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Zimbabwe's income tax is a tax on taxable income, and taxable income is reached by subtracting allowable deductions from income. The engine that allows deductions is Section 15 of the Income Tax Act [Chapter 23:06] — in particular the general deduction formula in Section 15(2)(a), which permits "expenditure and losses to the extent to which they are incurred for the purposes of trade or in the production of the income". But the Act does not let a taxpayer deduct everything that survives the Section 15 gate. Section 16, headed "Cases in which no deduction shall be made", is the statutory list of prohibited deductions — the items that may not be subtracted even where, on a loose reading of Section 15, they look business-related.

The opening words of Section 16(1) are load-bearing: "Save as is otherwise expressly provided in this Act, no deduction shall be made in respect of any of the following matters". This tells you two things. First, Section 16 operates as an override on Section 15: where a paragraph of Section 16 bites, the deduction is gone regardless of Section 15. Second, the override is itself subject to express contrary provision — so a specifically permitted deduction elsewhere in the Act (for example a regulated pension-fund contribution under Section 15(2), or a capital allowance under the Fourth Schedule) can survive what would otherwise be a Section 16 prohibition.

The prohibited matters run from paragraph (a) to paragraph (u). They group naturally into themes: private and domestic consumption (paragraphs (a) and (b) — maintenance of self and family, and domestic/private expenses including home-to-work travel); amounts that are not a real economic cost to the taxpayer (paragraph (c), recoverable losses; paragraph (h), notional interest on own capital); income tax and certain transaction taxes themselves (paragraph (d), tax and interest on tax; paragraph (d1), Intermediated Money Transfer Tax); appropriations of profit rather than expenses (paragraph (e), reserves and capitalised income; paragraph (l), shares awarded to employees); expenditure tied to non-taxable income (paragraph (f), the production of exempt or foreign-source income; paragraph (n), proviso-(i) income; paragraph (o), interest on bank deposits and loans); and a modern cluster of anti-avoidance and base-erosion caps (paragraph (k), passenger-vehicle lease caps; paragraph (q), thin-capitalisation 3:1 debt-to-equity; paragraph (r), management and administration fees to associated enterprises; paragraph (s), foreign-loan interest at off-market exchange rates; paragraph (t), royalty payments above 1½% of turnover; and paragraph (u), nominee rental expenses where the beneficial owner is not disclosed). Section 16(2) adds a sweep-up power: a non-expenditure deduction may be refused if the Commissioner decides the matter is not directly related to the trade carried on in Zimbabwe.

Two important clarifications that examiners love to test. Expenditure of a capital nature is not prohibited by Section 16 at all — it is excluded one step earlier, by the "except … expenditure or losses of a capital nature" proviso inside Section 15(2)(a)(i) — and is instead recovered, where the law allows, through capital allowances under the Fourth Schedule. And political donations are likewise not named in Section 16; their non-deductibility flows from the positive limb of Section 15(2)(a) (they are not incurred "for the purposes of trade or in the production of the income"), while a defined band of charitable and public-interest donations is specifically allowed by Section 15(2). Reading Section 16 in isolation, without Section 15 beside it, is the single most common student error.

Several paragraphs are recent and rate- or threshold-specific, so the year of assessment matters. Paragraph (k) caps deductible leasing of a passenger motor vehicle at US$50,000 (cumulative) for vehicles first leased on or after 1 January 2021 (increased by the Finance Act 13/2023 with effect from 29 December 2023). Paragraph (q) (thin capitalisation) was substituted by the Finance Act 1/2018; paragraph (r) (management fees) was substituted by the Finance Act (No. 2) of 2017; paragraph (s) (foreign-loan interest) was inserted by Act 13/2019 with effect from 1 January 2020; and paragraphs (t) and (u) were inserted by the Finance Act (No. 2) 7/2024 with effect from 1 January 2025. Paragraph (d1) (disallowing IMTT) was inserted by the Finance Act 1/2019 but was declared ultra vires in Mlilo v Minister of Finance (19-HH-605), against which an appeal was noted — so its current operative status carries a litigation caveat. This lesson walks every paragraph clause by clause, works the computations for individuals, SMEs and corporates, and integrates the Zimbabwean case law annotated in the Act itself.

Every tax system that taxes net income must answer a deceptively simple question: which outgoings may a taxpayer subtract before the rate is applied? If the answer were "anything you spent that helped the business", the tax base would be soft, manipulable, and unfair — a taxpayer could dress up private consumption, profit appropriations, and aggressive cross-border payments as "business expenses" and shrink the fisc's claim at will. Zimbabwe's Income Tax Act [Chapter 23:06] answers the question in two coordinated moves. Section 15 opens the door — it lists what may be deducted, anchored by the general deduction formula in Section 15(2)(a). Section 16 then shuts specific doors — it lists the matters for which "no deduction shall be made". This lesson is about that second move.

As established in the lesson on Income Tax Foundations, the charge under Section 6 is on taxable income, not gross income, and taxable income is produced by a funnel: gross income (Section 8) less exemptions (Section 14 and the Third Schedule) gives income; income less allowable deductions gives taxable income; the rate from the Finance Act is then applied and credits subtracted. Deductions therefore sit at the very heart of the computation. They are also where the largest amount of audit friction lives: ZIMRA assessors scrutinise claimed deductions far more aggressively than declared income, because over-claiming deductions is the easiest and most common way to understate liability. Section 16 is, in practical terms, ZIMRA's primary disallowance toolkit.

The concept a beginner must grasp first is the difference between a prohibited deduction and an expense that simply fails the general test. These are not the same thing, and the distinction governs how you argue a dispute:

• An expense that fails the Section 15(2)(a) positive test never qualified in the first place — it was not "incurred for the purposes of trade or in the production of the income". A purely private grocery bill fails here; so does a political donation. You do not even need Section 16 to refuse it.
• A Section 16 prohibition is a deliberate, express statutory "no" that can strike down an expense even if it would otherwise pass Section 15. For example, interest a company pays on excessive related-party debt is genuinely "for the purposes of trade" — yet paragraph (q) disallows the slice above a 3:1 debt-to-equity ratio anyway. That is the override at work.

Why does the Act bother with an express list when the general test already screens out non-business spending? Three reasons. First, certainty: naming the disallowed items removes argument (a taxpayer cannot litigate that home-to-work travel is "really" for trade — paragraph (b) settles it). Second, anti-avoidance: paragraphs (q), (r), (s), (t) and (u) are calibrated caps that attack base erosion — profit-shifting through interest, management fees, royalties and nominee structures — which a general test could not police with the same precision. Third, policy and integrity of the base: paragraphs (d) and (d1) stop the system from cannibalising itself (you cannot deduct income tax in computing income tax), and paragraph (e) preserves the line between earning profit and appropriating it.

This topic is heavily examinable precisely because it requires the candidate to hold two provisions in mind at once and to know which paragraph applies to which fact pattern. It is also where real money is won and lost in practice: the management-fee, royalty and thin-cap caps routinely move millions on a single multinational's return, and the private-expense and entertainment disallowances are the bread and butter of SME audits.

B.1 The general deduction gateway — Section 15(2)(a)

To understand a list of prohibitions you must first see the gate they qualify. Section 15(1) directs that "there shall be deducted from the income of such person the amounts allowed to be deducted in terms of this section", and Section 15(2)(a) defines the headline allowance: "expenditure and losses to the extent to which they are incurred for the purposes of trade or in the production of the income". This is the general deduction formula. It has a positive limb (must be "for the purposes of trade or in the production of income") and, immediately following, an "except" clause that carves out two things:

• Section 15(2)(a)(i) — "to the extent to which they are expenditure or losses of a capital nature"; and
• Section 15(2)(a)(ii) — prepayments for goods, services or benefits used up in a later year (allowed proportionately as consumed; substituted by the Finance Act 1/2018).

