Companies to pay tax in proportion to the currency used for trade: Treasury

HARARE – Treasury is currently working on a review of the Framework of Tax Payments to ensure a seamless transition from exclusive payment of taxes in the currency of trade to local currency.

This review will realign the legislative requirements, in particular, where the currency of trade is specified in Principal Legislation and will also set the current ratios of transactions in local and foreign currency.

The ministry also believes that the review will minimise economic shocks associated with abrupt policy changes.

The Reserve Bank of Zimbabwe, in its Monetary Policy Statement, had advised that in order to foster demand for local currency, government will make it mandatory for companies to settle at least 50% of their tax obligations on Quarterly Payment Dates (QPDs) in ZiG.

However, in an earlier article, Finance Permanent Secretary George Guvamatanga had noted that this was just a recommendation and an analysis of the liquidity situation would inform them on the tax ratios applicable.

In a statement, Finance Minister Mthuli Ncube said that cognisant of the ongoing review, payment of corporate income tax should be guided by Section 4A of the Finance Act, 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 in local and foreign currency, corporate income tax should be accounted for in the same ratio.

However, the Minister did give an option. He said that notwithstanding the current legislative provisions, Treasury has granted authority for corporates to account for the 2024 second quarter tax obligations in both local and foreign currency on a 50:50 basis.

Ncube said that companies that had already paid tax for Q2, in accordance to the current legal provisions are advised that Zimra has been given authority to manage such transactions on an administrative basis as guided by the law.

He also said that business and the general public have the option to pay government fees and charges in local currency, unless where specified to the contrary. In addition, customs duty on imported goods is payable in local currency, except for designated foreign currency dutiable non-essential or luxury products.