor vehicle, personal and home insurance.

Fiscalised Electronic Registers (FERs)

■ Rebate of duty paid on the importation of the FERs from approved suppliers. 50% of cost of acquisition of the FERsby a registered operator deductible as input tax, for VAT purposes.

■ In a public notice by the Zimbabwe Revenue Authority all VAT registered operators that is category A, B and D arerequired to have fiscalised devices to record taxable transactions as announced in the Mid-Term policy. The effectivedate for the fiscalisation program is the 01 January 2017.

Value Added Tax – current key provisions

17

Provisions

■ Capital gains on “specified assets” are taxed in terms of the Capital Gains Tax Act (Chapter 23:01) (“CGT Act”).Broadly speaking, specified assets are defined as immovable property and marketable securities. To avoid doubletaxation, transactions which are subject to income tax are excluded from the scope of the CGT Act. In determining acapital gain, deductions from sale proceeds include:- Expenditure on the acquisition or construction of a specified asset excluding expenditure in respect of which an

income tax deduction is allowable; - Expenditure on additions, alterations, or improvements to a specified asset;- Direct selling expenses; and- An allowance of 2.5% per annum of the cost of acquisition and construction and subsequent additions,

alterations and improvements from the date such costs were incurred to the date of sale

Rates of CGT

■ Specified assets acquired prior to 1/02/2009 are subject to CGT at 5% on the gross proceeds.

■ Sale of listed securities are subject to withholding tax (WHT) at 1% on the gross proceeds. Securities which havebeen subjected to the 1% WHT will be exempt from the normal 20% CGT.

■ Sale of unlisted securities are subject to WHT at 5% on gross proceeds.

■ Immovable property acquired on or after 1/02/2009 is subject to 15% WHT on gross proceeds. The WHT will becredited against the final 20% CGT on the actual capital gain on assessment.

■ Unit trusts will be exempt from capital gains withholding tax on the sale of units.

■ The cession of immovable property is subject to CGT.

■ Sale or disposal of shares to an indigenisation partner or community share ownership trust or scheme will now beexempt from CGT.

■ Payment of CGT must be by no later than the 3rd working day of the date of accrual.

Capital Gains Tax – current key provisions

18

Provisions

■ Stamp duty is levied on insurance policies or certificates or any other document which is in the form of a guarantee,fidelity, security or surety bond, at rate of US$0,05 for every dollar worth of premiums paid up to a maximum ofUS$100 000.

■ Stamp duty on policies of insurance is levied retrospectively at US$0.01 per dollar, with effect from 1 February 2009to 30 July 2015.

Customs Duty and Excise

■ With effect from 1/01/2016, capital equipment valued at greater than US$ 1 million, imported by mining, agriculture, manufacturing and energy sectors will not be liable to customs duty and VAT.

■ The monthly traveler’s rebate allowance is US$200.

■ Statutory Instrument 64 of 2016 (SI 64/2014) Open General Import License was introduced in 2016 for the control of goods. For individuals there is a limitation on the importation quantity of goods that are listed in the statutory instrument. Organisations in trade are required to apply for an import license to import the goods subject to quantity restrictions.

■ Capital equipment imported by tourism operators for purposes of refurbishment, expansion and modernisation ofhotels, lodges and conference facilities will not be liable to customs duty for the period between 1/01/16 and 31/12/17.

■ It is proposed that customs duty is suspended on the importation of game drive vehicles by safari operators for an ■ With effect from 1/01/2016, a rebate of duty shall be applicable for capital equipment (plant, equipment or machinery)

imported for use in specific industries including mining, manufacturing, agricultural and energy generation or distribution. Motor vehicles are not included under the rebate.

Age of vehicle 1000cc 1001-1500cc 1501-2000cc 2001-2500cc 2501-3000cc 3001-3500cc Above 3501cc

>20 years $50 $50 $50 $50 $50 $50 $50

16 -20 years $50 $75 $100 $150 $150 $150 $150

11 -15 years $75 $100 $150 $200 $200 $200 $200

5-10 years $150 $200 $250 $300 $400 $400 $400

0-4 years $300 $400 $500 $600 $600 $600 $600

■ With effect from 1/01/2016 excise duty on sale of second hand motor vehicles has been revised from 5% of the value, to a fixed duty rate based on the engine capacity and the age of vehicle. The applicable rates are as follows:


Other Tax – current key provisions

19

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice

© 2016 KPMG Zimbabwe, a Zimbabwean Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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