ZIMBABWE Law and Practice Contributed by: Nellie Tiyago and Rudo Magundani, Scanlen & Holderness
by the Commissioner General of ZIRMA and busi - ness property transfers to controlled companies and marketable security sales subject to the capital gains withholding tax (since 1 February 2009). Farm owners whose farms were expropriated under the land reform programme will not be subject to CGT on any amounts received or accrued as a result of the expropriation. 9.2 Withholding Taxes on Dividends, Interest, Etc Companies Withholding Non-Resident Shareholders’ Tax A dividend payable to a non-resident shareholder is subject to withholding tax. Every company that dis - tributes a dividend to a foreign company, a foreign life insurance company or a non-resident partnership must withhold non-resident shareholders’ tax from that dividend and shall pay the amount withheld to the Commissioner of Taxes within 30 days of the date of distribution. The tax is payable at a rate of 15% unless the investor qualifies to benefit from a DTA. For a listed company, the rate is 15%. A reduced rate of tax applies to dividends paid to a non-resident com - pany that holds at least 25% of the voting powers of the Zimbabwean entity, either directly or indirectly, and is resident in a country with which Zimbabwe has a DTA. If these conditions are met, the lower tax rate will apply. The specific applicable rates will be con - tained in the relevant treaty document. Exemptions from payment apply to dividends distributed to a for - eign medical aid society, pension fund or benefit fund. Non-Resident Tax on Interest Non-resident investors are currently exempt from pay - ing any withholding tax on interest. However, if a non- resident cedes its interest to a resident, this may result in that interest being taxed in Zimbabwe. 9.3 Tax Mitigation Strategies There are various tax mitigation strategies that foreign investors can employ to limit tax liability. They can: • acquire assets through a local subsidiary, increas - ing the depreciable asset basis and reducing tax - able income; • procure investment licences to enjoy tax benefits;
• apply for national project status for qualifying investments to enjoy tax exemptions; • invest in SEZs where specific tax benefits are granted by the government; and • take advantage of DTTs where applicable. Export-related benefits can be utilised as export-ori - ented incentives. 9.4 Tax on Sale or Other Dispositions of FDI In Zimbabwe, capital gains derived by a foreign inves - tor from the sale or disposition of FDI are generally subject to tax, but exemptions and relief are available CGT exemption applies to foreign investors who hold at least 25% of the voting power in a Zimbabwean company, provided there is a DTA between Zimbabwe and the investor’s country of residence. FDI exemption applies to investments made under the Zimbabwe Investment Authority (ZIA) Act, exempting capital gains from tax for a specified period. under certain conditions. Exemptions and Relief Types of FDI not eligible for capital gains relief include: • real property – gains from the disposal of immov - able property are taxable; • partnership interests – gains from the disposal of partnership interests may be taxable; and • specified assets – certain assets, like marketable securities, may not qualify for exemption. Significant exceptions include: • immovable property – taxable gains apply to dis - posals of real property; • partnership interests – taxable gains may apply to disposals of partnership interests; and • non-resident companies – CGT applies to gains from the disposal of Zimbabwean assets. Tax Benefits for Foreign Investors Using a Blocker Corporation Benefits for foreign investors using a blocker corpora - tion include:
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