Exemptions

 Section 14(1) as read with 3rd Schedule sets out the

receipts and accruals, which are exempt from tax.
Exemptions are gr0anted to a person to whom
income accrues to or due to the nature of the
income.
 Differentiate between income exempt because of the
status of the person
 and
 Income exempt because of it’s nature.
Exemptions
 Some of the exemptions are listed below:
a) Remuneration paid to employees of the UN
and its agencies
b) Allowances (to include T & S) granted to
civil servants
c) Chief & headman’s allowances
Status of taxpayer
 Certain taxpayers are exempt from taxation. The
nature of income they receive plays no part, only
the status of the taxpayer.
 Examples of such taxpayers are contained in
paragraphs 1 to 4 of the 3rd schedule and paragraph
17 to 19 of the 3rd schedule
Nature of income
 Paragraph 5 to 15 of the 3rd schedule deals with
income that is exempt because of its nature.
 NB.
 It is important to be able to identify income which
is exempt from tax, such income must be
subtracted from gross income since the taxpayer
does not pay tax on it.
 Exemptions Cont’d
 Bonus up to maximum of $1000
 Retrenchment package or similar payment paid under an
approved scheme of retrenchment , the greater of the first $
10000(minimum) or one third of approved retrenchment
package, subject to a maximum exemption of $ 20000.(1/3
of $60 000)
 Benefits accruing to employees of licensed investors
 $3000 of rental income accruing to elderly persons
 $3000 of income accruing to elderly persons from banker’s
acceptances and other discounted instruments traded with
financial institutions
 A pension receipt from a consolidated revenue fund or P F
for an elderly T
Retrenchment Package exemption

Scenario Package Minimum One third Maximum

1. 54 000 10 000 18 000 20 000
2. 30 000 10 000 10 000 20 000
3. 12 000 10 000 4 000 20 000
4. 3 000 10 000 1 000 20 000
 Exemptions Cont’d
 Medical expenses plus transport paid by
employer
 Sale of motor vehicle to a tax payer who is

over 55years on the date of the sale of car

 Reward paid to whistle blowers by Zimra

 Housing and transport and accommo for

staff at a mission hospital and rural clinic

 Local company dividends

 Interest accruing to individuals from

FCAs
 Exemptions Cont’d

 Local bank and building society interest

 Export bonus paid to an exporter of goods

 Entertainment allowance spent on

employer’s business
 Receipts and accruals of a licensed

investor during the first 5 tax yrs of

trading.
 Interest fro POSB and from the reserve

bank of Zimbabwe.
EXEMPTIONS CONTND
 Employees of licensed investor enjoy a benefit of
being exempted on their benefits. The exemption is
partial and is limited to 50% of total taxable
income inclusive of the benefits on an employee.
( the lesser of the benefit amount and the 50%
Exemptions continued
 Amount accruing by way of a war disability pension
 A widow’s pension
 An amount benefit or compensation in respect of
death, disablement
 An amount received by way of alimony
 Allowances for civil servants,
 Pension accruals-received from a pension fund by a
person who has attained 55 years of age before
commencement of the year of assessment
Cont’d
 Where a LSP is made on retirement ,1/3 of the
pension entitlement is exempt and this is known as
pension commutation. TP should elect for
commutation
Example
 Mr Mncedisi was aged 47 years when his employer
terminated his contact of employment at the end of
August 2015, due to the difficulties the company was
facing. He received the following during the tax year:
 Salary 10000
 Severance pay 42000
 Gratuity 14000
 Pension 30000
 Bonus 8000
CONT’D
 Calculate Mr Mncedisi’s taxable income(8 marks)