The HonourableProfessor MthuliNcube, Minister of Finance and Economic Development, presented the 2021 National Budget on Thursday, 26 November 2020, under the theme “Building Resilience and Sustainable Economic Recovery”.
This summary includes the key proposals from the 2021 Budget Statement. We have also included a summary of key existing tax provisions. The 2021 Budget Statement proposals are still to be promulgated into law either through the 2021 Finance Act or through separate Statutory Instruments.
The advent of hyperinflation and the significant devaluation of the ZWL$ following the introduction of the local currency in 2019 and numerous monetary policy interventions had resulted in distortions in taxation, in particular due to the requirements initially included in Statutory Instrument 33 of 2019.
There are a number of proposals which seek to address these distortions, prospectively, including the rebasing of tax thresholds, with effect from 1 January 2021, with reference to either consumer price indices and or underlying foreign currency amounts at the ZW$ equivalent values.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
Key proposals Budget Statement but not in Finance Bill
Payment of Tax in Foreign Currency
Payment of income tax in foreign currency on the basis of gross foreign currency receipts after deducting the prescribed retention or liquidation thresholds.
Unredeemed capital allowances as at 1 January 2021 will be rebased to the local currency equivalent of the outstanding foreign currency invoice value at the beginning of each financial year.
Power generation projects
Income accruing from power generation projects proposed to be liable to a tax rate of 0%, this will allow the investor to carry forward assessed losses incurred during the project development phase.
Intermediated money transfer tax (IMTT)
With effect from 1 January 2021, the tax free threshold will increase from ZWL300 to ZWL500. Maximum IMTT reviewed from ZWL50 000 to ZWL800 000 for transactions exceeding ZWL40 000 000.
Youth employment tax credit
Review of the tax credit for each employee hired from ZWL500 to ZWL1 500 per month, and the limit on the maximum credit from ZWL60 000 to ZWL180 000 in a year of assessment.
Interest rate on loans to employees
Proposed increase in the prescribed rate of interest for ZWL denominated staff loans at 15% per annum.
Petroleum importer’s levy
Proposed levy of USD0.05 a litre on both diesel and petrol imported other than through the pipeline to encourage importation through the pipeline.
Retrospective review of the tax rate on income accruing from mining operations from the current 25% to 24% with effect from 1 January 2020.