KEY CONCEPTS ON TAXATION OF AN INDIVIDUAL

1. Employment income s8(1)b

2. Employment benefits s8(1)f
3. Lumpsum payments [LSP] [Pension Refunds]
s8(1)c
4. Annuities s8(1)a. [pension &
RAF(purchased) + Inherited + Gift+ frm sale
of asset/buz]
5. Trade Income i.e Buz Income [self
employment]
TAXATION OF AN INDIVIDUAL CONTD
6. Investment income [rent, premium, impvt,
interest & div)
7. Exemptions- ordinary
8. Tax concessions to the elderly
9. Deductions available to individuals
10. Calculation of taxable income
11. The use of PAYE tables in calculating the
Tax Expense
12. Tax credits
 TAXATION OF AN INDIVIDUAL
 Individualsearn income from three main
sources, namely;
a) From employment

b) From trade/buz [self employment or

independent contractor); and
c) investments

 Theincome is taxable under the income tax

Act but the manner in which these 3 are
taxable is different.
 EMPLOYEE
1. One subject to control & supervision by
another.
2. He renders continuous service for a salary.
3. A contract of service.
4. Taxed using PAYE tables.
 SELF EMPLOYED PERSON [INDEPENDENT
CONTRACTOR]
1. One whose work is characterised by a great
measure of independence – Degree of
freedom.
2. No restricted working hours.
3. Not tied to a particular contract.
4. Person is at financial risk for any defective
work.
5. A contract for services.
6. Subject to tax rules of a business entity.
 DISTINCTION BTWN EMPLOYMENT & SELF EMPLOYMENT
1. An employee is provided wt tools to use
while an independent contractor supplies his
own tools, staff & r.m.
2. A self-employed person is paid wt reference
to output/results whereas an employee is pd
@ regular intervals @ a rate specified
(normally irrespective of actual pdn).
3. An employee is oblidged to render services ,
personally but a self employed person can
subcontract his work.
 DISTINCTION BTWN EMPLOYMENT & SELF EMPLOYMENT
4. An employee is oblidged to be present even if
there is no work to be done whereas an
independent contractor can choose when to
report for work.
5. An employee is bound by an exclusive r/ship
with one employer whereas a self employed
person can enter into contracts with several
persons.
 DISTINCTION BTWN EMPLOYMENT & SELF EMPLOYMENT
6. A self employed ind determines his own
work & the sequence thereof whereas an
employee is instructed on what work,
sequence etc.
7. An independent contractor does not receive
remuneration for work he does but receives
business income or fees.
8. A self employed bears the financial risk for
bad workmanship whereas employees are
paid despite poor performance or poor
markets.
 DISTINCTION BTWN EMPLOYMENT & SELF EMPLOYMENT

N.B.
1. Insurance agents & estate agents are not
independent contractors but employees of the
insure or registered estate agent.
2. A remuneration & advantages that a partner
receives from a partnership is considered as
an appropriation of business income. No
receipt of a partner can ever be a
remuneration becoz there is no
employer/employee r/ship btwn a prtner & a
ptrnship.
 CALCULATION OF TAX
1. What is income tax?
 It is tax on taxable income.
 HOW DO YOU CALCULATE TAX?
 Section 7 of the ITA guides how tax is
calculated.
 Use PAYE tables for employment income &
grant the taxpayer the credits to which he is
entitled to.
 Apply the corporate tax rate on business
[trade & investment] income. [25.75%].
 Special rate of 20% on foreign dividends.
 Special rate on Lumpsum receipts rcd i.t.o
section 8(1)c. The rate is the MTR of the TP.
 REMUNERATION FOR
SERVICES RENDERED
 REMUNERATION FOR SERVICES RENDERED (SECT 8
1(B))
 Section 8(1)b brings into GI any amt
rcd/accrued fm employment
 whether during or on termination of
employment .
 All items are taxable in full subject to certain
exemptions as provided by the 3rd schedule or
other provisions. e.g:
N.B The 1st $1 000 of a bonus payment is
exempt i.t.o para 4(o) of the 3rd Sch.
EXAMPLES OF EMPLOYMENT INCOME STREAMS
1. Salaries, Wages, OT & Allowances
2. CILL
3. Leave pay
4. Bonus
5. Gratuity on cessation of employment (Thank
you payments for past services)
6. Retrenchment packages
7. Payments in lieu of notice
8. Payments for wrongful dismissal
EMPLOYMENT INCOME STREAMS CONTD
7. Commissions, prizes & awards earned as a
result of employment
8. Pension (superannuation-Co’s pension plan:
DBP or DCP)
9. Commutation of a pension

