SEPTEMBER 2019 – ZIMBABWE
CURRENCY REFORMS AND TAX CHANGES
It is important that employers note the following:
Changes to tax rates due to currency reforms
Statutory Instrument (SI) 142 of 2019, published as part of the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, declares that the Zimbabwean dollar will be the sole currency for legal tender purposes, effective 24 June 2019.
The RTGS (Real Time Gross Settlement) dollar was introduced in February as a first step towards a new currency by year’s end. RTGS dollar means any funds held as bank deposits under the RTGS system established in terms of the National Payment Systems Act. Bond notes and RTGS dollars are at par with the Zimbabwe dollar (ZW$).
Other currencies, specifically US dollars, British pounds, South African rand and Botswana pula, are no longer legal tender. Even though SI 142 is valid, it does not expressly state that foreign currencies cannot be used in transactions or to price goods.
As a result of the currency adjustments, the Minister of Finance and Economic Development, Hon Prof Mthuli Ncube, announced in the 2019 mid-year budget review and supplementary budget, delivered in August 2019, a review of the tax-free threshold from the current ZW$350 to ZW$700 and widening of the tax bands to a maximum of ZW$30 000, above which income is taxed at the marginal tax rate of 40%, including separate US$ and ZW$ tax tables. This took effect on 1 August 2019.
Employees who earn in foreign currency will, however, continue to settle their tax liability in foreign currency. Every enactment in US$ is to be construed to be ZW$ at a rate of 1:1.
A new Final Deduction System (FDS) year of assessment came into effect on 1 August 2019 and ends on 31 December 2019. Taxpayers will be required to submit two annual income tax returns (ITF16s) for 2019.
Annual Tax Rates before and after 1 August 2019:
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