Taxes are a compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions. It is an obligation for every income generating business in Zimbabwe to register with ZIMRA and have a tax clearance as an indication that their tax affairs are up to date.

Employees are taxed on a monthly basis in terms of a pay-as–you-earn (PAYE) in accordance to   The Income Tax Act [Chapter 23:06] which specifies what elements of an employee’s remuneration or earnings are subject to tax and at what rate of tax. The PAYE system is a method of paying Income Tax on remuneration and it deals with what income is exempt from tax and what deductions are allowed from these earnings, prior to tax being calculated. Allowable deductions include pension contributions, subscriptions to professional, trade or technical associations and cost of tradesman’s tools. The employer is responsible for the calculation of the PAYE due from all forms of remuneration granted to the employees in terms of the 13th schedule to the Income Tax Act. The employer is the expected to remit the PAYE to ZIMRA.

According to ZIMRA, remuneration means any amount of income which is paid or payable to any person by way of any salary, leave pay, allowance, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance, stipend or commutation of a pension or an annuity, whether in cash or otherwise and whether or not in respect of services rendered.

According to ZIMRA, several incentives and benefits provided by an employer on behalf of an employee that are taxable include:

• Data and airtime for use at home or outside work premises- the benefit includes the provision of data and airtime given by the employer to the employee for use at the home or outside work premises. The deemed benefit is pegged at 30% of the cost to the employer.

• Use of motor vehicle- an employee enjoys the use of a company vehicle or is allocated a company vehicle, the value of the benefit is determined according to the engine capacity of the vehicle, an engine capacity up to 15,000cc has a monthly cost  of ZWL $ 81,000.

• Travelling expenses- benefit covers employee travels or employee’s spouse or children, which are not for the purposes of employer’s business.

• Occupation residence- the benefit arises when the employer grants free accommodation or pays subsidized rentals.

• School fees benefit- an employer pays school fees for the employee’s children, the cost of the fees payable becomes taxable in the hands of the employee. In situations where the employer is a school and the employee's child gets admitted/enrolled at the school without paying school fees or pays fees that are lower than those paid by other pupils attending the same school, the payments that were skipped become a taxable benefit in the employee's eyes. Any school fee cuts or reductions provided as a result of the employer-employee connection are also taxable compensation in the employee's hands. 

Only half the amount or value of a school benefit may be included in an employee's gross income if they are a member of the teaching or support staff of a school, and it may only apply to three of the employee's children.

• Loan benefit- Where the employer gives a loan to the employee amounting to ZWL$8000 or US$100 or more, a benefit will only arise where the interest rate charged on the loan is lower than the prescribed rates of interest or the loan is not fully repaid. The prescribed interest rates are based on the London Inter–Bank Offered Rates (LIBOR) plus five percent 5%.

The Finance Act specifies the tax rates that apply each year, and tax deduction tables are available on the ZIMRA website. Employee’s tax in Zimbabwe is levied on a sliding scale with higher rates of tax being levied on high income earners and lower rates of tax or no tax at all being levied on low income earners. It should be noted, however, that once earnings reach a certain level, a flat rate of tax is applied to any earnings above this level. Before subjecting income to taxation, all forms of remuneration should be considered.

The annual rates of tax payable are listed in the table below.             

                                                                                                          Table 1;SOURCE: PMRC.