10. Executive director’s fees

N.B Non-exe dr’s fees are not employees &
their fees are not subject to PAYE, since the
fees are not remuneration by definition.
REMUNERATION FOR SERVICES RENDERED (SECT 8 1(B)) CONT’D

11. Gifts from employer. [However, if the

employer did not claim a dedn i.r.o the
gift, the amt is not taxable in the hands
of the employee).
12. Gifts or tips rcd frm customers as a
result of employment.
13. Any advantage or fringe benefit from
employment
N.B. Payment for the benefit may be in cash
or otherwise.
 EMPLOYMENT INCOME STREAMS CONTD

14. Share options.

15. Exgratia payments
 DEFNS
• CILL (cash in lieu of leave)- i.e payments
for unused annual leave (encashment).
• Leave pay (salary advance) rcd in advance
by a person proceeding on leave. Taxable
in the month in whc the salary was due (&
not on the earlier of receipt or accrual).
• Ex-gratia (Voluntary) payments are GI.

However, Ex gratia pymnts are K in nature

when rcd by a deceased employee’s
widow, since the services were not
rendered by the surviving spouse.
 REMUNERATION FOR SERVICES RENDERED (SECT 8 1(B)) CONT’D
• Retrenchment packages (golden
handshakes)
 Are any benefit rcd on termination of
employment e.g severance pay
(redundancy pay), gratuity on cessation of
employment, co car granted to a taxpayer.
 A retrenchment package, by definition,
excludes a pension & CILL .
 RETRENCHMENT PACKAGE
• A retrenchment package approved by the
mistr of labour enjoys an exemption i.t.o
para 4p of 3rd Sch.
• Exemption is UP TO 10 000 or 1/3 of the
package (up to a maximum of 1/3 of 60
000); whichever is greater;
 EXAMPLES: TAXABLE PORTION OF A RETRENCHMENT PACKAGE

• Required: Calculate the amt brought into

income for the following approved
retrenchment packages:
1. 45 000
2. 120 000
3. 9 000
 TAXABLE PORTION ON PACKAGE OF 45 000

• Workings: “Greater of Up to 10 000 & 1/3 of

package”:
• 1/3 of package = 1/3 x 45 000 = 15 000
• This is greater than 10 000

Caln of taxable package:

Total package 45 000
Less (15 000)
Taxable package 30 000
 TAXABLE PORTION ON PACKAGE OF 120 000

• Workings: “Greater of Up to 10 000 & 1/3 of

package, up to a package of 60 000”:
• Package exceeds 60 000, thus restriction
applies
• 1/3 of package = 1/3 x 60 000 = 20 000
• This is greater than 10 000

Caln of taxable package:

Total package 120 000
Less (20 000)
Taxable package 100 000
 TAXABLE PORTION ON PACKAGE OF 9 000

• Workings: “Greater of Up to 10 000 & 1/3 of

package”:
• 1/3 of package = 1/3 x 9 000 = 3 000
• This is less than 10 000, AND actual package
is 9 000, thus use 9 000.
Caln of taxable package:
Total package 9 000
Less (9 000)
Taxable package NIL
 PENSION RECEIPTS
 A pension receipt or accrual is taxed in full.
 Except:

