SADC Member States

1. Angola
2. Botswana
3. DRC
4. Lesotho
5. Madagascar
6. Malawi
7. Mauratius
8. Mozambique
9. Namibia
10. Seychelles
11. South Africa
12. Swaziland
13. Tanzania
14. Zambia
15. Zimbabwe

1. OVERVIEW

incentives apply equally to domestic and foreign investors.

The major goals of incentives are : -

(a) Employment creation
(b) Small business development
(c) Industrial development
(d) Export promotion
(e) Spatial development
(f) The upliftment of the economically disadvantaged.

The Ministry of Industry and International Trade as well as the Industrial Development Corporation and the Zimbabwe Investment Centre are the main administrators of non tax incentives

Tax incentives are kept to a minimum.

Tariff protect local industry but the move towards harmonization of trade within the region has led to the reduction of tariff for COMESA and SADC countries.

Export incentive schemes involve an export marketing and investment assistance scheme, export credit and foreign investment reinsurance and targeting capital exports.

Government provides support to technology development.

2. Investment Policy

Government attempts to attract investment in economic activity by creating a stable macro-economic environment. Success has been achieved with regard to issues such as fiscal stability and a commitment to privatization and the development of free enterprise.

Most incentives for investment are in the from of first 5 years tax holiday which has attracted foreign investors and the second 5 years they are taxed at 15% and then taxed normally.

Zimbabwe Investment Centre plays a role in marketing investment projects to potential investors. Zimbabwe Investment Centre has knowledge of incentives and a qualified team of people to help potential investors through the regulatory and legislative requirements of investing in Zimbabwe.

3. General Incentives

i. Rebate provisions

These are available to all manufacturing industries. Provision exists for rebate or drawback of certain duties applicable to imported goods, raw materials and components used in manufacturing, processing or for export.

ii. Small Business Enterprises

This programme is available to local and foreign firms investing in land, buildings, plant and equipment to encourage small and medium sized manufacturing and to facilitate increased employment creation.

iii. Incentives for the small business sector

The Zimbabwe government is well aware of the important role that small, medium and micro enterprises play in job creation and innovative new production methods.

iv. Business loans

This scheme is available to businesses that meet the financial institutions criteria. The aim of the scheme is to provide business loans or lending to the businesses.

v. Seed loans

This scheme aims to provide initial capital to new organizations to initiate their portfolio and to fund operational expenses over a predetermined period.

4. Free Trade Zones

EXPORT PROCESSING ZONES

An Export Processing Zone (EPZ) means any part of Zimbabwe declared in terms of the EPZ Act Chapter 14:07 to be an export processing zone.

Role of EPZ Authority

(a) Establish EPZ where export oriented activities take place.
(b) To administer, control and regulate all export processing zones.

Requirements

To trade in the EPZ an investment licence is required. A company which operates in the EPZ is referred to as a licenced investor and should undertake in a manufacturing, processing or service utility which exports at least 80% of its production.

Incentives awarded/applicable to EPZ

The holder of an investment licence issued in terms of the Export Processing Zone Act, (licence investor) is granted the following incentives:

Tax and Duty concessions in relation to approved zones include:
- Exemption from income tax for the first five years of operation
- Thereafter, the application of the rate of 15% of taxable income
- Exemption from capital gains tax
- Exemption from non resident and resident shareholder’s taxes, non-residents taxes on interest,
fees, royalties and remittances
- Duty free importations
- Sales tax on goods and services is refundable.

Fringe benefits earned by staff employed by licenced investors operating in export processing zones are exempt from income tax. The exemption on fringe benefits is to be restricted to 50% of an employee’s taxable income.

INDUSTRIAL PARK DEVELOPER

An industrial park developer is a person who owns and maintains an industrial park. An industrial park is a premise or an area, other than an export processing zone, in which two or more persons, other than the industrial park developer, carry on the business of manufacturing or processing goods or components of goods for export from Zimbabwe.

The rate of tax on such operations is zero for the first five years of operation and is 15% thereafter.The distribution of amounts arising from industrial park operations are exempt from resident shareholder’s tax, non- resident shareholder’s tax and non-resident tax on interest and fees. The disposal of specified assets forming part of or connected to the industrial park are exempt from capital gains tax.