The first carve-out is critical to this lesson because it explains a point students perennially get wrong: the prohibition on deducting capital expenditure does not live in Section 16. It lives inside the general formula itself, in Section 15(2)(a)(i). Capital outgoings are not "prohibited deductions" in the Section 16 sense; they are simply outside the revenue-deduction allowance, and the Act gives them their own recovery mechanism — the capital allowances regime in the Fourth Schedule (special initial allowance, wear-and-tear, etc.), covered in Capital Allowances — Fourth Schedule. So when a ZIMRA assessor disallows the cost of a new server, the correct statutory hook is Section 15(2)(a)(i) (capital nature), not Section 16 — a point confirmed in A Bank Ltd v ZIMRA (20-HH-270), where computer expenses of a capital nature were held non-deductible under this proviso.

B.2 The prohibition provision — Section 16(1)

Section 16(1) then provides: "Save as is otherwise expressly provided in this Act, no deduction shall be made in respect of any of the following matters", and lists paragraphs (a) to (u) (with (p) repealed). The opening phrase establishes the hierarchy:

• "no deduction shall be made" — the default is disallowance for any listed matter; Section 16 overrides the Section 15 allowance where they collide.
• "Save as is otherwise expressly provided in this Act" — but an express contrary provision wins. So where the Act elsewhere specifically permits a deduction (e.g. a contribution to an approved pension fund within the limits in Section 15(2), or a capital allowance), that express permission survives, and the matching Section 16 prohibition yields to it. This is why paragraph (g), read alone, appears to bar all employer pension contributions, yet approved contributions remain deductible: Section 15(2) "expressly provides" otherwise within statutory caps.

B.3 The sweep-up — Section 16(2)

Section 16(2) is a discretionary backstop: "No deduction which is not a deduction in respect of expenditure or loss shall be made in respect of any matter, other than those referred to in paragraph (h) or (q) of subsection (2) of section fifteen, if the Commissioner decides that the matter is not directly related to the trade carried on by the taxpayer in Zimbabwe." In plain terms: for deductions that are not actual expenditure or losses (think allowances and notional deductions granted by the Act), the Commissioner may refuse the deduction if it is "not directly related to the trade carried on … in Zimbabwe" — except he may not use this power against the matters in Section 15(2)(h) and Section 15(2)(q), which are protected. This subsection is rarely the lead argument, but it backstops the territorial logic: deductions ultimately attach to a Zimbabwean trade.

B.4 Defined terms that recur in Section 16

Several terms used across the paragraphs are defined or cross-referenced and must be understood before the clause-by-clause walk:

• "trade" — defined widely in Section 2 to include any profession, trade, business, calling, occupation or venture; the touchstone for the Section 15 positive test and for Section 16(2).
• "associated enterprise" / connected persons — paragraphs (q), (r) and (t) target payments within a group. Paragraph (q)'s proviso refers to parties "associated with each other within the meaning contemplated in section twoA" (the associated-enterprises provision), tying the thin-cap rule to the transfer-pricing architecture covered in Transfer Pricing and Anti-Avoidance.
• "passenger motor vehicle" — paragraph (k) borrows the definition in subparagraph (2) of paragraph 14 of the Fourth Schedule.
• the "Thirty-Fifth Schedule" — paragraphs (r) and (t) reference comparable-value determinations under the Thirty-Fifth Schedule (transfer pricing), so the management-fee and royalty caps interact with arm's-length pricing.
• "employee" — for paragraphs (l) and (m), "employee" is expressly stated to include a director.

B.5 What changed, and when (old vs new)

Section 16 has been amended steadily, and a TAXTAMI lesson must surface the timeline because the deductible position depends on the year of assessment:

Paragraph	Effect	Key amendment(s)
(d1) IMTT disallowed	Inserted Finance Act 1/2019 w.e.f. 13 Oct 2018; "Section 36G" substituted for "Section 22G" by Finance Act 8/2022 (gazetted 24 Oct 2022). Declared ultra vires in Mlilo 19-HH-605 (appeal noted).
(k) Vehicle-lease cap	Long history of caps; current US$50,000 cap for vehicles first leased on/after 1 Jan 2021; figures re-denominated and increased through FA (No.2) 7/2019, Act 13/2019, FA (No.2) 10/2020, FA 8/2022, FA 13/2023 (w.e.f. 29 Dec 2023).
(q) Thin capitalisation	Substituted by Finance Act 1/2018 (w.e.f. YA 2018); proviso substituted by FA (No.2) 7/2019 (w.e.f. 1 Aug 2019).
(r) Management/admin fees	Inserted Act 18/2000 (w.e.f. 1 Jan 2001); amended Act 10/2003; substituted by Finance Act (No.2) of 2017 (gazetted 23 Mar 2017, backdated to 1 Jan 2017).
(s) Foreign-loan interest at off-market FX	Inserted Act 13/2019 w.e.f. 1 Jan 2020.
(t) Royalty cap; (u) nominee rental	Inserted Finance Act (No.2) 7/2024 w.e.f. 1 January 2025.
(p)	Repealed by Act 15/2002 from 1 Jan 2002.

The lesson on Capital vs Revenue and Corporate Income Tax supply the surrounding architecture; here we drill into each prohibition.

The discipline of this section is to take each paragraph, state plainly what it disallows, explain why the policy makes sense, and surface the edge cases. Throughout, remember the override logic from Section 16(1): a paragraph defeats a Section 15 claim unless the Act expressly provides otherwise.

C.1 Paragraph (a) — maintenance of self, family or establishment

Paragraph (a) disallows "the cost incurred by any taxpayer in the maintenance of himself, his family or establishment". This is the most fundamental line in income tax: the cost of living is not the cost of earning. A trader's food, clothing, housing, and the upkeep of the household ("establishment") are consumption, not the production of income. The disallowance is absolute and conceptual — these costs never had a trade purpose to begin with, so paragraph (a) simply makes explicit what Section 15(2)(a) already implies.

The annotated case in the Act is L v COT (91-HH-001), where the cost of an eye operation for a lawyer was disallowed — even though good eyesight is plainly useful to a practising lawyer, the expense was personal maintenance of the taxpayer's own body, not expenditure in the production of income. The principle: an expense that benefits the human being who happens to earn income is not thereby a trade expense; the benefit must accrue to the income-earning operations, not to the person's private wellbeing.

Edge case — mixed-purpose costs. Where a cost has both a private and a trade element (e.g. a home telephone used for both family calls and business), only the identifiable trade portion can be claimed under Section 15, and the private portion is barred by paragraph (a)/(b). Apportionment must be reasonable and supportable; ZIMRA will disallow the whole claim if no credible basis for apportionment is shown.

C.2 Paragraph (b) — domestic or private expenses, including home-to-work travel

Paragraph (b) disallows "domestic or private expenses of the taxpayer, including expenses incurred in travelling between his home and the place at which he carries on a trade and, in the case of a taxpayer who carries on 2 or more trades which are distinct in nature, between the places at which such trades are carried on". Two ideas:

1. Domestic/private expenses generally — overlapping with paragraph (a) but broader, covering any private outlay.
2. Home-to-work travel is expressly private. The cost of commuting from home to the place of trade is the classic "putting yourself in a position to earn" expense — it precedes the earning of income rather than being incurred in earning it. The statute removes all argument by naming it.