1) for pension receipts of TPs above 55 which

are exempt frm tax i.t.o. 3rd Sch.
2) The commuted portion of the pension
receipt, subject to the maximum restriction
of 1/3 of the total pension entitlement.
 06/12/2022
VARIOUS PENSION RECEIPTS
[ S8(1)(a) S8(1)(c),S8(1)(n),S8(1)(r)]
i. Commutation of RAF on retirement
–s8(1)n
ii. Commutation of PF on retirement–
s8 (1)r
iii. Annuity Pension on retirement–
s8(1)a
iv. Pension Refunds on withdrawal
[LSP]–s8 (1)c 26
 COMMUTATION

• A pension commutation arises when a TP

sacrifices (gives up) his future pension
entitlement by receiving a “lump sum” in the
year of retirement followed by a reduced
monthly pension over his life expectancy.
• Commutation of a pension annuity is capital in
nature i.e not taxable.
1.COMMUTATION OF A PENSION FROM A RAF: SECT 8 1(N)
• The amount to be taxed is arrived at after
taking off 1/3 of the TP’s TOTAL pension
entitlement in the first year of receiving the
lump sum amount.
• The 1/3 of pension entitlement is referred to as
a commutation.
• A pension commutation is an election.
• Thus the taxable portion is arrived after
deducting a 1/3 of the total pension
entitlement, (the commutation).
28
2.COMMUTATION OF PENSION FROM PF:SECT 8 1(R)
1. Before 01/08/70: commutation is excluded
from gross income. It is tax free in full. No
restriction on the capital amt.
2. On/after 01/08/70: the exclusion applies only
to the maximum of 1/3 with the excess being
brought into gross income.
 S8(1)N & S8(1)R
N.B.
• Effectively s8(1)n & s8(1)r are the same coz
very few TPs commenced contributions be4
1970.
• Amts accruing to a TP by way of a
commutation are taxable only to the extent to
which they exceed 1/3 of the total pension
entitlements; whether amt is from a RAF or
PF.
 06/12/2022
EXAMPLE 1 :COMMUTATION

A lecturer from NUST retired on 30 July 2014,

and received lump sum payment $250 000 from
a retirement annuity fund as pension. His
pension entitlement was $570 000.

Required: Calculate the lecturer’s taxable

income in 2014 if he elects to be availed
commutation.

31
 06/12/2022

SOLUTION 1: COMMUTATION IS FROM A RAF

Lump sum payment $250 000
Less 1/3 of pension or $570 000 $190 000
Taxable income $60 000

32
 I 06/12/2022

EXAMPLE 2: COMMUTATION
• A Professor from NUST retired on 1 July
2014 and elected to commute his pension.
• NUST is a contributor to Old mutual pension
fund.
• The Professor received $200 000 on 31 July
2014, and a reduced monthly pension of $1
600 in arrears with effect from 27 August
2014.
• His total pension entitlement is $420 000.

Required: Compute his taxable income. 33

 06/12/2022
SOLUTION 2: COMMUTATION IS FROM A PENSION FUND

Lump sum payment $200 000

Less 1/3 of pension entitlement $140 000
taxable portion of LSP $60 000

Add monthly pension(1 600x5mnths) 8 000

Taxable income 68 000

34
 06/12/2022

PENSION ANNUITY ON RETIREMENT –S8 (1) (A)

• The pension is taxable in full on receipt or
accrual basis, subject to a certain adjustment;
• The amount which was not allowed as
deduction during the time of contribution
(disallowed contribution) will be received tax
free where it is included in the pension being
received.

35
 I 06/12/2022

PENSION ON RETIREMENT –S8 (1) (A)

• The disallowed portion should be deducted
equally over the life of the pension from the
annual pension being received.

