Zimbabwe: Zimbabwe Tax Credits

The context of Tax Credits in Zimbabwe

Tax credits are generally availed to employers and employees through the provisions of section 7(c) of the Income Tax Act [Chapter 23:06], with reference made to the Charging Act [Finance Act (Chapter 23:04)]. They reduce the income tax liability of the qualifying taxpayer. We will consider the following Tax Credits, Elderly Persons’ Credit, Blind Persons' Credit, Invalid appliances & medical expenses Credit, Mentally or physically disabled persons Credit, Youth employment Credit, and Credit for employment of physically challenged persons, which are provided in sections 13A and 13B of the Finance Act.

The Rates are as in the Finance Act 13 of 2023, extract below.

Elderly Person’s Credit

This credit is for individuals who have attained the age of 55, and it reduces the amount of tax by US$900 per tax year. The amount is reduced proportionately to the period of assessment and qualification as an elderly taxpayer.  

Blind Persons Credit

In addition to the blind taxpayer, this credit can also be applied to the spouse of the taxpayer if they are also blind.  

Invalid appliances & medical expenses Credit

A taxpayer must take note that this credit is only applicable if they are ordinarily resident in Zimbabwe. 100% of medical Aid contributions, and 50% of other medical expenses are allowed as a tax credit against the taxpayer’s chargeable tax. The expenses include those paid by the taxpayer for approved family members.  

Mentally or physically disabled persons' Credit

Application of the credit is similar to that of a blind person; in addition, it can also be claimed for children. However, periods of non-residence will reduce the credit accordingly. For married couples, the claim for child credits begins with the husband, followed by the wife in that order.  

Youth Employment Credit

The credit is stipulated in Finance Act No.3 of 2019, and is applicable to tax-compliant taxpayers who employ any additional employee aged 30 years or less during the year of assessment and who has completed 12 consecutive months’ employment with the claimant (qualifying taxpayer). The applicable credit is US$50 per month for each additional employee up to a maximum of US$2,250 in any year of assessment.

An employer cannot claim the credit in respect of trainees, interns and apprentices and managerial employees. It also excludes businesses with annual turnover equal to or exceeding US$1,000,000.

Credit for the employment of physically challenged persons

A qualifying taxpayer can also claim credit for the employment of physically challenged persons during the year of assessment. A physically challenged person is defined in the Finance Act to mean an individual having a medically ascertainable physical condition or impairment that makes it difficult for him or her to do things that other individuals without the same physical condition or impairment can do easily.

The credit deductible for employment of physically challenged persons is calculated at the rate of US$50 per month (or local currency equivalent) for each additional employee up to a maximum aggregate amount of US$2,250 (or local currency equivalent) in any year of assessment. For the taxpayer to qualify for this credit, they should be compliant in every respect with the requirements of the National Social Security Act [Chapter 17:04]. The taxpayer should also provide proof that is satisfactory to the Commissioner in the form of a valid medical report, issued at the time a credit is claimed, by a medical practitioner employed in a Government hospital, and the employee should have completed 12 consecutive months’ employment with the claimant.

Cases where credit exceeds the tax payable

Where the credit (youth employment credit and credit for employment of physically challenged persons) is more than the amount of tax payable, the taxpayer shall not be entitled to a refund, but the amount will be carried over to the next year of assessment. Similarly, the credit can be added to any assessed loss for the purpose of carrying it over to the next year of assessment.

In conclusion, these credits reduce the amount of tax payable by a qualifying taxpayer, enhancing cash flows and promoting employment.

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Reference/ Citation

Zimbabwe Finance Act 13 of 2023

Income Tax Act Chapter 23.06

Finance Act Chapter 23.04

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