The express extension to a taxpayer with two distinct trades is subtle: travel between the two places of those distinct trades is also treated as private home-to-work-type travel and disallowed. By contrast, travel undertaken in the course of a single trade (e.g. a sales rep driving between client sites during the working day, or travel from the business premises to a supplier) is deductible under Section 15, because it is incurred in the production of income, not in getting to work. The dividing line is commuting vs operational travel.

Edge case — home as a place of trade. If a taxpayer genuinely carries on the trade from home (a registered home office that is the base of operations), the first journey of the day is no longer "home to work" because home is the workplace; subsequent operational travel is deductible. This must be a real, substantiated arrangement, not a label.

C.3 Paragraph (c) — losses or expenses recoverable under insurance or indemnity

Paragraph (c) disallows "any loss or expense which is recoverable under any insurance contract or indemnity". The logic is that a deduction compensates the taxpayer for a net economic sacrifice. If a loss is recoverable — the taxpayer will be made whole by an insurer or indemnifier — there is no net sacrifice to relieve. Note the word "recoverable", not "recovered": the test is the right to recover, so a taxpayer cannot manufacture a deduction by simply choosing not to claim on a policy. Where only part of a loss is recoverable, only the irrecoverable balance is potentially deductible (subject to the general test and the capital exclusion). Conversely, an insurance recovery of a previously deducted loss may be brought back into income as a recoupment under Section 8 (see Gross Income Definition and Case Law).

C.4 Paragraph (d) — income tax and interest on it

Paragraph (d) disallows "tax upon the income of the taxpayer or interest payable thereon, whether charged in terms of this Act or any law of any country whatsoever". You cannot deduct income tax in computing the income on which income tax is charged — that would be circular and would erode the base. The bar extends to interest on overdue tax and to foreign income taxes ("any law of any country whatsoever"). Foreign tax on the same income is instead relieved, where available, through the foreign tax credit / double taxation agreement mechanism (Section 25 and the DTAs — see Double Taxation Agreements and Relief), not as a deduction. This prevents double-dipping (a deduction and a credit for the same foreign tax).

Edge case — taxes that are not "tax upon income". Paragraph (d) bars income taxes. Other taxes that are genuine trading costs — e.g. customs duty on trading stock, or VAT that is irrecoverable input tax on deductible expenses — are not caught by paragraph (d) and may be deductible under Section 15 if they meet the general test (and are not capital).

C.5 Paragraph (d1) — Intermediated Money Transfer Tax (IMTT)

Paragraph (d1) disallows "any amount of Intermediated Money Transfer Tax charged in terms of Section 36G of this Act". IMTT (the 2% electronic-transaction tax examined in Other Income-Based Levies (IMTT, Carbon Tax, etc.)) is, by this paragraph, not deductible in computing income tax. The policy rationale is that IMTT is a transaction levy on the movement of money rather than a cost of producing income, and allowing its deduction would blunt its yield.

This paragraph carries an essential litigation caveat that a responsible lesson must flag. It was inserted by Section 8 of the Finance Act 1/2019 with effect from 13 October 2018, and the cross-reference was updated from "Section 22G" to "Section 36G" by Section 10 of the Finance Act 8/2022. Critically, the source Act annotation records that paragraph (d1) was "declared ultra vires by Mlilo M v Minister of Finance 19-HH-605 — against which an appeal has been filed in the Supreme Court". In other words, the High Court found the manner of its introduction invalid, and the matter was taken on appeal.

The prudent practitioner position as at the source date: treat IMTT as non-deductible for return-preparation purposes (the conservative stance the statute intends), while documenting the Mlilo challenge so the taxpayer's right to a refund is preserved if the disallowance is ultimately struck down.

C.6 Paragraph (e) — income carried to reserve or capitalised

Paragraph (e) disallows "income carried to a reserve fund or capitalized in any way". This protects the distinction between earning profit and appropriating it. Moving profit into a reserve, or capitalising it, is a disposition of income the taxpayer has already earned — a balance-sheet appropriation — not an expense incurred to earn income. Allowing it would let a company shelter profits simply by relabelling them as reserves. The annotated authorities are CF (Pvt) Ltd v ZIMRA (18-HH-099) and DNS (Pvt) Ltd v ZIMRA (19-HH-722). The practical trap: provisions and reserves created for accounting prudence (general provisions for future costs, transfers to a "repairs reserve", etc.) are appropriations, not deductible expenditure — only an actually incurred expense or a specifically permitted provision is deductible.

C.7 Paragraph (f) — expenditure producing exempt or foreign-source income

Paragraph (f) disallows so much of any expenditure or loss (including a brought-forward assessed loss) as is incurred:

• (i) "in the production of any amount exempt from income tax in terms of this Part or not derived or deemed to be derived from sources within Zimbabwe"; or
• (ii) in connection with an operation, transaction or trade which would have produced such exempt or non-Zimbabwean-source income had any amount been derived.

This is the matching principle: deductions follow the income they produce. If income is exempt (Third Schedule / Section 14) or is foreign-source (outside the Zimbabwean territorial charge — see Tax Residence and Source of Income), then the expenses of earning it are denied, because they do not relate to taxable Zimbabwean income. Sub-paragraph (ii) closes the loophole of incurring the expense on a would-be exempt/foreign venture that happened to yield nothing — you cannot claim the cost of chasing non-taxable income merely because the chase failed. The annotated authority is "T." Ltd v Commissioner of Taxes (66-RLR-021). In practice, paragraph (f) forces an apportionment where a taxpayer earns both taxable and exempt/foreign income from shared expenditure: only the portion attributable to taxable Zimbabwean income survives.

C.8 Paragraph (g) — contributions to employee benefit funds

Paragraph (g) disallows "any contribution made by a taxpayer to a fund established for the purpose of providing pensions, annuities or sickness, accident or unemployment or other benefits for employees" (and their widows, children, dependants or nominees). Read alone this seems to bar all such contributions — but recall the "save as is otherwise expressly provided" opening of Section 16(1). The Act does expressly provide for the deductibility of contributions to approved pension funds, benefit funds and retirement annuity funds within prescribed limits under Section 15(2). The correct reading: paragraph (g) bars contributions to unapproved or non-conforming arrangements, while approved contributions remain deductible up to the statutory caps. This is the clearest illustration of the override-with-exception architecture, and a favourite exam point.

C.9 Paragraph (h) — notional interest on own capital

Paragraph (h) disallows "interest which might have been earned on any capital employed in trade". This bars a notional (imputed) deduction. A business owner who funds the business with their own capital sometimes argues that they "lose" the interest that capital could have earned elsewhere, and seeks to deduct that foregone interest. Paragraph (h) says no: a deduction requires actual expenditure or loss, not an opportunity cost. There is no outflow, so there is nothing to deduct. (Contrast genuine interest paid on borrowed capital, which is deductible under Section 15 if the borrowing is for trade — subject to the thin-cap cap in paragraph (q).)

C.10 Paragraph (i) — rent and repairs of non-trade premises

Paragraph (i) disallows "the rent of, or cost of repairs to, any premises not occupied for the purposes of trade, or any dwelling-house or domestic premises, except such part thereof as may be occupied for the purposes of trade". This is the property-specific application of the private/domestic principle. Rent and repairs are deductible only to the extent the premises are occupied for trade. A dwelling-house is presumptively private; only the part genuinely used for trade (a properly delineated home office or workshop) generates a deductible proportion, and the taxpayer must be able to quantify and justify that proportion (floor area, exclusive use, etc.). The "except such part … occupied for the purposes of trade" wording is the statutory authority for apportioning home-office costs.