36
 06/12/2022
EXAMPLE : S8 (1) (A)
A bus driver at NUST turned 65 years on 31
March 2014 and had to retire since he had
reached the compulsory retirement age. NUST
contributes 80% to Old mutual for its
employees. Over the years the driver’s
contribution exceeded the limit by $3 500. He
will be receiving $500 per month in arrears with
effect from 25 April 2014. His life expectancy is
20 years.
Required: Compute his taxable income for 2014
tax year. 37
 06/12/2022

SOLUTION

Gross pension accrual/receipt [$500x9]-

$4 500.00
Less Disallowable(9/240months)x$3 500 131.25
Taxable income 4 368.75

38
FRINGE BENEFITS
 FRINGE BENEFITS

1. Brought into GI ito s8(1)b.

2. Measured ito s8(1)f.
 FRINGE BENEFITS (SECT 8 1(F))
Fringe Benefit
• An advantage granted by an employer to an
employee.
• It is paid over & above the remuneration.
• Given to a holder of an office.
• All benefits granted to civil servants or persons
employed by the state are exempt in full, 3rd Sch,
para 4d.
• Those employed by a licensed investor (EPZ
operator) are exempt up to a max of 50% of total
remuneration; 3rd Sch, para 4q.
 FRINGE BENEFITS CONT’D
 Some of the benefits are:
1. Housing benefit
2. Use of furniture
3. Motoring benefits
4. Passage benefit
5. School fees benefit
6. Loan benefit
7. Allowances e.g Entertainment allowance.
 HOW TO VALUE (MEASURE) FRINGE BENEFITS
 These benefits shall be valued as follows:

1. Housing or the use of furniture -value to the

employee/TP.

2. All other benefits - cost to the employer.

 1] HOUSING BENEFIT (OCCUPATION OF QUARTERS)
 A house granted to an employee as a place to
live by an employer is a benefit to the
employee as follows:
a) Houses in Municipal areas – The Open
market rentals.
b) Houses o/s Municipal areas- 12.5% of basic
salary.
c) In the absence of above 2, the benefit is 7%
of cost of construction of the house
HOUSING BENEFIT CONTD

1. The above benefit is reduced by any rentals

paid by employee to the employer.
2. Where the employee does not pay anything
towards that accommodation (free
accommodation), the whole amount as
determined above is a benefit and subject to
tax.
3. Where an employee pays subsidised rentals;
the difference between the amount paid and
the open market value constitutes a benefit.
 HOUSING BENEFIT CONT’D
4. For example, if an employee occupies a
house granted by the employer and valued at
US$1 000 per month for which he/she pays
US$300 per month as rent, the benefit to be
taxed in the employee’s hands would be
US$700 per month.
5. Where the employer pays rent on behalf of the
employee, the benefit is the higher of the rent
paid and the open mkt rentals.
HOUSING BENEFIT CONT’D
6. However where TP’s conditions of service
require him to stay in a co house, there is no
benefit. In practice, this is ltd to e.g
caretakers in a flat.
7. TPs who are employed by a mission hospital
or rural clinic are exempted on their housing
benefit, transport allow & housing allow i.t.o
3rd Sch, para 4t.
8. There is no benefit where the TP pays rentals
above the market rate.
 2] FURNITURE PROVIDED BY THE EMPLOYER
• For the purposes of calculating the deemed
Annual benefit; the amount to assessed as the
value of the furniture provided by an
employer, should, in general, be 8% of the cost
of the furniture.
• Example: An employer grants free use of
furniture to an employee on 1 April 2014. The
furniture had originally cost the employer
$800 to acquire.
• Required: The taxable benefit from the use of
furniture in the 2014 tax year.
 SOLN: FURNITURE BENEFIT

• Therefore deemed benefit is calculated as

follows: Benefit = $800x 8% x 9/12
= $48
 3] MOTORING BENEFIT
• This is the advantage by the TP for the pvt use
of an employer’s vehicle i.e Where an
employee is allocated a company car.
• The value of the benefit is determined
according to the engine capacity of the
vehicle. The deemed motor vehicle benefits
for 2014 tax year are as follows:
 MOTORING BENEFIT CONT’D
Engine capacity of motor vehicle Deemed value
(annual) mthly
 Up to 1500cc $3 600 $300
 1501cc -2000cc $4 800 $400
 2001cc -3000cc $7 200 $600
 3001cc & above $9 600 $800
The deemed cost should be reduced
proportionately where the period of use for the
motor vehicle is less than 12 months.
 MOTORING BENEFIT ACQUISITION OF CAR
• Another benefit also arises on the sale of a
motor vehicle to an employee, either during or
on termination of employment.
• The deemed benefit = A –B

where –A: the market value of the MV

B: the cost at which the employee
acquired the motor vehicle.
• For employees who are 55 & above, the
benefit that accrues on date of sale of the car is
exempted from tax.
 EXAMPLE 1: MOTORING BENEFIT

