The cornerstone of the Zimbabwean tax system is the source of income.

Generally only income with a

true Zimbabwean source is subject to tax. The term 'source' is at the epicentre of the tax system but it
was not defined in the Act. It was defined by case law in the celebrated case, Rhodesia Metals vs COT. It
was defined as, "not a legal concept but something which an ordinary man would regard as the real
originating cause of income."

Therefore income which originates in Zimbabwe is taxable, however there are special cases where
foreign income is taxed ie if its source is deemed to be Zimbabwe according to Section 12.

Other cases in regard to source include Unilever & Lever Bros vs CIR, Millin vs CIR, United British
machinery Co vs COT, Boyd vs CIR & COT vs Shein

In CIR v Lever Bros & Unilever Ltd 1946 AD 441, 14 SATC 1 it was held (by the majority) that
the source or originating cause of interest payable on a loan of money was not the debt but the
services that the lender performs to the borrower, namely, the supply of credit, in return for
which the borrower pays him interest.

An investor in interest-bearing securities is in all respects the same as a lender of money as he is

paid for the services that he performs to the borrower, being the supply of credit. Thus the true
source of interest from an interest-bearing security is, in terms of the Lever Bros case, also the
provision of the credit. This would be the place where the money for the investment was actually
handed over. Therefore non residents making investments in interest-bearing securities in the
Republic will cause the resulting interest to be from a Republic source.

In Millin v CIR 1928 (AD) 207, 3 SATC 170, it was held that the true source of royalties accruing
from a book was the author’ s wits, labour and intellect. Therefore if these activities are carried
out in the Republic, the true source is in the Republic. The principle from Millin’ s case also
applies to royalties accruing to inventors from patents and similar assets. If the inventor applies
his wits, labour and resources in the Republic, any resulting income accruing to him is from a
true source in the Republic.

When a royalty is earned by a person who is not the original author or inventor, for example, by
a person who has purchased the royalty-producing asset from the original author or inventor,
since the royalties would then be derived not from the wits, labour or intellect of the recipient but
from the ownership of the royalty-producing asset, the true source of the royalty would be where
the purchaser employed his capital when he purchased the royalty-producing asset.