C.11 Paragraph (j) — exclusive-supply (restraint) obligations

Paragraph (j) disallows "any expenditure incurred by the taxpayer in pursuance of an obligation imposed on him under an agreement which restrains another person from selling goods other than those supplied to him by the taxpayer". This targets payments made under exclusive-dealing / tied-supply arrangements — for example, sums a supplier pays to bind a retailer to stock only the supplier's goods. The legislature treats such expenditure as disallowed (its character being closer to securing a market position — an enduring, capital-like advantage — than to a recurring revenue expense). It is a narrow, specific prohibition; identify it by the fact pattern of a restraint on the counterparty's freedom to sell competing goods.

C.12 Paragraph (k) — passenger motor vehicle leasing cap

Paragraph (k) disallows expenditure on leasing a passenger motor vehicle (as defined in subparagraph (2) of paragraph 14 of the Fourth Schedule) to the extent that the cumulative lease expenditure on that vehicle exceeds a statutory cap. The cap has risen over the decades as currency and prices changed; the operative current threshold is US$50,000 (cumulative across years) for a passenger motor vehicle first leased on or after 1 January 2021, the figure having been increased by the Finance Act 13/2023 with effect from 29 December 2023. (Earlier vintages carried lower caps — $22,000, $30,000, $50,000, $75,000, $200,000 and, in the inflation era, ZWL figures — each keyed to the year the vehicle was first leased.)

The policy mirrors the capital-allowance cap on owned passenger vehicles (the Fourth Schedule limits the cost on which wear-and-tear may be claimed): without paragraph (k), a taxpayer could sidestep the ownership cap by leasing a luxury vehicle and deducting the full lease rentals. Paragraph (k) imposes a parallel ceiling on the lease route. The cap is cumulative per vehicle — you add the current year's lease expenditure to all prior years' lease expenditure on the same vehicle, and disallow the excess over the cap.

C.13 Paragraph (l) — shares awarded by a company to an employee

Paragraph (l) disallows "the cost of any shares awarded by any company to any employee" (and expressly, "'employee' includes a director"). When a company awards its own shares to staff, it has not incurred a deductible expense in the ordinary sense — it has issued equity, an appropriation of ownership rather than a cash outflow producing income. The cost of those shares is therefore non-deductible to the company. (The employee's tax position — a taxable benefit on the value received — is a separate matter under employment-income rules; see Taxation of Employment Income and PAYE.) The director-inclusion guards against arguing that share awards to directors fall outside "employee".

C.14 Paragraph (m) — entertainment expenditure

Paragraph (m) disallows "any expenditure incurred by any taxpayer on entertainment whether directly or by the provision of any allowance to any employee to incur expenditure or entertainment on behalf of the taxpayer", with "'employee' includes a director" and "'entertainment' includes hospitality in any form". Entertainment — client lunches, corporate hospitality, functions — is wholly disallowed, whether the company pays directly or funds it through an employee's entertainment allowance. The breadth of "hospitality in any form" is deliberate: it stops re-characterisation of entertainment as "marketing" or "staff welfare".

The two annotated cases draw the boundary finely. In SZ (Pvt) Ltd v ZIMRA (20-HH-142), lunch taken at the workplace in a mine canteen was considered, and in IAB Company v ZIMRA (22-HH-032) a "hospitality test" was applied where canteen meals were provided in a bakery. The lesson: routine provision of basic sustenance to staff at the workplace (a mine or factory canteen serving the workforce) is examined under a hospitality test and may fall outside "entertainment", whereas client-facing hospitality and lavish functions are squarely within paragraph (m) and disallowed. The fact-sensitive question is whether the provision is genuine operational staff feeding or disguised entertainment.

C.15 Paragraph (n) — expenditure producing proviso-(i) income under Section 12(2)

Paragraph (n) disallows "any expenditure incurred in the production of any income referred to in proviso (i) to subsection (2) of section twelve". Section 12 contains source/deeming rules; the proviso-(i) income to which paragraph (n) attaches is a defined category whose expenses are matched out of the income computation, consistent with the same matching logic as paragraph (f). Because the precise content depends on the current text of Section 12(2) proviso (i), the safe teaching point is the principle (expenses of producing that specific category of income are disallowed) rather than over-specifying.

C.16 Paragraph (o) — expenditure producing bank/building-society interest income

Paragraph (o) disallows "any expenditure incurred in the production of income consisting of interest payable by" a bank, discount house or finance house (registered or required to be registered under the Banking Act [Chapter 24:20]) or a building society (under the Building Societies Act [Chapter 24:02]), in respect of a loan to, or deposit with, such an institution. The mischief: a taxpayer earning interest on bank deposits cannot offset against that interest the costs of earning it (or, in some structures, borrow to deposit and claim the borrowing cost against the deposit interest). The paragraph matches expenses out of this specific interest income.

C.17 Paragraph (p) — repealed

Paragraph (p) was repealed by Act 15/2002 from 1 January 2002 and is shown in the Act as "(p)……". It has no current operation; it is noted only so candidates recognise the lettering gap and do not assume a missing rule.

C.18 Paragraph (q) — thin capitalisation (3:1 debt-to-equity)

Paragraph (q) is the thin-capitalisation rule. It disallows "any expenditure incurred by a local branch or subsidiary of a foreign company, or by a local company or subsidiary of a local company, in servicing any debt or debts contracted in connection with the production of income to the extent that such debt or debts cause the person to exceed a debt to equity ratio of 3 : 1". "Equity" is defined for the paragraph as "issued and paid-up capital, unappropriated profits, reserves, realised reserves and interest-free loans from shareholders".

The mischief is earnings-stripping: a group can finance its Zimbabwean entity with thin equity and thick (often related-party) debt, then strip taxable profit out of Zimbabwe as deductible interest. Paragraph (q) caps deductible debt-servicing at the interest referable to a 3:1 debt-to-equity ratio; interest on the excess debt above 3× equity is disallowed. The proviso (substituted by the Finance Act (No.2) 7/2019 w.e.f. 1 August 2019) excludes from the rule debts contracted by a local company with a locally domiciled/registered financial institution or person ordinarily resident in Zimbabwe where the parties are not associated within Section 2A and have not colluded to exploit the proviso, and debts contracted through a Government credit facility by a public entity (Public Entities Corporate Governance Act [Chapter 10:33]). The annotated case is NOC (Pvt) Ltd v ZIMRA (19-HH-765), where it was held improper to split payments of expenditure into deductible and non-deductible segments in a manner inconsistent with the provision. Paragraph (q) was substituted by the Finance Act 1/2018 with effect from the year of assessment beginning 1 January 2018. This rule sits with the broader anti-avoidance regime in Transfer Pricing and Anti-Avoidance.

C.19 Paragraph (r) — management and administration fees to associated enterprises

Paragraph (r) caps the deduction for "expenditure incurred on fees, administration and management in favour of a company of which the taxpayer is an associated enterprise, or (where the company is a foreign company) the local branch". The caps are computed by a formula A – (B + C), where A is the total expenditure qualifying for deduction under Section 15, B is the expenditure on fees/administration/management paid outside Zimbabwe, and C is expenditure qualifying under Section 15(2)(f)(i). The deductible management-fee ceiling is then:

• 0.75% of [A – (B + C)] for fees incurred prior to the commencement of trade or during a period of non-production; and
• 1% of [A – (B + C)] for fees incurred after the commencement of trade or the production of income.

