• New Tax on Fast Foods: 0.5% tax will be implemented on fast food items, including pizza, chicken, and fries
• Sports Betting Tax Introduced: A 10% withholding tax on gross winnings from sports betting will take effect in 2025
• New Measures for the Informal Sector: Informal traders to register for Personal and Corporate Income Taxes, Penalties from US$9k to15k

Harare- As the government grapples with the challenge of raising capital amid significant debt levels that hinder access to credit and strained diplomatic relations with Western nations, it has shifted its focus toward the informal sector, fast food outlets, and betting establishments.

This pivot comes in the wake of exhausting traditional avenues for tax revenue generation, compelling the government to impose taxes even on economically vulnerable populations engaging in low-stakes betting.

The aim is to bolster the fiscal base by tapping into these previously underregulated areas, reflecting a broader attempt to enhance revenue streams in an increasingly constrained financial landscape.

Finance and Economic Development Minister Mthuli Ncube has introduced several tax initiatives aimed at fast food outlets, sports betting, and the informal sector, which has a history of tax evasion.

He has removed certain investor incentives that previously enhanced investment appeal and suspended duty on inputs for motor vehicle production.

Tax on Fast Foods

Effective January 1, 2025, a 0.5% tax will apply to all fast-food items. This category encompasses pizza, chicken, French fries, doughnuts, shawarma, and burgers.

The rationale for this tax stems from concerns that these foods contribute to obesity and related non-communicable diseases, prompting the government to encourage responsible consumption.

Major fast food chains, including Chicken Inn, Chicken Slice, and KFC, will be significantly affected, likely resulting in increased prices for consumers.

Tax on Betting

In response to the inability to provide adequate employment opportunities due to a challenging business environment, many individuals have turned to sports betting in hopes of improving their financial situations.

Historically, only bookmakers have been taxed at a 3% rate on gross takings, alongside VAT on bets placed.

To integrate punters into the tax system, the latest budget proposes a 10% withholding tax on gross winnings from sports betting, effective January 1, 2025.

This tax will apply to the total winnings of punters.

Taxes on the Informal Market

With approximately 10% of the workforce employed in the formal sector, Zimbabwe's informal sector accounts for nearly 80% of employment. This sector has been a vital source of job creation and livelihood but has largely evaded taxation.

The 2025 budget now mandates that informal traders be subject to taxation.

Minister Ncube stated that a survey revealed many operators within the emerging sector engage in substantial economic activities and, therefore, are expected to contribute through Personal and Corporate Income Taxes, rather than presumptive tax.

Consequently, informal traders in sectors such as fabric, clothing, automotive, hardware, groceries, and kitchenware must register for Corporate and Personal Income Tax with the Zimbabwe Revenue Authority.

They are also required to conduct transactions through Point-of-Sale Machines and maintain thorough transaction records by January 1, 2025.

Non-compliance may result in fines ranging from US$9,000 to US$15,000. The Zimbabwe Revenue Authority (ZIMRA) has the authority to temporarily close businesses that do not comply with these regulations.

Removal of Special Economic Zones Incentives

Previously, Special Economic Zones (SEZ) offered investors substantial tax incentives, including a five-year tax holiday.

This policy has been amended, with the holiday replaced by a 15% Corporate Income Tax rate.

Also, the exemption on withholding tax has been revoked, now subjecting companies in sectors such as petroleum and mining to a 10% tax, negating the appeal of SEZ status for many investors.

Rental Income Tax: Change of Principal Purpose

The government has announced that properties converted from residential to business use will be subject to a 25% Rental Income Tax, requiring separate accounting with the Zimbabwe Revenue Authority.

Companies utilizing rented premises must disclose rental expenses, including property location and ownership, to the Commissioner.

Failure to declare rental property ownership will preclude companies from claiming rental expenses against taxable income.

Taxes on Tender Holders

Current legislation mandates VAT registration for operators with annual turnovers exceeding US$25,000.

To enhance tax compliance, the budget proposes that any individual supplying taxable goods and services through a tender with a minimum value of US$25,000 must provide proof of VAT registration.

Consequently, any tender exceeding this value must include VAT in the purchase price.

Tax on Quarry Stones and Coal

The government has introduced a new royalty tax of 0.5% on quarry stones and coal, calculated based on the sales value. The existing legislation imposes a 1% levy on quarry stone proceeds; however, these resources do not currently attract a mineral royalty.

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