RBZ policy on sale of disposable property

misrepresentation of policy and misconceptions about the bank’s intentions in implementing the said policy.
For purposes of clarity, some of the policy distortions and misconceptions from the media and the general public the bank has responded as follows.
(Misconception) That the policy seeks to control the disposal of immovable property
(Clarification) The policy is not about the purchase and sale of property, nor utilisation of the proceeds, but rather, the management of the external remittance of the proceeds arising from the sale of immovable property for amounts above a given minimum threshold.

• That the policy particularly restricts foreign sellers from repatriating the proceeds of real estate deals.

• The policy does not restrict foreigners from remitting funds outside the country after selling their immovable property. In fact, foreigners are entitled to instantly remit all their net proceeds (after the payment of statutory taxes to Zimra), where there is evidence that the foreigner purchased the property using funds originating outside Zimbabwe.

The proceeds of sale of immovable property will be surrendered to the Reserve Bank during the tranching period.
The proceeds of the sale of immovable property will not be surrendered to the Reserve Bank but shall be held in an account opened by the seller, with a local bank of his/her choice. It shall be treated the same way as ordinary accounts, held with local banks. That the balance subject to tranching accrues an interest rate pegged at 10 percent per annum by the Reserve Bank of Zimbabwe.

The Reserve Bank has not prescribed any interest rate to the funds that are subject to tranching. The applicable interest rate is determined by the individual banks in line with their internal policies.

• That the policy is a currency control measure by the Reserve Bank of Zimbabwe. The policy is simply a mechanism to enhance the monitoring and management of capital outflows related to the proceeds of sale of immovable property in order to reduce pressure on the country’s Balance of Payment position. In fact, permitting locals to remit their immovable property sales proceeds off-shore, without any corresponding importation of goods and services, is a form of liberalisation of the Capital Account.

• That through the policy, the Reserve Bank introduced an “involuntary loan” order.

There is no “involuntary loan” order created in this respect. The Reserve Bank will derive no benefit from the funds deposited with local banks, as is currently the case under the multi-currency system. The funds, which are maintained in the FCA (Property), remain foreign currency assets for the seller who has the liberty to utilise the funds for payment of local or foreign goods and services, in line with the liberalisation of the Current Account.

• That tranched funds are locked in for one year.

Tranched funds are accessible for remittance outside the country in equal quarterly installments. Note should be taken that funds subject to tranching, qualify for immediate usage in full, when transacting locally or importing goods and services. The tranching requirement is only applicable where one would want to remit the funds off-shore without any corresponding benefit to the country.

Frequently asked questions

• How are proceeds of company owned houses treated?

Corporates do not need to open FCA (Property). Where the companies are local, the funds should be deposited into the Corporate FCA (General). Where the transaction is between a local and foreign owned company or between two foreign owned companies, the funds should also be deposited into the Corporate FCA (General). In the event that the company selling the property is foreign and the disposal is part of disinvestment from Zimbabwe, prior Exchange Control approval shall be sought in line with Exchange Control Guidelines on disinvestment.

• Can funds in the FCA (Property) be utilised for imports?

Yes. Funds in the FCA (Property) can be freely utilised to pay for imports of goods and services during the period they are retained in the account.

• Are individuals required to submit invoices when making payment for imports from the FCA (Property)?

The Current Account has been fully liberalised. Payments for imports from the FCA (Property) should, therefore, be administered in line with existing legal and operational framework for all current account transactions.

• Will we not incur additional transaction costs by opening an FCA (Property)?

The opening of an FCA (Property) should not be viewed as anything different from the opening of any other foreign currency account opened with banks.
It is also the Reserve Bank’s intention to promote the use of the banking sector in the country in line with the existing laws on bank use promotion and suppression of money laundering.
If the owner of the property is a Zimbabwean residing in the Diaspora and the buyer is also residing outside Zimbabwe, and payment is to be effected offshore without the funds coming to Zimbabwe, would this transaction require the opening of FCA (Property)?
If the transaction is above the minimum threshold of US$50,000 and is subject to tranching requirements, the opening of an FCA (Property) is mandatory, regardless of where the seller is domiciled. – RBZ.

• Why are Authorised Dealers asking for lease agreements each time rentals are to be remitted to the property owner residing abroad?

It is an Exchange Control requirement for all service agreements to be registered with Authorised Dealers. As such, lease agreements fall under this category. However, there is no need to continue furnishing the Authorised Dealer with the lease agreement for the same property once the initial submission has been registered.

• How does this new regulation relate to the Bank Use Promotion and Anti-Money Laundering Act?

This policy is also aimed at promoting bank-use in line existing laws on bank use promotion and suppression of money laundering regulations. In this respect, the source of funds to be remitted is known.
Is this new policy not going to prejudice the buyer if the transfer of title is going to take one year to be effected?
The purchaser is not affected by this new policy. It is only the seller, the beneficiary of sale proceeds, who is required to open FCA (Property). The transfer of title is expected to be effected in the normal way through the Registrar of Deeds.

• In which instances is the FCA (Property) required?

The opening of an FCA (Property) is required only in cases where sale proceeds are above the minimum threshold of US$50,000 and remittances require tranching. The application of this policy is limited to disposal of property by locals (resident and non-resident Zimbabweans who have not formally emigrated). The policy does not apply to the disposal of property by foreigners, formal emigrants, beneficiaries of deceased estates domiciled off-shore and locals whose immovable property sales are below the minimum threshold of US$50,000.

• Will there be need for tranching of remittances if the property is worth US$210,000 and a buyer is paying in cash?

The policy applies to all sale proceeds that are above the minimum threshold of US$50,000. However, in cases where the balance after the first tranche is insignificant, a special Exchange Control dispensation may be granted for a wholesome remittance.

• Does tranching affect Zimbabweans who sell their properties and wish to invest on external stock exchanges?

Individuals may freely invest on external Stock Exchanges. In the case where the individual’s sale proceeds are subject to tranching under the new policy, such investments will be done as and when funds are available to be released from the FCA (Property). In the event that the individual wants to invest on the local bourse, sale proceeds are entitled to 100 percent immediate release, because this is considered as domestic utilisation of funds.

• What is the purpose of introducing FCA (Property) if sellers can use their existing accounts to deposit their sale proceeds?

Existing accounts held by individuals are treated as Individual (FCAs) for Exchange Control purposes. This means that funds deposited into these accounts are designated as free funds and are not subject to Exchange Controls on utilisation and off-shore remittances. However, funds emanating from sale of immovable property above the threshold of US$50,000 cannot be treated as free funds under this new policy. As such, these funds should be deposited in an FCA (Property), which is separate from Individual (FCA) for purposes of distinction and policy applicability.

• Is a registered Estate Agent who earns commissions from the sale of immovable properties allowed to invest such funds externally?

Commissions earned by local Estate Agents from the sale of immovable property are treated as domestic commercial earnings and are treated as revenues to be deposited into Corporate FCA (General). In terms of existing Exchange Control Regulations, where a corporate wants to invest off-shore – cross border investment – prior Exchange Control approval should be sought.

• If sale proceeds are a result of disposal of properties by the small-scale real estate agents and sale proceeds are for amounts that are less than US$15,000 and in some cases payment is in cash, would it be necessary to open FCA (Property) in view of the costs involved in opening such an account?

The setting of a minimum threshold of US$50,000 means that all property sales in the small-scale sector and falling below this threshold are not subject to this policy.