Marvelous Tapera 
TAX compliance and administration in Zimbabwe has witnessed a significant transformation with the introduction of a new Pay-As-You-Earn (PAYE) return system.
Effective from January 1, 2024, this new system aims to streamline the process of tax returns for employers and employees alike, offering a modernised approach to tax declarations in both United States dollars and Zimbabwean dollars.
This article explores the intricacies of the new PAYE return system, its legal and administrative context, its breakdown for a comprehensive understanding, and its broader impacts on the business environment and the economy at large.
Through Public Notice 12 of 2024, ZIMRA introduced a new PAYE return system. The reform is designed to cater for submission of tax returns in both United States dollars and Zimbabwean dollars. ZIMRA then put a pause on the implementation of the new PAYE system through Public Notice 16 of 2024. The revenue authority introduced a temporary measure that requires employers to submit a short PAYE form through the Tax and Revenue Management System (TaRMS). The issuance of
Public Notice 12 of 2024, followed by a temporary withdrawal and subsequent adjustments as outlined in Public Notice 16 of 2024, reflects ZIMRA’s commitment to enhancing the tax submission process while addressing the practical and technical challenges encountered during its initial rollout.
The transition to the new PAYE return system is grounded in Zimbabwe’s ongoing efforts to modernise its tax collection and administration mechanisms. The introduction of this system, replacing Form P2 and rendering the annual ITF16 submission redundant for the 2024 tax year onwards, signifies a pivotal shift towards digitalisation. This move is not only reflective of global trends in tax administration but also caters to the dual-currency context of Zimbabwe’s economy, accommodating declarations in both US$ and ZWL.
To make the new PAYE return system comprehensible to a broad audience, it’s crucial to dissect its components and functionalities. This system facilitates tax declarations in both of Zimbabwe’s legal tender currencies, addressing the unique economic conditions of the country.
The provision for automatic tax credit calculations for eligible individuals based on their Taxpayer Identification Number (TIN) is another notable feature. Despite the ambitious nature of this initiative, the temporary withdrawal of the new PAYE return underscores the practical challenges of implementing sophisticated tax administration systems in real-time. Key legal and administrative issues pertinent to this transition include the adaptation to the Final Deduction System (FDS) for tax computations and the temporary withdrawal of the new PAYE return due to technical challenges in the TaRMS system
At the heart of the new PAYE return system are the principles of efficiency, inclusivity, and adaptability. By allowing for tax declarations in both US$ and ZWL, ZIMRA aims to ensure smooth administration and compliance. The system’s design, particularly the FDS, aims to simplify tax computations, ensuring accuracy and fairness in tax liabilities.
However, the encountered technical setbacks leading to the temporary withdrawal of the system highlight the complexities inherent in overhauling established tax reporting frameworks. These challenges, while temporary, underscore the importance of robust testing and stakeholder engagement in tax system reforms.
The introduction and subsequent adjustment of the new PAYE return system have far-reaching implications for Zimbabwe’s business environment and economy.
For businesses, the transition represents both an opportunity for streamlined tax reporting and a challenge in adapting to new requirements. The dual-currency declaration capability directly addresses the realities of operating in Zimbabwe’s economy, potentially reducing administrative burdens for employers. On a broader scale, the success of this system could enhance tax compliance rates, bolstering national revenue and reflecting positively on economic stability and growth prospects.
The journey towards the full implementation of the new PAYE return system in Zimbabwe encapsulates the challenges and opportunities inherent in modernising tax administration in a complex economic setting. While the initial rollout has faced hurdles, the potential benefits of a more efficient, accurate, and user-friendly tax reporting process remain clear. As ZIMRA continues to refine the system, the ultimate goal is to foster a tax compliance culture that supports the nation’s economic objectives. Through this lens, the new PAYE return system is not merely a procedural change but a step towards building a more resilient and prosperous Zimbabwe.
WTS Tax Matrix Academy will be hosting its 8th Annual Tax Conference from the 22nd to the 25th of May 2024 at Elephant Hills Resort. Marvellous Tapera is the Founder of WTS Tax Matrix (Pvt) Ltd and the CEO of WTS Tax Matrix Academy. He writes in his personal capacity.
