Marvelous Tapera 
FOLLOWING the 2024 Mid-Term Budget Review presented by the Minister of Finance, Economic Development and Investment Promotion, the Zimbabwe Revenue Authority (ZIMRA)’s Public Notice 71 of 2024 introduces significant updates on quarterly payment dates (QPDs) for income tax.
The notice provides detailed guidelines for taxpayers with income in both foreign currency and local currency, offering two distinct scenarios depending on the proportion of income earned in each currency.
Taxpayers are required to aggregate their income earned in both Zimbabwean dollars (ZWG) and United States dollars (US$) to determine total income. Based on the proportionate contribution of each currency, two scenarios apply. Scenario 1: Foreign currency income contributing 50 percent or more. Scenario 2: Local currency income exceeding 50 percent. For each scenario, taxpayers are required to account for income tax in proportion to the currency in which the income is earned. Specifically, ZIMRA requires taxpayers to apportion their tax liabilities based on their income currency breakdown, allowing them to split tax payments between US$ and ZWG according to the actual ratio of income earned in each currency.
The guidelines for 2024 QPDs distinguish the tax treatment for the first, second and third QPDs. For the first QPD, taxpayers were required to account for income tax in the currency of trade. In the second QPD, taxpayers had the option to either (1) account for tax on a proportionate to trade basis, based on the ratio of foreign currency to local currency income, or (2) apply a 50-50 basis, where at least 50 percent of the income is assumed to be earned in foreign currency.
For the third QPD, all taxpayers must account for income tax using the 50-50 basis regardless of actual income ratios, with any foreign currency income exceeding 50 percent adjusted to reflect this proportional treatment.
By the end of the third QPD, 65 percent of the annual tax liability should be settled, with necessary adjustments based on the income ratio or tax method selected in earlier QPDs. For the final quarter, taxpayers are required to settle the balance of the annual tax liability in full. Meanwhile, income earned in foreign currency other than USD is deemed USD income and that which is liquidated in terms of Reserve Bank of Zimbabwe surrender policy is deemed local currency income.
Public Notice 71 is based on the legal framework provided by Section 37AA of the Income Tax Act, which governs the taxation of income earned in multiple currencies. The section specifically allows for the conversion and apportionment of income and tax liabilities when a taxpayer earns income in both foreign and local currencies. It grants ZIMRA the authority to prescribe how such apportionment should be handled, ensuring that taxpayers account for income tax in a manner that accurately reflects their earnings in each currency.
While the guidelines in Public Notice 71 of 2024 are comprehensive, concerns about their legal enforceability have arisen due to the absence of a supporting Finance Act. The public notice is pre-empting contents of the Mid Term Budget proposals which are yet to be made into law. However, the legal precedent set by the Supreme Court in the Zimplats vs ZIMRA case suggests that ZIMRA’s public notices can have legal force even in the absence of explicit legislative backing. In the Zimplats dispute, the Supreme Court upheld ZIMRA’s apportionment method, which was outlined in Public Notices 36 and 57 of 2021, emphasising that they accurately reflected the legislative intent and were consistent with legal requirements. This ruling reinforces the likelihood that ZIMRA’s guidelines in Public Notice 71 may still be enforceable, despite the absence of a supporting Finance Act.
Given the shifting tax environment, businesses should adopt a prudent approach to ensure alignment with ZIMRA’s guidelines while staying alert for any legislative updates that may clarify the legal standing of these requirements. In addition to regular reviews of key contracts and comprehensive tax planning, it is essential to stay proactive in monitoring regulatory changes, maintain open communication with tax authorities, conduct regular tax health checks to identify compliance risks and tax-saving opportunities and implement training programs across all organisational levels. Managing foreign currency tax obligations is also critical to aligning with these guidelines. WTS Tax Matrix can assist with these efforts, including liaising with ZIMRA to resolve any uncertainties related to Public Notice 71, ensuring businesses safeguard their financial positions.
l Tapera is the founder of WTS Tax Matrix (Pvt) Ltd and CEO of WTS Tax Matrix Academy. He writes in his personal capacity. WTS Tax Matrix Academy will be hosting Tax Summer School, from October 17-20, 2024 at Troutbeck Resort, Nyanga.
