• Zimbabwe and the Swiss Federation have signed a treaty to avoid double taxation on income and capital gains
• The Double Tax Agreement addresses the issue of individuals or businesses being taxed on the same income by both the source and residence countries
• DTA serves as a mechanism to mitigate double taxation, facilitating cross-border investment and economic activity

Harare-Zimbabwe and the Swiss Federation have signed a treaty to avoid double taxation concerning income and capital gains.

This agreement aims to enhance transparency and cooperation in tax matters among participating countries and is part of Zimbabwe’s broader efforts to strengthen its economic, diplomatic, and political relations with other nations.

The Double Tax Agreement (DTA) is to address double taxation, which occurs when an individual or business is taxed on the same income by both the source country where the income is earned and the residence country.

The DTA serves as an international tax mechanism to mitigate this issue.

“It is important to note that imposing similar taxes on the same income has detrimental effects on the cross-border movement of capital, technology, and expertise. Hence, there is a need for an effective mechanism to eliminate such practices,” said Professor Mthuli Ncube, the Minister of Finance, Economic Development, and Investment Promotion, during the signing ceremony in Harare.

Switzerland has been actively involved in the socio-economic development of Zimbabwe, having signed an international cooperation agreement in 2017 focused on humanitarian aid and technical and financial cooperation.

This partnership contributes to sustainable poverty alleviation, democratic development, peacebuilding, and the promotion of human rights and the rule of law.

The two countries are engaged in the cross-border movement of goods and services, including gold, ferroalloys, nickel, coffee, tea, edible fruits, and tobacco, among others.

This treaty is essential in encouraging cross-border investment by providing clear treatment of various types of income, such as dividends, management fees, royalties, and remuneration, ensuring that income or capital is not taxed in both countries during the same period.

According to Professor Ncube, the agreement also seeks to eliminate treaty shopping opportunities, where taxpayers from third-party countries may manipulate tax residency concepts to benefit from the treaty.

The inclusion of the “Entitlement to Benefit” clause, an anti-treaty shopping measure, is a significant step toward eliminating such practices, which can undermine domestic resource mobilization efforts.

Despite experiencing weak economic growth in recent years, Zimbabwe boasts considerable potential due to its natural resources, strong institutions, and well-educated population.

Since the end of President Robert Mugabe's rule in 2017, Swiss business interest in Zimbabwe has increased, making Switzerland one of the largest European investors in the country according to Federal Department of Foreign Affairs (FDFA)

The two nations have also signed a Bilateral Investment Promotion and Protection Agreement (BIT) to further enhance economic cooperation.

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