ZIMBABWE Law and Practice Contributed by: Nellie Tiyago and Rudo Magundani, Scanlen & Holderness
• reduced withholding tax – using a blocker corpora - tion in a low-tax jurisdiction can reduce the with - holding tax on dividends; • deferred tax liability – income earned by a blocker corporation may not be taxable in Zimbabwe; and • flexibility: blocker corporations can facilitate invest - ment structuring and tax planning. Tax-Preferred Vehicles in Zimbabwe The tax-preferred vehicles in Zimbabwe are: • SEZs – these offer tax incentives, including exemp - tion from CGT; and • EPZs – these provide tax benefits, including reduced CGT. In addition, the Investment Promotion Act offers tax incentives for eligible investments. 9.5 Anti-Evasion Regimes Zimbabwe imposes various anti-avoidance rules on FDI, including: • transfer pricing rules governing transactions between foreign investors and local companies; • thin capitalisation rules limiting debt-to-equity ratios to 3:1 – exceeding this ratio may result in disallowed interest and a withholding tax; • an overarching anti-avoidance provision in the Income Tax Act to counter transactions aimed at avoiding or postponing tax liability; and • DTAs – Zimbabwe has signed DTAs with multiple countries to avoid double taxation, restricting with - holding taxes on dividends, interest and royalties. 10. Employment and Labour 10.1 Employment and Labour Framework Legal Framework The employer-employee relationship is governed by the Labour Act of Zimbabwe, as read in conjunction with sector-specific collective bargaining agreements (CBAs). The contract of employment must be aligned with the requirements of the Labour Act. At present, the type of contracts that are permitted by law are contracts for casual or seasonal work, or for
the performance of a specific service. Other regula - tions that an employer must be aware of pertain to: • health and safety; • social security; • pensions; • accident prevention funds; and • environmental laws. Protection From Unlawful Dismissal The law protects employees from unlawful dismissal. An employee’s contract of employment can only be terminated by mutual consent, by effluxion of time at the expiry of a contract of employment, for discipli - nary reasons after a hearing is conducted or by way of retrenchment. Trade Unions: The Right to Collective Job Action The law also protects the rights of employers and employees to join trade unions. Such trade unions must be registered under the Labour Act to be recog - nised. Registered trade unions and employer organi - sations are able to collectively negotiate working conditions for employees falling within their sectors. These negotiations are recorded and registered as CBAs. A CBA that has been registered becomes law, binding all employers and employees within its sector. The law also provides for the right to engage in col - lective job action where there is a dispute of interest. The Labour Act sets out the mandatory parameters for lawful exercise of a collective job action – ie, seven days’ written notice of intent to resort to such action, specifying the grounds for the intended action and any attempt to conciliate upon the dispute. Exchange Control Approval for the Payment of Salaries Into Foreign Accounts It is permissible for an employer to pay the salaries and wages of foreign employees into foreign accounts upon exchange control approval being granted. How - ever, all tax obligations arising from such salaries and wages must be computed and paid in the currency in which that salary was paid to the employee. It is unlawful to pay employees in foreign currency and compute and remit taxes in local currency.
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