Advanced Taxation(CUAC 408)

PROG: BSCAC
LEVEL: 4.1
YEAR : 2023
E.Muguti; PhD; M.Comm; BSc; PGDHE; AICTA,
RTAcc(Z)
+263775712712
emuguti@cut.ac.zw
Block 12
 7. Withholding Taxes in Zimbabwe

Chapter Outline
 Definition of & Benefits/Reasons behind Withholding taxes.
 Withholding Tax on Tenders.
 Resident Shareholder Tax.
 Non-Resident Shareholders Tax.
 Resident Tax on Interest.
 Non-Resident tax on Fees.
 Non-Resident Tax on Remittances.
 Non-Resident Tax on Royalties.
 Tax on Non-Executive Directors Fees.
 Capital Gains Withholding Tax
 Value Added Withholding Tax.
 Automated Financial Transaction Tax.
 Property or Insurance Commission Tax.
 Tobacco Levy.
 Electronic Commerce Transactions (Income Tax).
 Mining Royalties
 Withholding Tax Return & Due Dates, Compliance Requirements.
Withholding Taxes in Zimbabwe
 Learning Objectives
By the end of this presentation, you should be able to;
• Define Withholding Tax;
• Explain the reasons behind the Withholding tax
system;
• Discuss the different types of Withholding taxes in
Zimbabwe, including circumstances where applicable,
tax rates, due dates, and other compliance
requirements.
• Accurately fill in and submit the Rev 5 return for
Withholding taxes.
 Presentation Outline
Definition of Withholding tax
Benefits/Reasons behind Withholding taxes
1 Withholding Tax on Tenders
2 Resident Shareholder Tax
3 Non-Resident Shareholders Tax
4 Resident Tax on Interest
5 Non-Resident tax on Fees
6 Non-Resident Tax on Remittances
7 Non-Resident Tax on Royalties
8 Tax on Non-Executive Directors Fees
9 Capital Gains Withholding Tax (Immovable property)
10 Capital Gains Withholding Tax (Marketable Securities)
11 Value Added Withholding Tax
12 Automated Financial Transaction Tax
13 Property or Insurance Commission Tax
14 Tobacco Levy
15 Electronic Commerce Transactions (Income Tax)

16 Mining Royalties
 Definition of WHT
A tax collection system where tax is
collected at source.
Tax is paid to the government by the
payer of the income rather than the
recipient.
The recipient of the income will receive
net income from the payer;
After the tax has already been deducted.
The payer of the income then remits the
tax deducted (withheld) to ZIMRA.
 Definition of WHT
Some Withholding taxes (WHT) are final
taxes, i.e
The income is exempted from further
taxes.
E.g Resident Tax on Interest.
Other WHT are allowed as a deduction
against a tax payer’s tax liabilities;
E.g Withholding tax on contracts/tenders.
 Reasons/Benefits Behind WHT
Minimise tax evasion;
Captures unregistered taxpayers into the
tax net.
Improves taxpayer’s cash flow
management.
Boosts government cash flows as an
advance tax payment;
Simplifies tax compliance.
Minimises tax administration costs
 Reasons/Benefits Behind WHT
A mechanism mainly to improve tax
collection;
Mainly applicable to particular groups of
taxpayers;
Who may be difficult to collect tax from.
These include;
Delinquent taxpayers;
Non-residents;
Directors and shareholders.
 1.WHT on Contracts/Tenders
Section 80 ITA (Income Tax Act);
All registered business operators are required to
withhold;
30% of amounts payable under contract to payees;
Without valid tax clearance certificates;
Before making certain payments.
Applies to cumulative payments of
ZWL$500,000/US$1,000 and above;
Paid to a supplier in the year of assessment.
 1.WHT on Contracts/Tenders
“Payment” includes;
Cash transaction;
Barter;
Set-off;
Crediting a director’s loan account;
Intercompany debits/credits and;
Other settlements or of obligations of whatever and in
any form.
 1.WHT on Contracts/Tenders
Registered business operators include;
Government institutions;
Quasi-Government institutions;
Statutory Corporations and;
Taxpayers registered with ZIMRA.
Payable on or before the 10th day of month;
Following that on which payment was made.
Withholding tax paid to ZIMRA by a taxpayer;
Should be credited on tax computation for the year.
 1.WHT on Contracts/Tenders
Exceptions
Amounts paid in terms of employment contracts.
Sales effected in any shop in the ordinary course of the
business of the shop and;
Any other consumer contracts for the sale or supply of
goods or services.