5. Export Incentives

6. Financial Assistance

Zimbabwe has a well developed banking and financial infrastructure, consisting of : - the Reserve Bank (which acts as the Central Bank) major international and domestic commercial banks, venture capital companies, development banks, a number of merchant banks and discount houses providing financial services such as medium-term loan, finance, foreign market transacting equity issues, stock exchange transactions, portfolio management, company broking, corporate restructuring, etc. The state owned Agribank provides agricultural loan financing.

Industrial Development Corporation (IDC)

- Most of the assistance for capital projects is administered by IDC. The cooperation provide among other things :-

legal services;

registration of newcoys;

research for new opportunities;

building of factory shells;

audit services; and

policy direction.

The banking sector has been deregulated and banking regulations are continuously being reviewed to encourage greater competition in the financial sector. Interest rates are market-determined.

Commercial Banks issue credit cards in line with international banking practices, and several Bureau deChanges are operational.

Several broking firms offer comprehensive advisory services on local and foreign markets.

7. Regional Incentives

Zimbabwe regional incentives are offered through bilateral and multilateral agreements the country has entered into. These include the following project :

- Beira Development Corridor;
- Tourism Development Zones;
- Kruger National Park; and
- Shared Water courses.

8. Industrial Financing

This can be equated to our Small Enterprise Development Scheme were funding is provided for certain approved projects which create self-employment as well as enhance economic development. This is administered through the Small Enterprise Development Corporation. Promotion of SMEs and indegenisation are fulfillment of Industrial Financing.

Revised and consolidated fiscal framework for mining in Zimbabwe.
- The regime seeks to standardize and address the current difficulties facing investors in the mining industry and to encourage development of new mines and expansion of existing ones while at the sometime safeguarding the government’s revenue and other interests.

Proposed Motor Industry Development Policy. The document contains proposals that should be implemented inorder to ensure the survival and long terms growth of the Zimbabwe motor industry. The proposal has been formulated by representatives from all stakeholders and forms the consensus of the motor industry on what is for the coordinated and planned growth of the industry.

9. Development Programmes And Incentives For Specific Industries

10.1. Rates

Rates of taxes are fixed annual by Parliament for the different category of taxpayers. Neither ZIMRA nor any other person has a discretion to change the rates.

10.2. Deferral Period

In terms of the definition of “gross Income” tax is termed on the earlier of when an amount is received by the taxpayer or when it accrues. Case law exist to the effect that ZIMRA has no authority when to tax an amount but has to tax on the earlier of receipt or accrual.

Specific provisions may provide for limited relief. For example, when an amount is received or it accrues, but future expenditure is still needed to be incurred in respect of the amount so received, the whole amount will not be taxed in year one. Under section 15 (2)(cc) a deduction is available for future expenditure still to be incurred.

10.3. Tax Holiday

In an attempt to stimulate general investments a tax holiday was granted to certain qualifying companies which will be taxed at zero rate for a 5 year period or at reduced rates of taxes e.g. EPX companies, build own operate transfer.

10.4. Depreciation

An investment allowance, deductible in the year of assessment, equal to 15% of the cost of a taxpayer carrying on trade on a growth point of –

(a) Now commercial or industrial buildings or staff housing constructed by him,
(b) Additions or alterations to existing commercial or industrial buildings or staff housing,
(c) Now or unused articles, implements, machinery and utensils (S.15 (2)(dd) of the Income Tax Act.

Export Market Development Expenditure Section 15 (2)(gg)

This is a double deduction available in respect of non-capital expenditure incurred for the purposes of seeking new opportunities/markets for the export of goods (not services) from Zimbabwe, or of creating or increasing the demand for such products.

10.5. Other

Deduction of payments by employer towards the ownership of shares by employees :

- employers who donate shares to its employees in pursuance of ownership of shares by the employee in share ownership Finance Act Scheme 2002 may claim a deduction.

PERFORMANCE RELATED BONUSES

The Ministry of Finance introduces performance related bonuses for employees.