Fees above the relevant percentage are disallowed. This is a classic base-erosion control: intra-group "management fees" are a common profit-shifting channel, so the Act fixes a formulaic cap rather than relying solely on arm's-length analysis (though the Thirty-Fifth Schedule comparable-value rules also apply). The annotated cases are pointed: GFZ Ltd v ZIMRA (19-HH-843), where a 100% penalty was applied for deliberately invoking the inapplicable provisions of Section 15(2)(cc); TL v ZIMRA (20-HH-413); MR Bank Ltd v ZIMRA (19-HH-779) (on element B of the formula); and MBCA Bank (Pvt) Ltd v ZIMRA (21-SC-140). Paragraph (r) was inserted by Act 18/2000 (w.e.f. 1 Jan 2001), amended by Act 10/2003, and substituted by the Finance Act (No.2) of 2017 (backdated to 1 Jan 2017).

C.20 Paragraph (s) — foreign-loan interest at an off-market exchange rate

Paragraph (s) disallows "any interest expenditure incurred on foreign loans in excess of the interest that would have been payable had the exchange rate used to purchase the foreign currency needed to service the interest on the loan been the same exchange rate as that ordinarily offered to other clients of the financial institution providing or mediating the loan on the date of the transaction". This anti-avoidance rule (inserted by Act 13/2019 w.e.f. 1 January 2020) attacks the inflation of deductible interest through a non-standard, unfavourable exchange rate applied when buying the foreign currency to service the loan. The deduction is capped at the interest that would have been payable at the ordinary client exchange rate; the excess attributable to the off-market rate is disallowed. It is a product of the multi-currency era and the temptation to bury extra deductions in FX spreads.

C.21 Paragraph (t) — royalty payments above 1½% of turnover

Paragraph (t) (inserted by the Finance Act (No.2) 7/2024 w.e.f. 1 January 2025) disallows "any royalty payments for the use of, or the right of use of, any literary, dramatic, musical, artistic, scientific or other work … in which any copyright subsists, or for the use of any patented article, trade mark, design or model, plan, secret formula or process" — whether claimed by the taxpayer directly or in favour of a company of which the taxpayer is an associated enterprise (or, for a foreign company, the local branch) — "to the extent that the deduction claimed exceeds 1½% of the annual turnover of the taxpayer claiming the deduction, or the comparable value determined in terms of the Thirty-Fifth Schedule of this Act, whichever is lower".

So the deductible royalty is capped at the lower of (i) 1.5% of annual turnover and (ii) the arm's-length comparable value under the Thirty-Fifth Schedule. Royalties are, like management fees, a favoured profit-shifting channel (paying an offshore IP holder for the "use" of brands and know-how), and this 2025 measure imposes a hard turnover-linked ceiling. Identify it whenever a Zimbabwean payer deducts brand, patent, copyright or know-how royalties, especially to a related party.

C.22 Paragraph (u) — nominee rental expenses without beneficial-owner disclosure

Paragraph (u) (also inserted by the Finance Act (No.2) 7/2024 w.e.f. 1 January 2025) disallows "any deduction in the way of a rental expense claimed by a taxpayer who is the nominee of the beneficial owner of the rental property, or claimed on behalf of any property-owning entity, unless full particulars of the identity and address of the beneficial owner of the rental property or of the property-owning entity are disclosed to the Commissioner". "Beneficial owner" is defined to capture both the person who enjoys ownership benefits while title sits in a nominee's name, and the person who, through shares/stakes/assets, can "exert a significant or preponderant voice" in a property-owning entity (including through a nominee). This is a transparency-forcing rule: the rental deduction is conditioned on disclosing who really owns the property, attacking the use of nominee structures to obscure beneficial ownership (and the matching rental income). No disclosure, no deduction.

C.23 Section 16(2) — the Commissioner's "not directly related to trade" power

Finally, Section 16(2) allows the Commissioner to refuse a deduction that is not a deduction in respect of expenditure or loss (i.e. a granted allowance or notional deduction) where he "decides that the matter is not directly related to the trade carried on by the taxpayer in Zimbabwe", except for the matters in Section 15(2)(h) and Section 15(2)(q), which are shielded from this power. The subsection reinforces the territorial-and-trade nexus: a deduction must ultimately connect to a Zimbabwean trade. It is a backstop the Commissioner can invoke against allowance-type deductions lacking a real link to the local trade.

C.24 The unifying logic

Step back and the paragraphs cohere around four ideas. (1) Consumption is not a cost of earning — (a), (b), (i). (2) A deduction needs a real, net, actual outflow — (c) recoverable losses, (e) appropriations, (h) notional interest, (l) share awards. (3) Deductions follow taxable income — (d)/(d1) the tax itself, (f)/(n)/(o) expenses of exempt, foreign-source or specified-interest income. (4) Cross-border and related-party flows are capped to protect the base — (k), (q), (r), (s), (t), (u). Hold these four buckets in mind and you can place almost any fact pattern in the right paragraph.

The prohibitions bite differently depending on taxpayer type. Below are worked computations in USD (the YA 2025 reporting currency for USD-earning taxpayers; company/trust rate 25% per the Finance Act, as established in Corporate Income Tax in Zimbabwe).

D.1 Individuals — sole trader (Tendai's hardware stall, Mbare)

Tendai runs a small hardware retail trade as a sole proprietor. His draft profit-and-loss for YA 2025 shows the following claimed "expenses". We test each against Section 16.

Claimed item	Amount (USD)	Treatment	Authority
Cost of trading stock sold	40,000	Allowed (Section 15(2)(a))	—
Shop rent	6,000	Allowed (trade premises)	Section 15(2)(a)
Tendai's family groceries & rent at home	7,200	Disallowed	Section 16(1)(a)/(b)
Daily kombi fare, home to shop	600	Disallowed (home-to-work)	Section 16(1)(b)
Delivery fuel, shop to customers	900	Allowed (operational travel)	Section 15(2)(a)
Stock destroyed by fire, fully insured	2,500	Disallowed (recoverable)	Section 16(1)(c)
Income tax paid for prior year	1,800	Disallowed	Section 16(1)(d)
IMTT on business transfers	300	Disallowed (conservative)	Section 16(1)(d1) [see VERIFY]

Computation of the correction to taxable income:

Net profit per Tendai's draft accounts (after deducting everything above) USD - (assume) 19,300
Add back disallowed items:
 Family groceries & home rent (Section 16(1)(a)/(b)) USD 7,200
 Home-to-shop commuting fare (Section 16(1)(b)) USD 600
 Insured (recoverable) fire loss (Section 16(1)(c)) USD 2,500
 Prior-year income tax (Section 16(1)(d)) USD 1,800
 IMTT (Section 16(1)(d1), conservative) USD 300
 -----------
Total add-backs USD 12,400
Corrected taxable income from trade USD 31,700

The lesson for individuals: the single largest exposure is private/domestic spending run through the business (paragraphs (a), (b), (i)). ZIMRA SME audits routinely strip these out, and the under-declaration can attract additional tax of up to 100% under Section 46 (see Provisional Tax, QPDs and PAYE Administration).

