Zimbabwe’s Income Tax Act (Chapter 23:06) broadly treats companies (including trusts and corporate entities) as corporate persons conducting trade. Section 2 of the Act defines a “company” as any company ordinarily resident in Zimbabwe, and expressly includes private business corporations (Pvt Ltd). In practice, any corporate entity incorporated under Zimbabwean law – or effectively managed in Zimbabwe – is taxed as a resident company. Companies must appoint a resident “public officer” or representative in Zimbabwe to receive tax notices.

Residence Rules. A company is generally resident if it is incorporated in Zimbabwe or its central management and control is exercised here. Residents are taxed on worldwide income; non-resident companies are taxed only on income from Zimbabwe sources. A non-resident company is deemed to have a permanent establishment (PE) – and thus taxable in Zimbabwe – if it carries on business through a fixed place of business in Zimbabwe, or through a dependent agent concluding contracts on its behalf. A “fixed place of business” includes offices, branches, factories, or any structure for exploiting resources. Routine activities (storage, display, information gathering) or independent agents do not create a PE. Under the 2026 budget, a PE is now defined more restrictively: for construction sites or projects, a company must operate for 90 days or more in any 12-month period to have a PE. Until January 2026, the statutory definition (s.19B) simply requires any fixed business presence or dependent agent.

Corporate Tax Rates. The standard corporate income tax rate in Zimbabwe is 25%. This flat rate applies to most companies and trusts. Special rates apply for certain sectors: companies deriving income from mineral exploitation pay 15% if they hold a Special Mining Lease, otherwise mining companies pay 25%. Pension funds trading as business entities are taxed at 15%. New or “licensed” industrial projects enjoy zero tax for the first 5 years, then 25% thereafter. Likewise, industrial park developers and approved BOT/BOT (build-own-operate-transfer) projects have zero tax in early years. Manufacturing companies get graduated lower rates if they export goods: if 30–<41% of output is exported, tax is 20%; if 41–<51% exported, 17.5%; if ≥51% exported, 15%. Tourism operators in approved development zones enjoy 0% tax for five years, then 25%. Earnings from special economic zones (SEZs) enjoy 0% tax for the first five years, then a reduced 15%.

Tax Incentives and Credits. Beyond lower rates, the law provides tax incentives via credits and allowances. Under the Income Tax Act, companies may claim tax credits for certain employment and social expenses. For example, Youth Employment credits (under s.13A) grant a corporate credit of US$50 per month for each new youth hire, capped at US$2,250 per annum. Similarly, a Physically/Mentally Disabled employment credit allows up to US$900 per year per company for hiring qualifying disabled employees. (The Finance Bill 2025 reportedly adds a 150% tax credit for corporate sports sponsorships, encouraging investment in athletics, though full legislative text is pending.) Approved research, training or export-orientation expenditures may also carry enhanced allowances under the Act.

Special Economic Zones offer further incentives. Companies operating in a SEZ are treated effectively as domestic for income tax: for instance, a foreign company in a SEZ is not considered “non-resident” for tax purposes. Furthermore, regulations exempt SEZ investors from certain duties and grants tax holidays as noted above. In practice, an SEZ company can pay no tax in its first five years and only 15% thereafter, plus a 3% levy (AIDS levy) on the chargeable tax.

Taxable Income: Inclusions and Exclusions. A company’s taxable income begins with its accounting profit from trade or investment. Income includes revenues from sales of goods and services, rental income, interest, royalties, and gains on disposal of trading assets. The Act distinguishes trading income from capital receipts. Routine trading profits are taxable; but certain receipts are excluded or treated specially. For instance, capital gains are generally not subject to income tax (Zimbabwe has a separate Capital Gains Tax for certain disposals). Dividends received from local companies are not taxed again (Zimbabwe eliminated “secondary tax” on dividends), but dividends paid to a company and received from foreign companies are subject to a 20% withholding tax. Many statutory exclusions mirror international norms: e.g. bank interest, government bond interest, and insurance payouts may be exempt under specific conditions (see Finance Act schedules).