This caters for sales by retailers or wholesalers to
consumers.
 1.WHT on Contracts/Tenders
Exceptions
Payments for the supply of farm produce and livestock
to farmers.
There is therefore no need to ask for tax clearances in
such cases.
NB
Payments for farm produce to persons who buy for
resale such as;
Traders, retailers and wholesalers;
Are still subject to the withholding tax.
 1.WHT on Contracts/Tenders
Taxation of Non-Resident Artists or Entertainers
A 15% withholding tax will be levied on;
Gross fees paid to non-resident performing artists.
The withholding tax is due from a withholding agent;
Who includes a “contractor” of the services of a non-
resident artist or entertainer;
Contracted to perform in Zimbabwe.
 1.WHT on Contracts/Tenders
Obligations of Business Operators
Deduct 30% of the amount to be paid where the payee;
Has not submitted a valid tax clearance certificate
(form ITF 263).
Can be checked for authenticity.
The payment to ZIMRA should be accompanied with a
schedule showing;
All names of the persons from whom the WHT was
deducted.
Attached on Rev 5 form
 1.WHT on Contracts/Tenders
Obligations of Business Operators
Retain a copy of the tax clearance certificate furnished
by payee;
For tax audit purposes.
Furnish the person from whom any amount has been
withheld (payee);
With a certificate showing full details of payee;
 Including the amount withheld.
 1.WHT on Contracts/Tenders
Risks for non-compliance with provisions of Section
80 of ITA

100% penalty and interest;

Interest at 10% per annum;

Civil penalties (US$30 per day; max=90 days).

 1.WHT on Contracts/Tenders
Case Study
Mugomaster Ltd is a Zimbabwean company with headquarters
in Harare. During the year 2022, the company awarded a tender
to Munowenyu Ltd, another Zimbabwean company for the
supply of hand sanitizers and masks. The Finance Manager of
Mugomaster has been persistently calling the Management of
Munowenyu Ltd requesting a tax clearance but to no avail. The
following payments were made by Mugomaster to Munowenyu
during the year on the contract.
30 April 2022: ZWL$400,000; 31 August 2022; ZWL$300,000.
The Finance Manager of Mugomaster is not sure if these
transactions had any withholding tax implications.
Required:
Explain to the Finance Manager, any withholding tax implications of the above
transactions, clearly indicating all the procedures the company needed to take
to be fully tax compliant.
 2. Resident Shareholder Tax
S28 a.r.w 15th Schedule to the ITA
Applies on payment of a dividend to resident
shareholders
Excludes bonus shares;
Includes deemed dividend (sect 16 (1) (q)).
A dividend shall be deemed to be paid to the payee if;
It is credited to his account or;
So dealt with that the conditions under which he is
entitled to it are fulfilled;
Whichever occurs first.
 2. Resident Shareholder Tax
No tax payable on payment of dividend by;
A local company to another locally registered tax
paying company.
The rate is 10% if paid by a listed company;
15% when paid by any other company.
Rev 5 forms should accompany all payments.
Due within 10 days from the date of distribution.
It is a final tax since local dividends are exempted from
income tax.
 3. Non-Resident Shareholder Tax
S26 a.r.w 9th schedule
Applies on payment of a dividend to non-resident
shareholders;
The rate is 10% if paid by a listed company;
15% when paid by any other company.
Check for DTA.
Rev 5 forms should accompany all payments.
Due within 30 days from the date of distribution.
It is a final tax since local dividends are exempted from
income tax.
 3. Non-Resident Shareholder Tax
Case Study
Ngoda Mines (Pvt) Ltd (Ngoda) is a 70% Zimbabwean
subsidiary of an Australian mining conglomerate
Mineral Giants Holdings Limited Headquartered in
Sydney, Australia. Ngoda operates a gold mine in the
Kwekwe area of Zimbabwe.
During the year ended 31 December 2022, Ngoda
borrowed ZWL$800 million from the holding company
to finance an expansion programme for the mine. The
parent company assigned a mining engineer from the
Head office in Sydney to oversee the expansion
programme.
 3. Non-Resident Shareholder Tax
Case Study
The issued ordinary share capital of Ngoda was held as
follows throughout the December 2022 tax year:
70% by Morales Mula, an Australian business tycoon;
10% by Zim Mines Ltd, a company registered in
Zimbabwe;
15% by Tipson Chipson a resident of Zimbabwe and the
managing director; and
5% by Munya Pakamisa, a resident of Zimbabwe.