D.2 SMEs / partnerships — Sunrise Bakery (Pvt) Ltd

Sunrise Bakery, a small private company, claims the following in YA 2025:

Claimed item	Amount (USD)	Treatment	Authority
Flour, fuel, wages, rent (ordinary trade)	180,000	Allowed	Section 15(2)(a)
Canteen meals for production staff (bakery floor)	4,000	Hospitality test — likely allowed as staff feeding	Section 16(1)(m); IAB 22-HH-032; SZ 20-HH-142
Client Christmas function & hampers	3,500	Disallowed (entertainment)	Section 16(1)(m)
New industrial oven (purchase)	25,000	Not a Section 16 matter — capital; claim capital allowances	Section 15(2)(a)(i); Fourth Schedule
Transfer of $5,000 profit to "expansion reserve"	5,000	Disallowed (appropriation)	Section 16(1)(e); CF 18-HH-099
Shares awarded to the head baker	2,000	Disallowed to company	Section 16(1)(l)

Worked correction (entertainment + reserve + shares add back; the oven leaves the revenue computation and enters the capital-allowance schedule):

Disallowed under Section 16:
 Client function & hampers (m) USD 3,500
 Transfer to expansion reserve (e) USD 5,000
 Shares awarded to employee (l) USD 2,000
 ----------
 Total Section 16 add-backs USD 10,500

Separately removed from revenue deductions (capital):
 Industrial oven (Section 15(2)(a)(i)) USD 25,000 -> Fourth Schedule capital allowances instead

The teaching points for SMEs: (i) the canteen-vs-entertainment line is fact-sensitive — genuine staff sustenance on the production premises is tested under the hospitality principle from IAB and SZ, while client hospitality is squarely disallowed; (ii) the oven illustrates that capital items are not "prohibited" by Section 16 — they are simply routed to capital allowances; and (iii) reserves and share awards are appropriations, not expenses.

D.3 Large corporates / multinationals — ZimManu Industries (Pvt) Ltd, subsidiary of a foreign parent

ZimManu is the Zimbabwean subsidiary of a foreign multinational. Its YA 2025 figures expose the anti-base-erosion paragraphs. Assume total expenditure qualifying for deduction under Section 15 (A) is USD 10,000,000; fees/admin/management paid outside Zimbabwe (B) is USD 1,200,000; Section 15(2)(f)(i) expenditure (C) is USD 800,000. Annual turnover is USD 20,000,000. Equity (issued/paid-up capital + unappropriated profits + reserves + interest-free shareholder loans) is USD 4,000,000; related-party debt is USD 16,000,000 at 10% interest = USD 1,600,000 interest. Management fees charged by the parent: USD 250,000. Royalties for use of the group brand: USD 400,000.

(a) Thin capitalisation — paragraph (q):

Equity USD 4,000,000
Permitted debt at 3:1 USD 12,000,000
Actual debt USD 16,000,000
Excess debt USD 4,000,000 (= 16,000,000 - 12,000,000)

Interest on permitted debt = 12,000,000 x 10% USD 1,200,000 -> deductible
Interest on excess debt = 4,000,000 x 10% USD 400,000 -> DISALLOWED (Section 16(1)(q))

(b) Management fees — paragraph (r) (post-commencement 1% cap):

Formula base A - (B + C) = 10,000,000 - (1,200,000 + 800,000) = USD 8,000,000
Cap at 1% (trade in production) USD 80,000
Management fee claimed USD 250,000
Disallowed excess (250,000 - 80,000) USD 170,000 -> DISALLOWED (Section 16(1)(r))

(c) Royalties — paragraph (t) (lower of 1.5% of turnover and 35th-Schedule comparable value):

1.5% of turnover = 1.5% x 20,000,000 USD 300,000
Royalty claimed USD 400,000
(Assume 35th-Sch comparable value >= 300,000, so the 1.5% turnover cap is the lower)
Disallowed excess (400,000 - 300,000) USD 100,000 -> DISALLOWED (Section 16(1)(t))

Total Section 16 add-backs for ZimManu:

Excess interest (q) USD 400,000
Excess management fee (r) USD 170,000
Excess royalty (t) USD 100,000
 -------------
Total disallowed USD 670,000
Additional tax at 25% (company rate) USD 167,500 (before AIDS levy / penalties)

For multinationals, paragraphs (q), (r), (s), (t) are the headline risk: each is a hard formula, each commonly involves related parties, and ZIMRA cross-checks them against the Thirty-Fifth Schedule transfer-pricing documentation (Transfer Pricing and Anti-Avoidance). The GFZ (19-HH-843) 100% penalty for deliberately invoking an inapplicable provision is a warning that aggressive characterisation of capped payments is penalised, not merely reversed.

The Income Tax Act itself annotates Section 16 (and the related Section 15(2)(a)(i) capital proviso) with the following Zimbabwean authorities. Each is cited because it appears against the relevant provision in the source Act.

• L v COT (91-HH-001) — Facts/issue: a lawyer claimed the cost of an eye operation. Decision/principle: disallowed under the private-maintenance principle (Section 16(1)(a)) — an expense that benefits the taxpayer's person, not the income-earning operations, is private. Today: the leading local illustration that personal-benefit expenses are barred even where they incidentally aid the taxpayer's capacity to work.

• CF (Pvt) Ltd v ZIMRA (18-HH-099) and DNS (Pvt) Ltd v ZIMRA (19-HH-722) — annotated against Section 16(1)(e) (income carried to reserve/capitalised). Principle: appropriations of earned profit to reserves are not deductible expenditure; the line between earning and appropriating income is preserved.

• "T." Ltd v Commissioner of Taxes (66-RLR-021) — annotated against Section 16(1)(f) and the Section 15(2)(a)(i) capital proviso. Principle: expenditure incurred to produce exempt or non-Zimbabwean-source income is matched out; the matching principle and the capital/revenue line operate together.

• SZ (Pvt) Ltd v ZIMRA (20-HH-142) — Facts: lunch taken at the workplace in a mine canteen. IAB Company v ZIMRA (22-HH-032) — Facts: canteen meals provided in a bakery; a "hospitality test" applied. Principle (Section 16(1)(m)): genuine provision of basic sustenance to the workforce at the production premises is tested under the hospitality principle and may fall outside "entertainment", whereas client hospitality is disallowed. These cases draw the practical canteen-vs-entertainment boundary.

• NOC (Pvt) Ltd v ZIMRA (19-HH-765) — annotated against Section 16(1)(q) (thin capitalisation). Principle: it is improper to split expenditure into deductible and non-deductible segments inconsistently with the provision; the statutory ratio governs.

• GFZ Ltd v ZIMRA (19-HH-843) and TL v ZIMRA (20-HH-413) — annotated against Section 16(1)(r) (management/admin fees). Principle: in GFZ a 100% penalty was imposed for deliberately invoking the inapplicable provisions of Section 15(2)(cc) — aggressive mischaracterisation of capped intra-group payments draws penalties, not just reversal.

• MR Bank Ltd v ZIMRA (19-HH-779) — annotated against element B of the paragraph (r) formula. MBCA Bank (Pvt) Ltd v ZIMRA (21-SC-140) — Supreme Court authority on paragraph (r). Principle: the management-fee formula (A − (B + C)) and its components are applied as drafted.

• A Bank Ltd v ZIMRA (20-HH-270) — annotated against the Section 15(2)(a)(i) capital proviso and Section 15(1) (the conjunctive "and"). Principle: computer expenses of a capital nature are non-deductible — and, importantly, the hook is the capital proviso in Section 15, not Section 16, reinforcing that capital is excluded at the Section 15 gate.

• Unki Mine (Pvt) Ltd v ZIMRA (22-SC-015) — annotated against the capital proviso. Principle: donations made to preserve the taxpayer's income-earning structure were held to be of a capital nature — useful in distinguishing a (potentially deductible) revenue donation from a capital one, and in showing that "donation" labels are tested by substance.

• Mlilo M v Minister of Finance (19-HH-605) — annotated against Section 16(1)(d1). Principle: the High Court declared the IMTT-disallowance (and the related SI) introduction ultra vires; an appeal was filed in the Supreme Court. Today: paragraph (d1)'s operative status carries the litigation caveat flagged above.