Crucially, the Act (s.12) also defines income sourced in Zimbabwe. Notably, nonresident digital services provided to Zimbabweans are taxed: amounts paid to foreign “electronic commerce operators” for sales into Zimbabwe are deemed Zimbabwean-source income. A nonresident e-commerce operator with revenues over US$500,000 from Zimbabwe clients must pay 15% tax on those receipts. This rule, introduced in 2019, ensures that nonresident internet service providers cannot escape tax simply by being offshore.

Deductions and Allowances. Deductions for business expenses are governed by s.15 of the Act. Generally, all expenditure and losses wholly and exclusively incurred in producing income are deductible. This includes operating costs (raw materials, wages, rent, utilities, advertising, etc.), interest on business loans, and certain bad debts (subject to conditions). The Act broadly mirrors the wholly and exclusively test found in many Commonwealth jurisdictions. Not all spending qualifies: capital expenditures (fixed asset acquisition, land), private or personal expenses, and prohibited payments are disallowed. Noteworthy disallowances include prohibited fringe benefits, penalties for law breaches (as illustrated by Alexander Von Glehn & Co), and ill-gotten gains.

Zimbabwe courts have clarified deductibility through case law. For example, in CIR v. Carron Co., a company incurred large legal and charter fees to reorganize under a new charter. The reorganization removed restrictions hindering profit-making. The court held these costs to be revenue expenses, fully deductible, because they were incurred solely to facilitate the company’s trade (they created no new capital asset). By contrast, in Shell Rhodesia v. COT, payments of scholarships and donations aimed at public goodwill were held capital (not revenue) expenses, since their object was to build reputation rather than directly increase sales. These cases show that the purpose of an expense is key: if it yields an enduring benefit (like goodwill or a new asset), it is likely capital; if it is simply to overcome a trading obstacle or to meet a contractual liability, it may be revenue.

Other case law illuminates specific rules. In Hancock v. General Reversionary, a lump-sum pension payment was held deductible because it discharged an existing liability for future pensions – it was simply “accelerating” business expenses under a prior contract. In contrast, very excessive related-party payments can be struck out. In ITC 569, payment of an abnormally high salary to a director’s son was held non-deductible: the court applied a fairness test (if remuneration is grossly excessive relative to services rendered and motivated by tax evasion, it is not wholly for trade). In practice, any management fees, royalties or salaries paid to related entities or individuals are scrutinized; transfer pricing rules (below) further ensure they are at arm’s length.

Capital Allowances. Expenditure on qualifying capital assets (plant, machinery, buildings, etc.) is not deductible as a current expense but is recovered via capital allowances. The Fourth Schedule to the Act grants annual allowances for machinery (26% diminishing value), industrial buildings (3% straight-line), farm improvements, and special allowances for depreciable assets like vehicles (25% diminishing). Low-value assets may be written off fully. Historically, mining had unique rules (capital redemption allowances), but these were streamlined: as of 2026, miners may no longer choose alternative methods and generally must use the “life-of-mine” approach or other fair methods for allowance claims. Zimbabwe also introduced re-basing rules for pre-2021 allowances: any unused capital allowances at 2021 must be revalued into ZWL using the official rate (Finance Act 2024).

Assessed Losses (Carry-Forwards). Companies may carry forward trading losses indefinitely against future profits, subject to anti-abuse conditions. By default, any loss in Year 1 is carried to Year 2 and so on until fully absorbed. To prevent perpetual loss carry-forwards or trafficking in losses, the Act imposes limits. Generally, a portion of a loss cannot be deducted more than six years after it arose. Importantly, as of 2026, mining companies face an extra restriction: only 30% of any assessed loss existing at 31 Dec 2025 (or incurred thereafter) can be carried forward each year. In other words, at most 30% of the loss can offset income annually, prolonging loss relief over time (unless changed by future law). Also, restructurings designed solely to exploit losses (changes in ownership or entity form) may be disallowed under anti-avoidance rules. Losses from tax-exempt activities (e.g. insurance companies or petroleum operators) cannot offset other income, nor can losses on bank interest business.

