Zimbabwe's ZIMRA: Navigating Income Tax and Statutory Deductions for Employees

Like other African countries, Zimbabwe taxes its citizens to fund various public services and government processes. While it is the primary obligation of taxable residents to ensure they comply with tax regulations, employers also have a role to play.

Local and remote employers hiring within the country must familiarize themselves with tax regulations, ensuring they withhold and submit the correct amounts to taxing authorities promptly.

So, what are the tax regulations in the Republic of Zimbabwe? Do the citizens also face statutory dedications? And how do they navigate income tax? The information below provides answers to these questions through exploring ZIMRA.

What is ZIMRA?

ZIMRA is the Zimbabwe Revenue Authority that assesses, collects, and accounts for revenue on behalf of the state through the Ministry of Finance. The authority works per Chapter 23:11 of the Revenue Authority Act, plus other related legislation.

Primary Functions and Responsibilities of ZIMRA

1. Tax collection. ZIMRA administers various revenue heads, including VAT, customs duty, mining royalties, PAYE, capital gains tax, and other taxes.
2. Trade and travel ZIMRA ensures the smooth movement of goods and people through the border and inland ports.
3. Protect civil society. ZIMRA's responsibilities include preventing smuggling and other forms of international trade crime. The authority also enforces import, export, and exchange controls.
4. Advise the government. ZIMRA counsels the government concerning revenue forecasting, the national budget, and modifying laws.

Taxation in Zimbabwe: Income Tax

ZIMRA administers various taxes, the most common being income tax. The taxing authority levies income tax on individuals, companies, and other institutions based on their income or profits. Chapter 23:06 of the Income Tax Act specifies the elements of an employee's earnings that are subject to tax and the rates ZIMRA applies to them. The act also outlines which remunerations are exempt from taxes.

Like most African countries, Zimbabwe uses the Pay As You Earn, or PAYE, income tax method. Employers must deduct taxes from the salary or earnings before paying the employee. All payments in cash, benefits, commissions, and value-added items are subject to income tax.

ZIMRA operates on a progressive rate of taxation. Therefore, the more an employee earns, the higher the percentage of taxes they pay. However, ZIMRA caps the percentage increase once earnings reach a certain amount. In such situations, the authority applies a flat tax rate known as the marginal tax rate.

Employment Income Tax Brackets and Rates

There are various income brackets and corresponding tax rates. ZIMRA applies taxes on incomes as follows:

Therefore, if an employee earns 65,000,000 Zimbabwean dollars (ZWL) annually, the employer can calculate their income tax by multiplying the total amount by 35% and then deducting 4,625,000 from the value. So, the owed taxes would be 18,125,000 per year.

In addition, authorities must add a 3% AIDS levy to the total taxes an employee owes. Employers must submit PAYE returns and payments by the 10th of the following month.

Individual Deductions

Workers may deduct contributions of up to ZWL 852,000 per year to approved retirement annuities, NSSS funds, and approved pension funds in the country.

On the other hand, motor vehicle expenses, entertainment, travel, and similar costs are potentially deductible.

However, the employee has to prove that they incurred the costs during the production of their taxable income. If an employer provides the allowances, the deduction is more readily discharged but may not exceed the allowance.

In contrast, domestic and personal expenses and mortgages are not usually deductible. But ZIMRA allows minor deductions for donations to welfare and educational institutions.

Social Security Taxes

The National Social Security Scheme is compulsory for all resident employees in Zimbabwe. The limited social security system requires employers to contribute 4.5% of their basic salary, and employees match the same, bringing the total to 9%.

The contributions should be within the prevailing ceiling as gazetted quarterly. So, if an employee earns ZWL$170,000, their total NSSS contribution would be ZWL$14,357.70. Employers remit the amount to the Zimbabwe National Social Security Authority (NSSA).

Individual Tax Credits

Zimbabwe allows tax incentives that reduce the taxes an individual owes. Older adults, blind people, and others with physical or mental disabilities may receive credits amounting to a maximum of $75 per month. Elderly people are people above the age of 55.

In addition, ZIMRA allows 50% of medical aid contributions and medical expense shortfalls as a credit. The disabled person's credit only applies to residents and not to blind taxpayers.

The total amount of credits is limited to the total income tax chargeable to a taxpayer. ZIMRA does not give refunds when the credits exceed the income tax chargeable.

Medical credit applies to payments by taxpayers to cover the taxpayer, the spouse, and minor children, but not dependents. In addition, blind and disabled persons' credits can shift to the spouse when the entitled individual has insufficient chargeable income tax.

Final Thoughts

The Zimbabwe Revenue Authority, or ZIMRA, is essential for the nation's economic stability. It is evident that ZIMRA's role goes beyond revenue collection—it extends into shaping trade, preventing financial crimes, advising the government, and maintaining civil society's integrity.

ZIMRA's significance becomes particularly apparent in income tax. The administration of income taxes, facilitated by ZIMRA, plays a pivotal role in the nation's fiscal health. Employees contribute their share to the nation's development through the Pay As You Earn (PAYE) system, enabling the government to provide essential public services and infrastructure.

Employees and employers have significant roles to play in ensuring compliance with tax regulations. It especially applies to employers from foreign countries hiring workers in Zimbabwe. Failure to comply could mean fines and similar consequences.

Therefore, both parties must be vigilant in keeping up with changing literature and ZIMRA's news. Similarly, Workpay offers updated insight into the changing spectrum of taxation in different companies. So keep up with our informative blog!