 Evelyn was employed by XYZ Ltd on 1 April

2014. As part of his employment contract he
had the free use of an Isuzu KB300 with an
engine capacity of 3,000ccs.

 Required: Calculate the assessable amount for

the 2014 tax year .
 SOLN 1: MOTORING BENEFIT

 Potential benefit per table = $7 200

 Limited to period used = $7 200*9/12
= $5 400
 EXAMPLE 2: MOTORING BENEFIT
 Brian (45) resigned from his job on 31/12/14
& rcd a car worth $2 000 from his employer.
 The employer had purchased the car on 5 Feb
2012 for $10 000.
 The mkt value of the car at the time of sale
was $15 000.
 Required: Calculate the employee’s deemed
benefit from this sale.
 SOLN: MOTORING BENEFIT
 Mkt value 15 000
 Less:

Cost price to employee (2 000)

Deemed benefit to employee 13 000
 4] PASSAGE BENEFIT

 A passage benefit- A payment by the employer

for the cost of a journey undertaken by an
employee, his spouse or chn. In other words,
the employer sponsors the trip and the passage
benefit is taxable in the hands of the employee.
 There are 3 types of journeys an employee can
undertake:
a) During employment (cd be business or pvt)
b) On taking up employment.

c) On termination of employment.
 PASSAGE BENEFIT CONT’D

1. A passage benefit is taxable in the

employee’s hands, except:
2. Exempt Passage benefit: (s14 arw 3rd Sch)
a) The 1st journey for taking up employment by
the employee wt each employer.
b) The 1st journey on termination wt each
employer.
[the first time such benefit in (a) & (b) is
granted by that employer to the employee]
c) Any business related trip by the TP himself
(but not his family members).
 PASSAGE BENEFIT CONT’D
 A benefit will only arise where the journey
does not benefit the employer, but the
employee, his/her spouse or child.
i.e. All the TP’s & his family mbrs’ holiday trips
whc are paid for by the employer are taxable in
the hands of the employee.
 Any holiday allowance is taxable in full,
whether or not the employer exercised control
over the use of the allowance.
DUAL PURPOSE TRIPS
1. Where the journey made during employment
is both private and business, there will be an
apportionment and only the private
component is part of gross income.
2. If period spend on business accounts for less
than 10% in a trip, the trip is deemed to be
wholly pvt (a holiday). Therefore the full
cost of the trip is taxable in the hands of the
TP.
DUAL PURPOSE TRIPS CONTD
3. On the other hand, if business accounts for
at least 90% in a trip, the trip is deemed to
be wholly a business trip. The pvt time is
considered incidental to the business trip.
No amt is GI to the TP.
i.e where the employee, who has travelled for
business uses the opportunity to take a period
of leave, the whole amount of the passage
benefit will be exempt except, if the period
spent on pvt matters amts to at least 10% of
the total period of absence/journey.
DUAL PURPOSE TRIPS CONTD

4. Where period spent on business is btwn 10%

& 90% of the total period of absence, we
apportion the passage benefit btwn business
& pvt.
 The exempt passage benefit = A X B

C; where:
A: The number of days spent on business
B: The amount of the passage benefit money
C: The total # of days spent on the journey
(absence).
 EXAMPLE 1- PASSAGE BENEFIT
 Econet Ltd gave Michael, one of its directors,
a holiday allowance of $10 000 for him to take
a tour during his annual leave.
 Michael, however, only spent $4 000 on the
holiday tour and pocketed the remaining $6
000.
Required: What is Michael’s taxable income?
 SOLUTION 1- PASSAGE BENEFIT
 The full holiday allowance of $10 000 is GI
coz whether or not Econet (the employer)
exercised control over the use of the holiday
allowance is irrelevant.
 06/12/2022

EXAMPLE 2: PASSAGE BENEFIT

Mr Hove was sent on a business trip to the USA

for 10 days. He however decided to pass
through UK, where he spent 5 days seeing his
girl friend. The total amount for the trip paid by
the employer was $5 000.