Dividends and Withholding Taxes. Dividends paid by a Zimbabwe company to residents are not taxed again at the shareholder level. Dividends paid to non-residents, however, are subject to non-resident withholding tax. As per Sec.25A of the Act, a company paying a dividend to a nonresident individual or company must withhold 20% of the gross dividend. (The rate on foreign dividends received in Zimbabwe by a local company is also 20%.) Other payments to non-residents attract similar withholding tax: interest, royalties, fees for technical services and dividends each have specified rates (often 15–20%). The Commissioner can treat any disallowed “deemed dividend” (e.g. benefit to shareholders) as dividend subject to tax.

Provisional Tax and Filing. Companies in Zimbabwe operate on a self-assessment system. After year-end, a company submits an income tax return and pays any tax due. To spread the liability, companies are required to pay provisional tax in quarterly installments. By law, provisional tax is paid in four instalments: 10% by 25 March, 25% by 25 June, 30% by 25 September, and 35% by 20 December of the tax year. (These percentages are percentages of the estimated annual tax liability, designed to match a 100% total.) A company must estimate its annual taxable profit and file provisional tax returns accordingly. In each quarter, it remits the proportionate share. If a company underpays (or fails to file), penalties and interest may apply. Final tax payable (based on the filed return) is then balanced in the following year. Critically, any provisional tax already paid is credited against the final assessment.

In recent years, Zimbabwe has moved toward mandatory electronic filing and payment for companies; tax clearance certification (showing all taxes paid) is also required to access some public incentives and permits.

Resident vs Non-Resident Companies. As noted, resident companies pay tax on worldwide income; non-residents only on Zimbabwe-source income. A foreign company without a PE pays tax on specific income streams: for example, 20% withholding on dividends, interest, royalties, management fees, and any gain on immovable property. Special rules apply to nonresident oil, mining or BOT investors, ensuring they pay at least a baseline rate. Under s.12A (inserted 2019), a foreign electronic commerce operator earning >US$500,000 from Zimbabwe customers must pay 15% tax on that turnover (this tax is charged in Zimbabwe on what would otherwise be offshore revenue). Also, Finance Act changes do not apply to income deemed in terms of e-commerce (section 12(6)-(7)); such income is charged at the separate withholding rate (sec.12A(3)).

Special Economic Zones (SEZs). Companies in SEZs enjoy tailored tax treatment. By law (Income Tax Act definition of “non-resident”), a foreign entity operating in a SEZ is not treated as a non-resident for tax purposes. Moreover, profits of SEZ enterprises are exempt from tax for the first five years of operation and taxed at a flat 15% thereafter. These benefits were enshrined in separate SEZ legislation (Special Economic Zones Act, Chapter 14:32) and implemented via Finance Acts (e.g. Finance (No.2) Act 2017). The Income Tax Act also provides that dividends and fees relating to SEZ activities are often exempt or subject to reduced rates. In practice, the SEZ regime is intended to spur exports and foreign investment by offering a stable low-tax environment (zero tax/ custom duties initially, etc.).

Anti-Avoidance Measures. Zimbabwe’s tax law includes multiple anti-abuse provisions. A general anti-avoidance rule in section 14 empowers the Commissioner to recharacterize any transaction lacking commercial substance. More specific rules include thin-capitalization (debt-to-equity limits: interest on excessive related-party debt may be disallowed) and transfer pricing rules. Transfer pricing is governed by the Thirty-Fifth Schedule: multinational transactions between related parties must be at arm’s length. Taxpayers must document and justify such transactions; failure to do so can lead to adjustments. The transfer pricing framework explicitly adopts OECD principles. While Zimbabwe does not have detailed Controlled Foreign Company (CFC) rules akin to some countries, certain “attribution” provisions apply – for example, under s.37, an uncontrolled subsidiary’s unremitted profits may be taxed if controlled by a Zimbabwe resident. The courts uphold anti-avoidance vigorously: for example, an excessive salary to a shareholder’s relative was disallowed because it was essentially a disguised distribution. Also, section 82 of the Act permits the Commissioner to disregard any scheme that shifts income to a lower- taxed person.

