Withholding Taxes (WHT)
A Lesson Context
Withholding Tax is a mechanism where the Payer of certain amounts (fees, interest, dividends) is required by law to deduct tax at source and remit it to ZIMRA. The recipient receives the net amount.
This ensures tax is collected efficiently, especially from non-residents or informal traders who might otherwise evade tax.
B Resident Withholding Taxes
Taxes deducted from payments made to Zimbabwean residents:
- Section 80 (Contracts): 10% (or 30%) deducted from payments to suppliers who do not have a valid Tax Clearance Certificate (ITF 263).
- Residents Tax on Interest: Banks deduct WHT (e.g., 15% or 5% for fixed deposits) from interest paid to depositors.
- Shareholders Tax: Companies deduct WHT on dividends paid to resident shareholders (10% for listed shares, 15% for unlisted).
C Non-Resident Withholding Taxes (Section 30)
Payments made to persons outside Zimbabwe attract WHT at a standard rate of 15% (unless a Double Tax Agreement reduces it).
- Fees: Management, Technical, Consultancy, and Directors' Fees.
- Royalties: For use of IP, patents, or know-how.
- Remittances: Allocable expenditure head office charges.
D Summary Rates Table
| Type of Payment | Standard Rate | Notes |
|---|---|---|
| Non-Resident Fees | 15% | May be reduced by DTA. |
| Non-Resident Royalties | 15% | May be reduced by DTA. |
| Resident Interest | 15% | Final tax for individuals. |
| Dividends (Listed) | 10% | Also applies to non-residents (usually). |
| Dividends (Unlisted) | 15% | Standard rate. |
| Section 80 (Tenders) | 10% / 30% | Depends on clearance status. 30% if no clearance. |
E Payment Deadlines
Generally, WHT must be remitted to ZIMRA by the 10th of the month following the payment.
Example: You pay a foreign consultant on 15 June. You must pay the WHT to ZIMRA by 10 July.
F Case Law Integration
Grossing Up: If a contract states "$1,000 net of tax", the payer must "gross up" the amount to find the tax base. $1,000 represents 85%. The Gross Amount is $1,000 / 0.85 = $1,176. The WHT is 15% of $1,176 = $176.
G Common Pitfalls
Failure to Withhold (Section 80)
Paying a supplier without checking their Tax Clearance status is a huge risk. You become liable for the tax plus a 100% penalty.
Late Payment Interest
WHT interest (often 25% or more) and penalties are strictly enforced. Automate your payments for the 10th.
H Knowledge Check
Scenario: You hire a South African engineer to fix a machine. You agree to pay him $5,000. He sends an invoice for $5,000. How much do you actually transfer to his bank account?
Calculation: If the agreed fee was "$5,000 NET", what is the cost to your company (assuming 15% WHT)?
Attempt these before checking the answers below.
I Quiz Answers & Explanations
A1: $4,250. You deduct 15% ($750) and pay it to ZIMRA. You transfer $4,250 to him.
A2: $5,882.
Gross Up: $5,000 / 0.85 =
$5,882.
WHT: $5,882 * 15% = $882.
Net to Consultant:
$5,000.
Total Cost to Company: $5,882.
J Key Takeaways
- Rate Sourcing: Always check if a DTA applies before using the 15% standard rate.
- Section 80: Mandatory checks on all local suppliers over $1,000/year.
- Gross Up: Understand net vs gross contracts to avoid underpaying tax.
- Deadline: 10th of the following month.