ZiG transactions attract ZiG corporate tax

Nyashadzashe Ndoro

Chief Reporter

Finance Minister Mthuli Ncube has directed that Corporate Income Tax payments should mirror the currency used in business transactions.

In a statement released on Wednesday, June 19, regarding the second quarter corporate income tax for 2024, Minister Ncube stipulated that companies operating solely in local currency must pay taxes in the same currency, denominated in Zimbabwe Gold.

This move is part of a broader review of the Framework of Tax Payments aimed at ensuring a smooth transition to local currency payments.

The review, currently underway at the Treasury, seeks to align legislative requirements with the currency of trade, set ratios for local and foreign currency transactions, and minimise economic shocks resulting from sudden policy changes.

Ncube explained that Corporate Income Tax payments will be guided by Section 4A of the Finance Act [Cap. 23:04], which stipulates that tax payments should be made in the same proportion as the currency of trade.

To illustrate this, the Minister explained that if a company transacts 60% in local currency and 40% in foreign currency, it will pay 60% of its Corporate Income Tax in ZiG and 40% in foreign currency.

However, the Treasury has granted permission for companies to pay their 2024 Second Quarter Corporate Income Tax obligations in both local and foreign currency on a 50:50 basis.

“Cognisant of the above, I wish to advise that payment of Corporate Income Tax should be guided by the provisions of Section 4A of the Finance Act [Cap. 23:04], which provides for payment of tax in the equivalent proportion of the currency of trade. For example, if a company exclusively transacts in local currency, tax shall accordingly be paid in local currency (ZiG).

“Similarly, where a corporate transacts in the ratio of 60%:40%, that is, local and foreign currency, respectively, Corporate Income Tax should, accordingly, be accounted in the same ratio.

“However, notwithstanding the current legislative provisions, Treasury authority is hereby granted for corporates to account for the 2024 Second Quarter Corporate Income Tax obligations in both local and foreign currency on a 50:50 basis,” he said.

Ncube further announced that businesses and the general public can opt to pay Government fees and charges in local currency, unless otherwise specified. Customs duty on imported goods will also be payable in local currency, except for certain foreign currency dutiable non-essential or luxury products.

The Minister assured that the Treasury will specify the taxes that will be exclusively payable in local currency, with the necessary legislative support, in due course.

He stated that this comprehensive review of the tax framework will ensure a seamless transition and minimise economic shocks associated with sudden policy changes.