 3. Non-Resident Shareholder Tax
Case Study
On 25 October 2020 the company declared a dividend of
ZWL$5,000,000 to its shareholders. This was
distributed to shareholders on 10 December 2020.
Required:
Explain and calculate the withholding taxes applicable to
Ngoda. Indicate the dates by which Ngoda should pay
the withholding taxes. Outline all the procedures Ngoda
need to take to be fully tax compliant.
 4. Resident Tax on Interest
S34 a.r.w the 21st Schedule.
15% should be withheld from interest paid by a
financial institution;
E.g. banks, building societies, the Reserve Banks, unit
trust managers and asset managers on;
Loans, deposits, income from Treasury Bills, Bankers
Acceptances and instruments traded by financial
institutions.
A dividend distributed by a building society in respect
of any share other than class A shares.
 4. Resident Tax on Interest
5% should be withheld from interest on fixed term
deposits for at least 90 days.
This WHT becomes the final tax because this interest
is exempted from income tax.
Due on or before the 10th of the following month.
 5. Non-Resident Tax on Fees
Section 30 a.r.w 17th Schedule ITA.
Deducted on the fees payable to a non-resident person.
A Non-resident person includes a foreign company
which is not ordinarily resident in Zimbabwe.
“Fees” means any amount from a source within
Zimbabwe;
Payable in respect of any services of a technical,
managerial, administrative or consultative nature.
 5. Non-Resident Tax on Fees
The general rate of withholding tax on fees is 15%.
The rate can differ where there are DTA agreements.
Payable to ZIMRA within 10 days from date of
payment.
Should be remitted by the payer or agent;
accompanied by REV 5 return.
 5. Non-Resident Tax on Fees
The payer shall provide the payee with a certificate;
In a form approved by the Commissioner, showing;
• (a) the amount of the fees; and
• (b) the amount of the non-residents’ tax on fees
withheld.
 5. Non-Resident Tax on Fees
Case Study
Ngoda Mines (Pvt) Ltd (Ngoda) is a 70% Zimbabwean subsidiary
of an Australian mining conglomerate Mineral Giants Holdings
Limited Headquartered in Sydney, Australia. Ngoda operates a
gold mine in the Kwekwe area of Zimbabwe.
During the year ended 31 December 2022, Ngoda borrowed
ZWL$800 million from the holding company to finance an
expansion programme for the mine. The parent company assigned
a mining engineer from the Head office in Sydney to oversee the
expansion programme.
The following were included in the expenses paid by Ngoda on 30
September 2022. (i) Management fees payable to the parent
company=ZWL$16,000,000.
 5. Non-Resident Tax on Fees
Case Study
Ngoda also enlisted the services of Bistos Pty, a South African
Company to provide advice on the best accounting software.
Various tests on the system were done until the best choice was
made. Ngoda paid ZWL$10,000,000 to Bistos on 10 March 2022
for the services.
Required:
Explain the WHT implications of the above transactions with
supporting calculations. Also outline everything Ngoda need to do
to be fully tax compliant.
 6. Non-resident tax on remittances
Any non-resident person who effects any remittance in
respect of;
Allocable expenditure shall in relation to such
remittance pay NRT on remittances to the
Commissioner;
Within 10 days of the date of remittance;
The rate of the withholding tax is 15%.
 6. Non-resident tax on remittances
Allocable expenditure means;
Expenditure of a technical, managerial, administrative
or consultative nature;
Incurred outside Zimbabwe by;
A non-resident person in connection;
Carrying on by him of any trade within Zimbabwe.
Remittance is the transfer of any amount from
Zimbabwe to another country.
 6. Non-resident tax on remittances
Case Study
Max Pty a South African company owns 90% of the
shares in Mugo Ltd a Zimbabwean company. Max
enlisted the services of Bistos Pty, another South African
Company to provide advice on the best accounting
software to Mugo Ltd. Various tests on the system were
done until the best choice was made. Mugo Ltd
transferred ZWL$10,000,000 from their CBZ account to
Bistos’ Standard Bank account in South Africa on 10
March 2022 for the services.
Required:
Explain the WHT implications with supporting calculations. Also
indicate the procedures that Mugo should take to be fully tax
compliant.
 7. Non-Resident Tax on Royalties
Sect 31 a.r.w 19th Schedule
Deducted by every payer of royalties to a non-resident.
Due within 10 days of the date of payment.
Tax rate is 15%.
 Royalties means payment for the right of use of
intellectual property within Zimbabwe.
