Treasury authorises 50-50 currency split for tax payment

TREASURY has granted corporates authority to pay Second Quarter Corporate Income Tax obligations in both local and foreign currency on a 50:50 basis as it works on a comprehensive review of the framework of tax payments.

This comes at a time when the economy is showing relative stability after the introduction of ZiG.

Zimbabwean law mandates companies to pay taxes quarterly, with these deadlines known as quarterly payment dates (QPDs), falling on March 25, June 25, September 25 and December 20 of each year.

According to the Reserve Bank of Zimbabwe (RBZ), the Zimbabwe Revenue Authority (Zimra) collects approximately US$300 million worth of corporate income tax each quarter.

This translates to a projected demand for ZiG equivalent to US$150 million, approximately ZiG2 billion.

At the moment there is about ZiG1 billion worth US$80 million that is circulating in the official market following the currency conversion in April when ZiG replaced the Zimbabwe dollar.

The imbalance between the ZiG available in the market and the expected volume needed by businesses to fulfil their QPD commitments is projected to greatly boost demand for the domestic currency.

This could result in a substantial strengthening of the domestic currency.

In a statement yesterday, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube said in recent months, the economy has shown relative stability spurred by the RBZ Monetary Policy Statement on 5 April and the successful transition from the Zimbabwe dollar to the ZiG.

He said a stable economic environment brought by ZiG has positively affected the economy, with the Government acknowledging the acceptance of ZiG by economic agents and the public.

ZiG continues to show its viability as the exchange tender of choice with more industry players now accepting the new local currency in exchange for goods and services.

The apex bank introduced the ZiG as part of a raft of policy interventions to address exchange rate volatility, curtail inflation and restore macroeconomic stability.

The new currency is backed by precious minerals, mainly gold and foreign currency reserves.

Zimbabwe has 2,5 tonnes of gold and US$300 million in cash reserves to back the new currency.

Of the gold reserves, 1,5 tonnes are held at the RBZ vaults and one tonne is held offshore.

It is against this backdrop and with the goal of sustaining the positive economic momentum that Prof Ncube said Treasury is intensifying efforts to support the Fiscal and Monetary Policy Framework aimed at further anchoring the currency, exchange rate and price stability.

The review of the Framework of Tax Payments is meant to facilitate a smooth transition from exclusive payment of taxes in the currency of trade to local currency, re-align the legislative requirements, in particular, where the currency of trade is specified in Principal Legislation.

Added to that, the review aims to establish the current ratios for transactions in local and foreign currency to reduce economic disruptions associated with abrupt policy changes caused by sudden policy shifts.

“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 percent, that is, local and foreign currency, respectively, Corporate Income Tax should, accordingly, be accounted in the same ratio,” said Prof Ncube.

He added that the 2024 Second Quarter Corporate Income Tax obligations should be paid in both local and foreign currency on a 50:50 basis.

“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.

“Corporates that have already paid tax for the Second Quarter, in accordance to the current legal provisions are advised that the Commissioner General of the Zimbabwe Revenue Authority is hereby authorised to manage such transactions on an administrative basis as guided by the law,” said Minister Ncube.

He added that businesses and the general public have the option to pay Government fees in local currency, unless where specified to the contrary.

“Additionally, customs duty on imported goods is payable in local currency, except for designated foreign currency dutiable non-essential or luxury products. As part of the comprehensive review of the Framework of Tax Payments, Treasury will, in due course, specify the taxes which will exclusively be payable in local currency and the necessary supportive legislation, with the requisite approval by Parliament.”