Zim, Switzerland sign double taxation agreement

Zimbabwe and Switzerland yesterday signed a landmark agreement to eliminate double taxation and prevent tax evasion in a development expected to enhance economic cooperation and attract cross-border investments between the two nations.

Speaking at the signing ceremony in Harare yesterday, Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, hailed the agreement as a critical step in strengthening economic ties.

“It is important to note that the imposition of similar taxes on the same income has detrimental effects on the cross-border movement of capital, technology and expertise,” Minister Ncube stated, adding, “Hence the need for an effective mechanism to eliminate such practices.”

The Double Taxation Agreement (DTA) aims to ensure that businesses and individuals operating in both countries are not taxed twice on the same income, which is expected to promote foreign direct investment.

“The agreement embodies the key principles of ensuring that companies investing in both contracting parties’ economies contribute fairly to government revenue while ensuring that income already taxed in Zimbabwe, for example, is not subjected to additional tax in the Swiss Federation,” Minister Ncube explained.

The Finance Minister also emphasised that the modern digital economy has presented challenges in taxation, with multinational corporations often exploiting the loopholes.

He pointed out that the agreement incorporates measures to prevent treaty shopping, where entities from third countries attempt to benefit from the treaty unfairly.

“The inclusion of the entitlement to benefit clauses and anti-treaty shopping provisions is an important step in eliminating such practices, which are detrimental to domestic resource mobilisation efforts,” he said.

Switzerland’s Ambassador to Zimbabwe, Stefan Rey, echoed these sentiments, highlighting the broader economic significance of the agreement.

“This is further evidence of our excellent bilateral relations,” Ambassador Rey remarked.

“Such agreements foster cooperation between the competent authorities of the contracting states, facilitating the exchange of information on tax matters.

‘‘Through reducing the risk of double taxation, these treaties promote international investment and trade.”

Switzerland, a key player in global finance and trade, has maintained robust economic engagements with Zimbabwe over the years. According to Minister Ncube, Swiss companies are already deeply integrated into Zimbabwe’s economy.

“I do not know how many of you know that the biggest, probably the biggest, buyer of coffee from the Eastern Highlands is a company called Nespresso, based in Lucerne, Switzerland. So already you can see the benefits of this relationship,” he noted.

“Even prior to signing the agreement, those of you who enjoy Cerevita like me, you know that it is made by a Swiss company (Nestle) based here in Harare.”

Other Swiss companies operating in Zimbabwe include Asea Brown Boveri (ABB), which specialises in mechanics and robotics, agriculture companies Syngenta and Organic Africa as well as Schindler, the elevator lift company

Ambassador Rey was optimistic about the future positive impact of the DTA, stating, “Businesses and individuals are more likely to invest in a country if they know they will not suffer from double taxation. I am very optimistic that this double taxation agreement will contribute to a stronger and more prosperous future for both our nations.”

Beyond the direct financial benefits, the agreement is expected to enhance transparency in tax matters and combat illicit financial flows. Minister Ncube emphasised the importance of information-sharing between tax authorities, beyond what the agreement formally stipulates.

“Contracting parties should go beyond the Article 25 provisions of this agreement and ensure effective and efficient exchange of information upon request and automatic exchange of information with a view to combat aggressive tax avoidance, tax evasion, and illicit financial fraud,” he urged.

Secretary for Finance, Economic Development, and Investment Promotion, George Guvamatanga, reiterated the Government’s commitment to strengthening international economic relations through such agreements.

“The signing of the agreement comes at a time when the Government is enhancing its economic, diplomatic and political relations with all countries, pursuant to the engagement and re-engagement mantra by His Excellency, the President, Dr Mnangagwa,” Mr Guvamatanga stated.

He further pointed out that Zimbabwe and Switzerland enjoyed significant trade across multiple sectors, including gold, ferroalloys, nickel ore, coffee, tea, edible fruits and tobacco.

“The signature of the tax treaty will, thus, pave the way for the enhancement of investment, in particular, through the Permanent Establishment of companies, which is key in the growth of both economies,” he said.

The Treasury, he noted, would immediately undertake the legal procedures necessary to bring the agreement into force. He also highlighted Zimbabwe’s broader efforts to ensure tax transparency, citing the recent endorsement of the Yaoundé Declaration by Minister Ncube.

“The agreement conforms to international best practices, including the emphasis on the importance of exchange of taxpayer information, which is a topical issue worldwide,” Mr Guvamatanga said.

“Recently, the Minister of Finance endorsed the Yaoundé Declaration, a significant initiative aimed at enhancing transparency and cooperation in tax matters among participating countries.”

With the signing of the Swiss-Zimbabwean DTA, Zimbabwe now has 19 operational tax treaties, forming a crucial part of its strategy to create an investor-friendly business climate.

“This agreement is premised on the key principles of equity, fairness, and transparency, which will go a long way in clarifying the taxation of cross-border income and the treatment of natural persons and independent consultants in the two jurisdictions,” the permanent secretary added.

As Zimbabwe continues to push its re-engagement agenda, the agreement with Switzerland stands as a testament to its commitment to fostering international trade and investment.

It is expected to provide much-needed confidence for investors looking to do business in Zimbabwe, offering a more predictable tax environment and reducing barriers to cross-border economic activity.herald