Includes; literary, dramatic, musical, artistic, scientific
works, cinematograph films or recordings;
In which any copyright exists.
 7. Non-Resident Tax on Royalties
Any patented article, trade mark, design or model,
plan, secret formula or process, or for the use of, or the
right to use, industrial, commercial or scientific
equipment, or for information concerning industrial,
commercial or scientific experience.
 7. Non-Resident Tax on Royalties
Royalties shall be deemed to be from a source within
Zimbabwe if;
Paid by an ordinary resident of Zimbabwe, or;
Payable by virtue of the use in Zimbabwe or;
The grant of permission to use in Zimbabwe of IP.
 8. Tax on Non-Executive Directors Fees
Section 36J a.r.w 33th Schedule.
A NED is a member of a company's board of directors;
Who is not part of the executive team.
A NED typically does not engage in the day-to-day
management of the organisation but;
Is involved in policymaking and planning.
The WHT should be deducted from the fees of a NED;
Who doesn’t receive any other form of remuneration
from the entity.
If any other form of remuneration is received in
addition, the fees are subjected to PAYE.
 8. Tax on Non-Executive Directors Fees
Payable within 10 days of the date of payment.
Rate is 20%.
Applies to NEDs employed by private, public and
statutory corporations.
With effect from 1 January 2020, this tax is now a final
tax.
This means that NEDs are no longer required to pay
QPDs on the directors’ fees or;
Declare the fees on Income Tax, or;
Produce a tax clearance certificate upon receiving fees.
 8. Tax on Non-Executive Directors Fees
In cases where the NED earns or is entitled to an
amount equal to US$40,000 or rtgs equivalent;
In respect of fees or other business income, in a tax
year;
They must register for VAT.
In such a case, the director will be liable to pay and file
VAT return.
 8. Tax on Non-Executive Directors Fees
Case Study
Ngoda Mines (Pvt) Ltd (Ngoda) is a 70% Zimbabwean subsidiary
of an Australian mining conglomerate Mineral Giants Holdings
Limited Headquartered in Sydney, Australia. Ngoda operates a
gold mine in the Kwekwe area of Zimbabwe.
Tipson and Munya are full time employees as well as executive
directors of the company and as such receive salaries from Ngoda.
Morales is a non-executive director.
Morales was paid ZWL$10,000,000 for meetings he attended as a
director during the year. This was paid to him on 31 December
2022 as director’s fees. Tipson and Munya were also paid
Directors’ fees amounting to ZWL$5,000,000 each on the same
day.
Required:
Explain the withholding tax implications of the above
transactions. Outline all the procedures Ngoda Mines and the
directors need to take to fully tax compliant.
 9. Capital Gains Withholding Tax
Tax deducted at source on the disposal of specified
assets.
Due within 3 working days from the date of sale.
A depository should remit the tax to ZIMRA.
Rev 5 form should be used.
Not deducted on the sale of exempted specified assets
(s10 CGTA)
e.g sale of PPR by an elderly person.
Not deducted if the taxpayer holds a valid capital gains
tax clearance certificate.
 9. Capital Gains Withholding Tax
Depositary includes:
Conveyancer, legal practitioner, estate agent, building
societies, Sheriff or Master of the High Court,
stockbroker or financial institution who;
Holds the whole or part of the price paid or payable to
the seller in respect of the specified asset.
Where the depository fails to withhold the tax;
And pays over the whole amount to an agent;
Then the agent assumes the same responsibility.
 9. Capital Gains Withholding Tax
Rates
Immovable Assets
Acquired before 22 Feb 2019-5%
Acquired after 22 Feb 2019-15%
Marketible Securities
CGWT on listed securities held for at least 180
days=1.5% of the sales price.
CGWT on listed securities held for less than 180 days
=40% of the sales price.
CGWT on unlisted securities=5% of the sales proceeds.
 9. Capital Gains Withholding Tax
 Depositories should register with ZIMRA and file
appropriate returns.
No capital gains withholding tax shall be deducted if;
The payee concerned possesses a CGT clearance
certificate.
 9. Capital Gains Withholding Tax
 The Commissioner shall issue a clearance certificate if
he satisfied that;
No capital gains tax is likely to be payable in respect of
the sale or;
That any capital gains tax so payable is likely to be less
than;
• The capital gains withholding tax required to be
withheld; and;
• Adequate arrangements have been or will be made;
• For the payment of any capital gains tax due.