Where the Act annotates older foreign-derived authorities (e.g. "T." Ltd v COT 66-RLR-021 dates from the Rhodesian era), they remain influential but must be read against the current statute; never treat a pre-independence citation as overriding an express modern paragraph.

1. Looking only at Section 16 and forgetting Section 15. The most frequent error. Section 16 is an override on the Section 15 gate; you must test an expense against both. Capital expenditure, in particular, is excluded by Section 15(2)(a)(i), not by Section 16 — citing the wrong provision weakens a dispute and confuses the analysis.

2. Treating capital expenditure as a "prohibited deduction". It is not prohibited; it is outside the revenue allowance and recovered through capital allowances (Fourth Schedule). Saying "the oven is disallowed under Section 16" is wrong; the oven is a capital item under Section 15(2)(a)(i) that attracts wear-and-tear/SIA. A Bank (20-HH-270) is the authority.

3. Assuming all employer pension contributions are barred by paragraph (g). The "save as is otherwise expressly provided" opening preserves the Section 15(2) deductibility of approved fund contributions within caps. Only unapproved/non-conforming contributions are caught.

4. Deducting income tax, penalties, interest on tax, or foreign income tax. Paragraph (d) bars all of these (foreign tax goes to the credit/DTA route, not a deduction). Conversely, do not over-extend paragraph (d) to bar non-income taxes (customs duty, irrecoverable input VAT on deductible costs), which may be deductible under Section 15.

5. Mishandling IMTT. Paragraph (d1) disallows IMTT, but Mlilo (19-HH-605) declared the disallowance ultra vires (appeal pending). Neither blindly deduct it nor forget the challenge — take the conservative add-back and document the position to preserve a refund claim. [See VERIFY in C.5.]

6. Confusing commuting with operational travel. Home-to-work travel is private (paragraph (b)); travel in the course of the trade is deductible. Misclassifying the daily commute as a business expense is a standard SME audit hit.

7. Claiming insured losses. Paragraph (c) bars losses that are recoverable, regardless of whether the claim is actually made. Only the irrecoverable balance is potentially deductible.

8. Over-claiming entertainment as "marketing". "Entertainment includes hospitality in any form" (paragraph (m)). Relabelling client hospitality as advertising or staff welfare does not save it. But do not over-disallow genuine workplace staff feeding, which the hospitality test (IAB, SZ) may permit.

9. Forgetting the cumulative, per-vehicle nature of the paragraph (k) lease cap. The US$50,000 cap (for post-1 Jan 2021 vehicles) is cumulative across years for the same vehicle and keyed to the year first leased and the prevailing currency — not an annual reset. Using the wrong vintage/currency cap is a real risk given the amendment history.

10. Treating the anti-erosion caps (q), (r), (s), (t) as arm's-length-only. These are hard formulaic caps that apply in addition to transfer-pricing (Thirty-Fifth Schedule) analysis. Even a fully arm's-length management fee is capped at 1% of A−(B+C); even a commercial royalty is capped at the lower of 1.5% of turnover and comparable value. Aggressive mischaracterisation draws the GFZ 100% penalty.

11. Ignoring paragraph (u)'s disclosure condition. A nominee/landlord claiming rental expense must disclose the beneficial owner or lose the deduction outright (from YA 2025). This is a condition precedent, not a presumption.

Work through the questions one at a time. Choose an answer and it is graded immediately, with an explanation and the provision it comes from. Your progress is saved, so you can stop and resume.

• Section 16 is an override on Section 15, not a standalone code. Always test an expense against both the general deduction (Section 15(2)(a)) and the prohibitions (Section 16). The opening words "save as is otherwise expressly provided" let express permissions (approved pensions, capital allowances) survive.
• Capital expenditure is excluded by Section 15(2)(a)(i), not by Section 16, and is recovered through Fourth Schedule capital allowances (A Bank 20-HH-270). Likewise, political donations are non-deductible for failing the Section 15 positive test, while a defined band of charitable donations is specifically allowed by Section 15(2) — neither lives in Section 16.
• Private/domestic consumption is barred — maintenance of self/family/establishment (a), domestic/private expenses incl. home-to-work travel (b), non-trade premises and dwelling repairs except the trade portion (i). L v COT (91-HH-001).
• A deduction needs a real, net, actual cost — recoverable losses (c), reserves/capitalised income (e), notional interest on own capital (h) and shares awarded to employees (l) are all barred. CF (18-HH-099); DNS (19-HH-722).
• Deductions follow taxable income — expenses of producing exempt or foreign-source income (f), proviso-(i) income under Section 12(2) (n), and bank/building-society interest income (o) are matched out; and income tax itself (d) — plus IMTT (d1, subject to the Mlilo 19-HH-605 ultra vires caveat) — is non-deductible.
• Entertainment is wholly disallowed (m) — "hospitality in any form" — but genuine workplace staff feeding is tested under the hospitality principle (IAB 22-HH-032; SZ 20-HH-142).
• The anti-base-erosion caps are hard formulae: passenger-vehicle lease cap US$50,000 cumulative (k, post-1 Jan 2021); thin-cap 3:1 debt:equity (q, NOC 19-HH-765); management/admin fees capped at 1% (post-commencement) or 0.75% (pre-commencement) of A−(B+C) (r, GFZ 19-HH-843, MBCA 21-SC-140); foreign-loan interest at off-market FX (s); royalties capped at the lower of 1.5% of turnover and 35th-Schedule comparable value (t); and nominee rental expense disallowed without beneficial-owner disclosure (u). Paragraphs (t) and (u) apply from YA 2025.
• Section 16(2) lets the Commissioner refuse a non-expenditure deduction "not directly related to the trade carried on in Zimbabwe" (except Section 15(2)(h)/(q) matters) — reinforcing the trade-and-territory nexus.
• Audit and penalty exposure is high: over-claimed deductions are ZIMRA's prime audit target, with additional tax up to 100% under Section 46 and the GFZ 100% penalty for deliberate mischaracterisation. Document apportionments and related-party caps.

Table 1 — Section 16(1) prohibitions at a glance

Para	Prohibited matter	Theme	Key authority / amendment
(a)	Maintenance of self, family, establishment	Private consumption	L v COT 91-HH-001
(b)	Domestic/private expenses incl. home-to-work travel	Private consumption	—
(c)	Losses/expenses recoverable under insurance/indemnity	No net cost	"recoverable", not recovered
(d)	Income tax & interest on it (local or foreign)	Tax not a cost	foreign tax → credit/DTA
(d1)	IMTT (Section 36G)	Transaction levy	FA 1/2019; Mlilo 19-HH-605 ultra vires (appeal)
(e)	Income carried to reserve / capitalised	Appropriation	CF 18-HH-099; DNS 19-HH-722
(f)	Expenditure producing exempt / foreign-source income	Matching	"T." Ltd 66-RLR-021
(g)	Contributions to employee benefit funds	Override exception	approved funds allowed via Section 15(2)
(h)	Notional interest on own capital employed	No actual outflow	—
(i)	Rent/repairs of non-trade or dwelling premises (except trade part)	Private consumption	apportionment
(j)	Expenditure under exclusive-supply/restraint obligation	Market-position	narrow specific bar
(k)	Passenger-vehicle lease above cap (US$50,000 cumulative, post-1 Jan 2021)	Anti-avoidance cap	FA 13/2023
(l)	Cost of shares awarded by company to employee/director	Appropriation/equity	"employee" incl. director
(m)	Entertainment / hospitality in any form	Private/hospitality	IAB 22-HH-032; SZ 20-HH-142
(n)	Expenditure producing Section 12(2) proviso-(i) income	Matching
(o)	Expenditure producing bank/building-society interest income	Matching	Banking Act 24:20; Building Societies Act 24:02
(p)	Repealed	—	Act 15/2002
(q)	Interest on debt exceeding 3:1 debt:equity (thin cap)	Base erosion	FA 1/2018; NOC 19-HH-765
(r)	Management/admin fees to associated enterprise above 1% / 0.75% of A−(B+C)	Base erosion	FA(No.2) 2017; GFZ 19-HH-843; MBCA 21-SC-140
(s)	Foreign-loan interest at off-market exchange rate	Base erosion	Act 13/2019 (1 Jan 2020)
(t)	Royalties above lower of 1.5% turnover / 35th-Sch comparable value	Base erosion	FA(No.2) 7/2024 (YA 2025)
(u)	Nominee rental expense without beneficial-owner disclosure	Transparency	FA(No.2) 7/2024 (YA 2025)

