Key tax measures in the 2022 Budget

By KPMG Zimbabwe

On Thursday 25 November 2021, the National Budget was presented by the Honourable Mthuli Ncube, Minister of Finance and Economic Development under the theme of “Reinforcing Sustainable Economic Recovery and Resilience”.

The budget proposals were promulgated through the 2021 Finance Act (No.7) which was gazetted on the 31st of December 2021. This document includes the key revenue highlights from Finance Act (No.7) as well as the economic outlook and other topical tax issues we feel are of importance. The ZIMRA Public Notice 8 of 2022 (‘The Notice”), issued in January 2022, also highlights some of the important amendments which came into effect from 1 January 2022.

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.

Key Tax Measures

The following are the key tax measures introduced in the 2022 budget and the 2021 Finance Act (No.7) which were effective from 1 January 2022, unless stated otherwise.

Employees’ and Pensioners’ Welfare

• Increase in monthly tax-free thresholds from ZWL$10,000 to ZWL$25,000 and US$70 to US$100.
• Annual tax-free bonus threshold increased from ZWL$25,000 to ZWL$100,000 and US$320 to US$700 (w.e.f. 1 November 2021).
• Effective 1 January 2021, the tax-free portion of retrenchment was reviewed as follows:
  • where the package is in ZWL$, the exempt portion is the greater of ZWL$400,000 or one-third of the package up to a maximum of ZWL$2,000,000.
  • No changes were made to the US$ thresholds for

Further changes are effective from 1 January 2022 as follows:

• Pension deductions where the package is in ZWL$, the exempt portion is the greater of ZWL$1,300,000 or one third of the package up to a maximum of ZWL$4,875,000.

• where the package is in foreign currency, the exempt portion is the greater of US$10,000 or one-third of the package up to a maximum of US$37,500.
• Maximum allowable deduction for pension contributions has been increased to ZWL$390,000 or US$3,000 per annum.
• Corporate Tax
  • Donations to medical institutions run by the government, religious institutions and local authorities limited to US$100,000 or equivalent at the prevailing auction
  • A tax credit of US$50 per month for each additional employee who is physically challenged, who has served not less than 12 consecutive months earning a wage equal to or above the minimum taxable

  VAT

  • Definition of “tax invoice” or “fiscal tax invoice”
  • Tax invoices generated before 31 December 2021, must be claimed by 31 March
  • Non-compliant taxpayers, in respect of fiscalisation requirements, will no longer be issued with a tax clearance

  Compulsory VAT registration increased to ZWL$7,800,000 or US$60,000.

• • Inclusion in gross income of 30% of the cost to the employer for use at the home of the employee or outside of the work premises of:
    • mobile or landline telephone airtime; or
    • airtime or data for broadband or internet access, unless the employer proves to the Commissioner that any part of the taxable portion of such cost was used for employment
    • Tax Credits
      • The following tax credits were increased from ZWL$72,000 to ZWL$117,000 with effect from 1 January 2022:
        • Elderly persons’ credit
      • No changes were made to the US$ tax credits. Blind persons’ credit
      • Mentally or Physically disabled persons’ credit

Withholding Tax

• Increase on the withholding tax on tenders rate from 10% to 30%. ZWL$ threshold for withholding tax on tenders reviewed from ZWL$80,000 to ZWL$130,000. The US$ threshold remains at US$1,000.
• Increase in excise duty on cigarettes from 20% + US$5/1000 cigarettes to 25% + US$5/1000

Tobacco Levy Tax Returns

• Changes to tobacco levy return submission from within 48 hours from the date of sale to the 10th of the month following the
• Remittances remain due within 48 hours from the date of sale or relinquishing of the tobacco.

IMTT thresholds

• Exemption of transfers of less than ZWL$1,000 with effect from 1 January
• A flat fee of ZWL$1,320,000 shall be charged for amounts equivalent to or in excess of ZWL$66,000,000.
• ZIMRA public notice No. 8 of 2022 highlighted a flat fee of ZWL$1,325,000 but the Finance Act (No.7) of 2021 makes reference to ZWL$1,320,000 which translates to the stipulated 2%