 9. Capital Gains Withholding Tax
Case Study
Mairosi is a Business Tycoon who is 59 years old and is based in
Mutare. Due to economic challenges in 2022; he decided to
dispose off a number of his assets as follows;
(i) Main residence =ZWL$8,000,000.
(ii) Shares in Econet Zimbabwe Ltd, a company listed on the
Zimbabwe Stock Exchange=ZWL$5,000,000.
(iii) A commercial building in Harare CBD. It was bought on 30
November 2022=ZWL$10,000,000.
(iv) The assets were sold through an estate agent on 17 October
2022.
Required:
Outline the CGWT implications and the procedures that should be
taken to be fully tax compliant.
 10. Value Added Withholding Tax
 s50A of the VAT Act [Chapter 23:12].
Withholding of Value Added Tax (VAT) was
introduced with effect from 1 January 2017;
Some registered operators have since been appointed
as VAT Withholding Tax agents.
The VAT Withholding Tax agents’ role is to withhold a
portion of the VAT;
When paying their suppliers who are registered for
VAT;
For the acquisition of taxable goods and services.
 10. Value Added Withholding Tax
 No VAT shall be withheld on payment for the supply
of;
Exempt supplies and;
Zero-rated supplies.
The rate is 1/3 of the output tax (VAT charged);
In cases where payment of the supply is made in
instalments;
VAT shall be withheld on the output tax on each
instalment.
 10. Value Added Withholding Tax
 The supplier must:
Receive a VAT withholding tax certificate from the
agent.
Claim the VAT withheld as a credit on submission of
VAT returns.
Attach a schedule of amounts withheld by various
agents to the VAT return.
Keep the tax certificates obtained from withholding
agents for a period of six years.
 10. Value Added Withholding Tax
 The amount withheld is VAT and it is remitted to
ZIMRA by the agent.
The supplier claims the tax as a credit on the VAT
return;
Which means the tax is an advance payment.
Therefore, the supplier is not supposed to supply less
goods or services;
Following the withholding of the tax.
 10. Value Added Withholding Tax
Every value added withholding tax agent shall
withhold and remit to ZIMRA;
From each amount to be paid to an operator;
In the currency in which the goods and services
concerned were purchased.
 Due on or before the 15th of the following month.
 10. Value Added Withholding Tax
Case Study
Shava Mines Ltd is VAT registered operator under category C in
Zimbabwe. It has been appointed by ZIMRA as a Value Added
Withholding Tax Agent. During the month of June 2022 it made
the purchases
1. ZWL$2,000,000 worth of staff basic commodities/hampers
from registered operators.
2. Office Stationery worth ZWL$1,000,000 from unregistered
operators.
3. Office furniture worth ZWL$3,000,000 from registered
operators.
Required:
Explain with supporting calculations the Value Added
Withholding Tax implications of the above transactions. Outline
what Shava should do to be fully tax compliant
 11. Automated Financial Transaction Tax
Wherever a customer of a financial institution
withdraws or;
Effect a debit from an ATM;
The financial institution shall pay an automated
financial transaction tax to the Commissioner.
Due or before the 10th of the following month.
A financial institution to recover the tax from customer
by debiting the customer’s a/c.
 12. Property or Insurance Commission Tax
A principal who pays a commission to a freelance
agent;
Shall withhold property or insurance commission tax
(20%WHT);
From that commission and shall pay the amount
withheld to the Commissioner-General;
On or before the 10th day of the following month.
 13. Tobacco Levy
There is 0.75 percent government tax on all tobacco
delivered to auction, and;
A 0.8 percent levy charged by the Tobacco Industry
and Marketing Board;
For the gross value of tobacco sold at the auction.
The Ministry of Agriculture also deducts $0.875 per
kilogramme;
From the gross value of tobacco sold at the auction.
Levy due within 48hours of sale.
 14. Mining Royalties
Charged on the gross value of exports of minerals.
ZIMRA mandated banks to withhold the royalties by;
Deducting mining royalties from payments received for
mineral exports by;
Mining firms or exporting persons, by;
Crediting the business partner's royalties account or
receiver of the exports.
 14. Mining Royalties
Due on or before the 10th of the following month.
When remitting the royalties, banking institutions will
be required to;
Prepare and submit a schedule of payments to ZIMRA.
REV 5C form to be used
 References
Income Tax Act [Chapter 23:06]
Capital Gains Tax Act [Chapter 23:01]
Value Added Tax Act [Chapter 23:12]
Finance Act [Chapter 23:04]
 THE END

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