Finance Act and Budget Changes (2025–2026). Recent budgets have introduced several important changes affecting companies. The Finance Act 2024 (effective 2025) carried forward the existing framework but updated monetary credits and some definitions: for example, the Youth Employment and Disability credits remained (US$50/month and US$900/year respectively). The Finance Bill H.B. 14 of 2025 (parliamentary draft) proposes new credits (e.g. a 150% credit for corporate sports expenditures). It also confirms the 25% corporate tax rate, the special 15% mining rate, and reaffirms duties on digital services.

The 2026 Budget (Finance Act 2026, effective 1 Jan 2026) introduced major measures:

• Domestic Minimum Top-Up Tax (DMTT): To align with the OECD’s Pillar Two, Zimbabwe will tax large multinationals at a minimum 15%. Companies in groups with ≥€760 million turnover will face a 15% top-up tax on Zimbabwe-source income if their home-country tax is lower. In practice, if the foreign tax plus Zimbabwe’s tax yield under 15%, the company pays the shortfall. This ensures multinationals cannot escape tax through low-tax jurisdictions.
• Mining Loss Restrictions: Critically, assessed losses carried by mining entities (including under special mining leases) as of Dec 31, 2025 will be subject to a 30% cap. Hence, each year only 30% of such old losses can offset profits. This change, aimed at preventing prolonged tax loss exploitation, prolongs mining loss relief beyond 2025.
• Permanent Establishment: The PE definition was tightened. A fixed construction or project site is only a PE if it lasts ≥90 days in 12 months (as noted above).
• Presumptive Tax on Rentals: A new 10% withholding tax applies when a formal rental agreement is with a presumptive taxpayer (small trader).
• Corporate Social Responsibility (CSR) Levy: A 2% levy on gross value of coal exports was introduced (for coal miners).
• Value-of-Mine Reporting: Transfer pricing adjustments for mining can now use a published “safe-harbour” gross profit margin for exporters.
• Other Indirect Changes: The Budget 2025 proposals also foreshadowed adjustments to e-commerce tax and incentives, but those were largely confirmed rather than expanded.

In summary, the legislative trend is to broaden the tax base on large multinationals (via DMTT), clamp down on abuse of mining loss carry-forwards, and strengthen PE rules. Meanwhile, new credits encourage social goals (youth hiring, disability employment, sports). These changes should be read alongside the existing Income Tax Act provisions and the case law precedents that interpret them (as illustrated above).

Conclusion. Zimbabwe’s corporate tax system is built on a statutory framework that integrates traditional principles (wholly-exclusive expense deductibility, source taxation for non-residents) with sector-specific rules (mining, exporters, SEZs) and recent international developments (digital taxation, Pillar Two). For students, the key points are: companies pay a flat 25% tax (with many special rates for targeted industries); income is taxed when earned (incurred under accrual basis, as case law on accrual like Sacks v CIR would indicate); expenses must be solely for trade to be deductible (per Carron Co, Shell Rhodesia, etc.); and losses can be carried forward with limits. Non-residents are taxed only on Zimbabwe-source income, subject to permanent-establishment and withholding rules. Anti-avoidance provisions and transfer pricing ensure that intra-group transactions mimic market rates. Finally, recent finance laws and budgets introduce dynamic changes – including credits for social spending, new global minimum tax rules, and stricter PE thresholds – which must be applied alongside the longstanding Income Tax Act principles.

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