The Zimbabwean Treasury has unveiled foreign currency-denominated income tax bands, with tax-free threshold at 350 U.S. dollars a month and a rate of 40 percent for people earning more than 15,000 U.S. dollars a month.
While the main unit of exchange remains the Zimbabwe dollar, entities with free funds are allowed to pay their employees in foreign currency, predominantly the U.S. dollar.
According to Monday’s edition of The Herald newspaper, Finance Minister Mthuli Ncube unveiled the foreign currency income tax structure last Thursday in the National Assembly, while steering the Finance Bill.
The bill seeks to give legal effect to the several measures that he introduced during the Mid-Term Fiscal Policy Review statement in July this year.
Those earning above 350 U.S. dollars up to 1,500 U.S. dollars will be taxed at 20 percent.
Initially, the Finance Bill had pegged income-tax-free threshold at 840 U.S. dollars but Ncube reduced it to 350 U.S. dollars.
The National Assembly also adopted amendments by Ncube reducing the initial proposal to have the highest tax bracket of 40 percent pegged at 36,000 U.S. dollars, to 15,000 U.S. dollars.
In his Second-Reading speech, Ncube said the bill seeks to provide relief to taxpayers and enhance disposable income, promote capital accumulation, which is crucial in supporting the economic rebound, and to protect revenue sources.
He said the bill also provides that royalties on the sale of minerals be paid in foreign currency if the amounts from which royalties are withheld are foreign currency amounts.
“The clause proposes to deem all mineral royalties to be receivable in U.S. dollars unless the recipients of the amounts can furnish invoices or other documentary proof to the contrary,” Ncube said.
To minimize the tax burden and enhance disposable income, particularly given that most people are facing COVID-19-induced economic challenges, the bill seeks to raise the income-tax-free threshold to 25,000 Zimbabwe dollars, up from 5,000 dollars, with effect from August, he said.