Table 2 — Where the prohibition really lives: Section 15 vs Section 16

Type of outgoing	Allowed?	Governing provision	Recovery / treatment
Genuine revenue trade expense	Yes	Section 15(2)(a) positive limb	Full deduction
Capital expenditure	No (as a revenue deduction)	Section 15(2)(a)(i) (not Section 16)	Capital allowances, Fourth Schedule
Private/domestic expense	No	Section 16(1)(a)/(b)/(i)	Permanently disallowed
Political donation	No	fails Section 15(2)(a) positive test (not in Section 16)	Permanently disallowed
Approved charitable donation	Yes (defined band)	Section 15(2) specific allowance	Deductible within limits
Approved pension contribution	Yes (within caps)	Section 15(2) (overrides Section 16(1)(g))	Deductible within limits
Excess related-party interest/fees/royalties	No (excess slice)	Section 16(1)(q)/(r)/(t)	Excess permanently disallowed

Diagram — deciding whether an outgoing is deductible

flowchart TD
 A[Outgoing claimed as a deduction] --> B{Incurred for purposes of trade / production of income? Section 15 2 a}
 B -->|No e.g. private, political| C[Not deductible - fails Section 15 positive test]
 B -->|Yes| D{Is it capital in nature? Section 15 2 a i}
 D -->|Yes| E[Not a revenue deduction - claim capital allowances Fourth Schedule]
 D -->|No| F{Does a Section 16 1 paragraph prohibit it?}
 F -->|Yes - a b c d d1 e f h i j l m n o| G[Disallowed in full]
 F -->|Capped paras q r s t k| H[Allow up to the cap; disallow the excess]
 F -->|Para u nominee rental| I{Beneficial owner disclosed?}
 I -->|No| G
 I -->|Yes| J[Deductible]
 F -->|No paragraph applies| K{Express exception? e.g. approved pension Section 15 2}
 K -->|Yes| J
 K -->|No prohibition at all| J

Statutes & sections

• Income Tax Act [Chapter 23:06]:
• Section 16 — "Cases in which no deduction shall be made"; the prohibited-deduction list, paragraphs (a)–(u) (with (p) repealed) and the Section 16(2) Commissioner power.
• Section 15(1) and 15(2)(a) — general deduction formula ("for the purposes of trade or in the production of the income"); the "except … capital nature" proviso in Section 15(2)(a)(i) and the Section 15(2)(a)(ii) prepayment rule.
• Section 15(2) — express allowances (approved pension/benefit/RAF contributions; defined donations) that survive Section 16 via its opening words.
• Section 8 — gross income/recoupments (insurance recoveries of deducted losses).
• Section 12(2) proviso (i) — income to which the paragraph (n) disallowance attaches.
• Section 25 — foreign tax relief/DTA route for foreign income tax (paragraph (d)).
• Section 36G — Intermediated Money Transfer Tax (paragraph (d1)).
• Section 2 / Section 2A — definitions of "trade" and the associated-enterprises basis used in paragraphs (q), (r), (t).
• Fourth Schedule — capital allowances (recovery route for capital items) and the passenger-motor-vehicle definition (para 14(2)) used in paragraph (k).
• Thirty-Fifth Schedule — comparable-value / transfer-pricing determinations referenced in paragraphs (r) and (t).
• Finance Act [Chapter 23:04] — company/trust rate 25% used in the worked computations; the amending instruments that shaped Section 16: FA 1/2018 (para (q)), FA (No.2) of 2017 (para (r)), Act 13/2019 (para (s)), FA (No.2) 7/2024 (paras (t), (u)), FA 1/2019 & FA 8/2022 (para (d1)), FA 13/2023 (para (k) cap), Act 15/2002 (repeal of (p)).
• Banking Act [Chapter 24:20] and Building Societies Act [Chapter 24:02] — institutions referenced in paragraph (o).
• Public Entities Corporate Governance Act [Chapter 10:33] — public-entity carve-out in the paragraph (q) proviso.

Case law (as annotated in the source Act)

• L v COT (91-HH-001) — private maintenance (eye operation) disallowed; Section 16(1)(a).
• CF (Pvt) Ltd v ZIMRA (18-HH-099), DNS (Pvt) Ltd v ZIMRA (19-HH-722) — reserves/capitalised income non-deductible; Section 16(1)(e).
• "T." Ltd v COT (66-RLR-021) — expenditure producing exempt/foreign-source income matched out; Section 16(1)(f)/capital.
• SZ (Pvt) Ltd v ZIMRA (20-HH-142), IAB Company v ZIMRA (22-HH-032) — entertainment vs workplace staff feeding (hospitality test); Section 16(1)(m).
• NOC (Pvt) Ltd v ZIMRA (19-HH-765) — no improper splitting of expenditure; thin capitalisation, Section 16(1)(q).
• GFZ Ltd v ZIMRA (19-HH-843), TL v ZIMRA (20-HH-413), MR Bank Ltd v ZIMRA (19-HH-779), MBCA Bank (Pvt) Ltd v ZIMRA (21-SC-140) — management/admin-fee cap and formula; Section 16(1)(r); 100% penalty for deliberate mischaracterisation (GFZ).
• A Bank Ltd v ZIMRA (20-HH-270) — capital computer expenses excluded at the Section 15(2)(a)(i) gate (not Section 16).
• Unki Mine (Pvt) Ltd v ZIMRA (22-SC-015) — donation to preserve income-earning structure held capital.
• Mlilo M v Minister of Finance (19-HH-605) — IMTT disallowance (para (d1)) declared ultra vires; Supreme Court appeal noted. [Status to be confirmed — see VERIFY.]

ZIMRA guidance

• ZIMRA self-assessment return ITF 12C (companies) and the ITF 12C ZIMRA External Guide — the practical schedule where disallowed expenses are added back to accounting profit to reach taxable income.

Cross-references (this chapter)

• Gross Income Definition and Case Law (gross income & recoupments), Introduction to Taxation in Zimbabwe (taxable-income funnel), Corporate Income Tax in Zimbabwe (company rate & deduction architecture), Capital vs Revenue Receipts & Capital Allowances — Fourth Schedule (capital vs revenue and the recovery route for capital items), Other Income-Based Levies (IMTT, Carbon Tax, etc.) (IMTT), Transfer Pricing and Anti-Avoidance (35th Schedule, associated enterprises, thin cap), Double Taxation Agreements and Relief (foreign-tax relief), Provisional Tax, QPDs and PAYE Administration (assessments, additional tax/penalties), Taxation of Employment Income and PAYE (employee-side treatment of share awards/benefits).