Online Reporter
Martin Kadzere
The Zimbabwe Revenue Authority (ZIMRA) has begun implementing measures to increase tax compliance among businesses operating without formal registration with the first quarter provisional tax payment due this coming Tuesday.
These new tax measures among a host of others to boost state coffers, were announced by Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube in his 2025 National Budget presented in November last year.
In introducing the measures, Mthuli stated that a survey of selected enterprises in the emerging sector revealed that “a number of operators are engaged in significant economic activities, hence, qualify to contribute to the Fiscus through Personal and Corporate Income Taxes, as opposed to Presumptive Tax.”
“…I also propose that any operator which fails to register and account for taxes be compelled to pay tax….I further propose to empower ZIMRA to temporarily close businesses which fail to adhere to the above requirements, including failure to register for tax purposes, until such registration and payment of applicable taxes are completed,” said Mthuli.
A key component of these measures is the implementation of fixed quarterly provisional tax payments for selected business categories found to be operating without proper ZIMRA registration.
This means that instead of calculating provisional tax based on actual income, these businesses will be subjected to predetermined amounts.
ZIMRA has listed selected business categories that will be subject to mandatory quarterly provisional tax payments if they remain unregistered. These include spare parts dealers (US$9 000), car dealers (US$15 000), grocery and kitchenware merchandisers (US$9,000), and fabric merchandisers (US$12,000).
The provisional tax payment of US$12,000 will apply to clothing merchandisers or boutiques, US$15,000 for hardware operators, and US$5,000 for lodges registered or required to be registered under the Tourism Act.
According to ZIMRA, businesses that have applied for registration or are already registered with ZIMRA by the date the provisional tax is due will pay their provisional tax in the normal manner.
For taxpayers whose estimated total income is more than 50 percent in foreign currency, ZIMRA mandates a 50/50 accounting basis. This requires taxpayers to separately account for tax obligations in both foreign and local currency. Conversely, taxpayers with 50 percent or less of their estimated total income derived from foreign currency must account for tax in the currency of trade.
The first Quarterly Payment Date (QPD) for the tax year ending December 31, 2025, will require taxpayers to remit 10 percent of their estimated provisional tax. This initial payment serves as a preliminary contribution towards their total tax liability for the year, according to ZIMRA
Effective January 1, 2025, self-employed professionals — including architects, engineers or technicians, legal practitioners, health practitioners, and real estate agents — will transition from presumptive tax to the self-assessment system, requiring them to pay provisional tax.
Faced with a shrinking tax base due to widespread informalisation and the prevalence of cash transactions, the Government has intensified efforts to boost tax compliance.
The business categories targeted by ZIMRA’s mandatory quarterly provisional tax payments, specifically for unregistered entities, are highly visible throughout Harare and other urban centers across the country.
Clothing merchandisers and fashion boutiques, in particular, have become dominant occupants of retail space within Harare’s central business district (CBD). Over the past few years, property owners in Harare have increasingly adopted a “cubicle model” for retail spaces.
This involves subdividing larger shop floor areas into smaller, individual cubicles, which are then leased to a variety of businesses.
Clothing and electronics retailers have been particularly quick to take advantage of this model, establishing numerous small-scale operations within these subdivided spaces.
There has also been a notable
increase in auto spare parts businesses, lodges converted from residential properties, and car dealerships, particularly in the peripheral areas of the central business district. However, the lack of registration poses a substantial challenge to revenue collection efforts, as it allows numerous businesses to operate outside the national tax system. Some economic analysts have attributed poor revenue collection, particularly from the informal sector, to increased informality and cash transactions, which make tax evasion difficult to combat.
They highlighted the initial success of the 2 percent Intermediated Money Transfer Tax (IMTT) in capturing revenue from online payments, but its effectiveness has declined due to the shift back to cash transactions. This, combined with difficulties in enforcing presumptive tax, has resulted in substantial tax evasion and revenue shortfalls.
Economic analyst Tecla Karumbi acknowledged that while fixed quarterly provisional tax payments appear to be a positive step towards fostering compliance, she cautioned that corruption and weak enforcement could undermine their intended goals. “Corruption and poor enforcement could prevent them (ZIMRA) from delivering the expected results,” said Karumbi. Some shop owners interviewed by Business Weekly reported that ZIMRA enforcement agents regularly visit their premises, demanding information regarding goods clearance, revenue, and duty payment details. They allege that bribes are commonly offered to prevent shop closures.
“It’s pay or close your doors,” a shop attendant at a high-end clothing boutique in Harare CBD said.
Authorities’ efforts to tax Zimbabwe’s substantial informal sector have proven largely ineffective.
In the first eight months of 2024, the Treasury collected only 3 percent of its targeted presumptive tax revenue. Specifically, against a target of ZiG 1.2 billion, only ZiG 35.2 million was realised.
The government’s presumptive tax, a fixed-rate levy for informal businesses lacking formal financial records, targets sectors such as hair salons, bottle stores, and public transport operators. Its aim is to integrate these businesses into the formal tax system and expand the national revenue base. Meanwhile, Mthuli has announced new income tax interest rates effective in 2025. For unpaid local currency income tax, the rate will be the bank policy rate plus 5 percent. For foreign currency income tax, the rate is fixed at 10 percent. The Commissioner-General for ZIMRA is obligated to pay interest on overdue refunds after 60 days, at the same rates.
Previous interest rate notices from 2019 and 2022 have been repealed
Bongani Ndlovu