Marvelous Tapera 
REMUNERATION means any amount of income paid or payable to any person by way of a salary, leave pay, allowance, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance, stipend or commutation of a pension or an annuity, whether in cash or otherwise, and whether or not in respect of services rendered.
Advantages and benefits granted to an employee, spouse or child form part of remuneration.
The following are the advantages and benefits that form part of remuneration: board or occupation of quarters or residence, use of company furniture or motor vehicle, use of or enjoyment of any other property, loans, school fees benefit, any allowance and passage benefit.
Section 4A (1) (a) of the Finance Act provides that: “Notwithstanding section 41 of the Reserve Bank of Zimbabwe Act and the Exchange Control Act,
a person other than a company, a trust or a pension fund whose taxable income from employment is earned in whole or in part in a foreign currency shall pay tax in the same or another specified foreign currency on so much of that income as is earned in that currency.”
Thus, employees who receive salaries in foreign currency must pay their pay as you earn (PAYE) in the foreign currency that they receive it.
Income tax laws provide that: “Where part of the remuneration from which employees’ tax is required to be withheld under income tax laws is remuneration paid in foreign currency, the employer shall determine the amount of employees’ tax to be withheld from that part of the remuneration that is paid in foreign currency separately from the other remuneration, and shall pay to the Commissioner-General within the period specified, the appropriate amounts of employees”.
Except for amounts denominated in foreign currency through Finance Act no 2 and 3 of 2019, the RTGS amounts (earnings and deductions) should be converted to US$ using the interbank rate prevailing on the date of payroll for purposes of using US$ tables.
Tax credits for US$ amounts are now also available together with deemed motoring benefit amounts. The taxpayer must then withhold the tax in foreign currency and then remit same in foreign currency.
However, the law is silent on how the PAYE due is apportioned between the two amounts, that is the US$ earnings and the RTGS dollar earnings.
Our view is that the apportionment of tax should be based on taxable income in foreign currency and in RTGS dollar. PAYE returns should however, be filed in the local currency.
Meanwhile, Statutory Instrument (“SI”) 142 of 2019 brought about the ban in use of foreign currency in domestic transactions, while simultaneously treating the Zimdollar as the sole currency of legal tender.
The introduction of SI 142 of 2019 made extinct all the local transactions made in foreign currency and provided that the sole legal tender in
Zimbabwe shall be the Zimdollar, with the RTGS dollars being the Zimbabwe dollar equivalent adjusted to inflation.
Where a person’s taxable income is in foreign currency, deductions expressed in the Zimdollar amounts should be converted using the Zimra rates prevailing on the date of payroll.
The Finance Act no 7 of 2021 has, however, provided for prescribed values in US$ and Zimdollars and these are amounts that should be used for payroll purposes.
In as far as credits are concerned, the law now provides for both Zimdollar credits and US$ credits. It follows that US$ credits will be applied on the US$ income for persons that earn purely in foreign currency. In terms of Finance Act number 7 of 2021, the credits amount was increased in US$ terms to $900 per year and ZWL117 000
In conclusion, taxpayers are advised that the tax laws in Zimbabwe state that a person whose taxable income from employment is earned in whole or in part in a foreign currency shall pay tax in the same or another specified foreign currency on so much of that income as is earned, received or accrued in that currency.
In line with these provisions, clients are hereby reminded that where remuneration is paid in foreign currency, the PAYE arising from this income should be in foreign currency.
Meanwhile, Matrix Tax School invites you to take part in the upcoming Annual Tax School. The tax conference commences on May 25, and ends on May 29, 2021 at Elephant Hills Hotels in Victoria Falls.
Tapera is the founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity.
