Following the 2024 Mid-Term Budget Review, the Zimbabwe Revenue Authority (ZIMRA) issued essential guidance on September 23, 2024, regarding the application of Quarterly Payments Dates (QPDs). With the third quarter (Q3) approaching its close, businesses are expected to have paid 65% of their annual tax liability. This requirement could demand immediate adjustments to avoid significant penalties for non-compliance.
Operating in a dual-currency economy—where taxpayers must balance income streams between USD and ZWG—requires precise calculations and strategic decision-making to comply with ZIMRA’s updated tax guidelines. This year’s changes mark a shift toward more nuanced compliance requirements, and failure to adapt quickly could result in steep consequences.
Key Guidance and Compliance Requirements:
- Income Aggregation where all income from ZWG and USD must be combined to calculate total income, which should then be expressed either in ZWG or USD for tax purposes.
- Proportional Income Assessment where businesses must determine the proportionate contributions of ZWG and USD income to identify which scenario applies to their tax situation.
- Scenario Guidelines:
Scenario 1: For businesses where more than 50% of income is earned in foreign currency, specific tax rules apply.
Scenario 2: If more than 50% of income is in local currency, different tax guidelines come into effect.
4. Fixed Income Scenario: Both scenarios are illustrated based on a taxpayer earning fixed rental income in USD and ZWG and incurring fixed expenses in both currencies
5. Quarterly Breakdown: ZIMRA has issued distinct QPD guidance for the first three quarters of 2024, reflecting the importance of precise compliance throughout the year.
Urgent Implications for Your Business:
- Cash Flow Risks where businesses earning significant foreign income must carefully manage cash flow to meet tax obligations in both USD and ZWG. The complexity of handling multiple currencies requires immediate attention to avoid falling behind on tax payments.
- Currency Fluctuation Challenges where the dual-currency nature of the economy presents risks related to exchange rate volatility. Failing to account for these fluctuations could lead to inaccurate tax filings, potentially triggering audits and penalties. Businesses should consider hedging strategies to safeguard against these risks.
- Increased Compliance Burden where with distinct guidelines for different income scenarios, businesses face a heightened compliance burden. Lack of accurate tracking and reporting could result in penalties. Now is the time to invest in robust accounting systems or seek professional tax advice to ensure full compliance.
- Potential Bias Toward ZWG where the current tax framework may incentivize businesses to conduct more transactions in ZWG, helping to stabilize the local currency. However, businesses that fail to adjust their strategies could miss opportunities to optimize their tax position.
Businesses that do not adjust their tax strategies immediately risk falling out of compliance with ZIMRA’s stringent guidelines. The penalties for late payments or underreporting can be severe, especially given the complexities of Zimbabwe’s dual-currency system. This is not the time to take chances with your tax obligations. To avoid audits, penalties, and financial strain, it is critical that you consult with a professional tax advisor as soon as possible. Expert guidance will ensure that your business is fully compliant and able to navigate the complexities of the QPD framework for 2024. While ZIMRA has provided a summary of the QPD framework for 2024, taxpayers should be mindful of the tax proportions, as the figures in the public notice have been rounded off. This could potentially lead to the overstatement or understatement of tax payments.