Zimbabwe’s New Domestic Minimum Top-Up Tax

Zimbabwe’s introduction of the Domestic Minimum Top-Up Tax (DMTT) marks a paradigm shift in the taxation of foreign entities operating within the country. The DMTT is meant to foster a fair and effective tax system in line with global rules. This article unpacks the complexities of this new tax for multinational corporations.

At its core, the DMTT is a tax levied on the income of foreign entities active in Zimbabwe. Under the tax, global profits of large multinational enterprises will be taxed at a minimum corporate income tax rate of 15 percent. It targets companies, trusts, or juristic persons domiciled outside Zimbabwe, including locally incorporated subsidiaries, registered companies, and local branches of foreign entities. The essence of this tax is to ensure that foreign entities contribute a fair share to Zimbabwe’s tax revenue, particularly when these entities benefit from the country’s market but pay little to no corporate tax in their country of residence.

To determine the DMTT, a two-step calculation process is used. The actual corporate tax charged on the entity’s income is compared against the corporate tax that would have been charged without deductions under section 15 of the Income Tax Act. This comparison yields the “effective” rate of corporate tax, reflecting the real tax burden on the entity’s income.

The tax comes into play under specific circumstances. It will be applicable when a foreign entity earns income from any business or activity within Zimbabwe. It will also be applicable when the foreign entity’s country of residence either does not levy corporate tax at all or it levies taxes at an effective rate of less than 15% of the corporation’s income. Under these conditions, despite any existing double taxation agreements, the foreign entity is liable to pay the DMTT.


The DMTT for entities not liable to tax in Zimbabwe, the DMTT is equal to 15% of jurisdictional profits earned in Zimbabwe during the assessment year. Where the entity on the other hand, is liable to tax in Zimbabwe but at a rate less than 15%: the DMTT is 15% minus the corporate tax rate paid in the country of residence, or the tax chargeable under Zimbabwean law due to double taxation agreements, whichever is greater.


The introduction of DMTT has significant implications for foreign entities operating in Zimbabwe. It ensures that these companies contribute a minimum tax amount, thus aligning Zimbabwe’s tax policy with global efforts to prevent tax base erosion and profit shifting by multinational corporations. Recognizing the complexities of international taxation, the DMTT takes into account the potential for double taxation. If a foreign entity’s income in Zimbabwe is taxed as if it were earned in its home country, the DMTT is adjusted accordingly. The entity will pay either the DMTT calculated at 15% minus the tax rate in its country of residence or the amount chargeable under Zimbabwean tax laws due to double taxation agreements.

To facilitate the implementation of this new tax law, the Ministry of Finance is empowered to make regulations deemed necessary or convenient. This provision ensures that the DMTT can be effectively integrated into Zimbabwe’s existing tax framework and adapted as necessary to meet evolving economic and international tax standards.

The DMTT offers several benefits. It will ensure that foreign entities contribute a fair share of tax. Also, the DMTT can potentially increase Zimbabwe’s tax revenue, providing more revenue for public services and development. Third, the tax aligns Zimbabwe with international efforts to curb tax avoidance.

While the DMTT offers many benefits, it also presents challenges such as a compliance burden where foreign entities must now navigate an additional layer of tax compliance in Zimbabwe. Also, there might be implications for international trade and investment if foreign entities perceive the tax as a barrier. There also could be complexity in the implementation of the DMTT. It should be ensured that the DMTT is applied fairly and efficiently. This may require significant administrative effort from the Ministry of Finance and Economic Development, the Zimbabwe Revenue Authority and the Zimbabwe Investment Development Agency.

In conclusion, Zimbabwe’s introduction of the DMTT is a bold step to align the domestic tax system with global tax rules. While it presents certain challenges, the potential benefits in terms of increased revenue are significant.

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