Required
Calculate the amount to be included in Mr
Hove’s gross income.
65
 06/12/2022

SOLUTION 2: PASSAGE BENEFIT

Total passage benefit $5 000
Less spent on business (10 x5 000) $3 333
15

Taxable income = $ 1 667

66
5] SCHOOL FEES BENEFIT
 Where the employer pays school fees for the
employee’s children, the cost of the fees
payable becomes taxable in the hands of the
employee.
 In cases where the employer is a school and
the employee’s child is admitted/enrolled at
the school without paying school fees or
 pays fees that are less than those paid by other
students attending the same school, the
foregone fees become a taxable benefit in the
hands of the employee.
 SCHOOL FEES BENEFIT CONTD
 In addition, any school fees discounts or
reductions granted because of the employer-
employee relationship become taxable
benefits in the hands of the employee.
6] LOAN BENEFIT

1. Benefit arises on a loan in excess of $100.

2. Exempted Loan benefit:
There is no taxable benefit i.r.o loans granted
for:
a) Edn of TP, spouse or chn

b) Technical training of TP, spouse or chn e.g at

Polytech
c) Medical treatment of TP, spouse or chn.
 LOAN BENEFIT CONTD

3. A benefit will only arise where the interest

rate charged on the loan is lower than the
prescribed rates.
4. The taxable benefit= A-B ; where:

A = int payable at the prescribed int rate of

LIBOR + 5%
B = the int the employee pays under the terms of
the loan.
• The benefit is apportioned where period of the
loan is less than a year.
LOAN BENEFIT CONTD
5. The int is calculated using the simple int rate
formula = O/S Loan X period (in yrs).
6. If the employer pays, assists or guarantees
loans obtained from 3rd parties, the diff btwn
the rate secured & the mkt rate is brought into
GI.
7. Where the employer cancels/discharges an
employee’s indebtness to him the amt tht was
o/s is brought into GI. (This does not apply to
pvt loans o/s employment)
LIBOR

• LIBOR is an acronym for London Inter Bank

Offered Rate.
• LIBOR is the interest rate that banks charge
each other for 1-month, 3-month, 6-month and
1-year loans.
• This rate is that which is charged by London
banks, and is then published and used as the
benchmark for bank rates all over the world.
 EXAMPLES- LOAN FROM EMPLOYER
1. An employ obtains a car loan of $5,000 with
an interest of 7% payable in arrears. Calculate
the deemed benefit arising from the granting
of the loan. Assume LIBOR is 5.3%.

2. Ms Moyo borrowed $5 000 from her

employer on 1/2/14 at 2.3% p.a. She repaid
her loan on 31/12/14. LIBOR IS 0.3%.
Calculate Ms Moyo’s taxable income.
 SOLUTION 1- LOAN FROM EMPLOYER
1. Interest payable = $5,000*7%
= $350

Interest @ libor + 5% = $5,000*10.3%

= $515

Therefore deemed benefit = $515 - $350

= $165
SOLUTION 2- LOAN FROM EMPLOYER

Prescribed rate = LIBOR + 5% = 0.3 + 5 = 5.3%

Therefore, benefit = (5.3%-2.3%) = 3%

= 3%*5 000*11
12
=$138
 06/12/2022
EXAMPLE 3: LOAN BENEFIT
A lecturer employed by NUST, was granted a
loan by his employer amounting to $6 000 on 1
Jan 2014 at 8% p.a. He utilised the loan as
follows:
 20% for the purchase of medical drugs for his
sister.
 30% for the education of his son at a college.
 10% for medical treatment of spouse.
 The rest used to complete construction of a
house
76
 06/12/2022

EXAMPLE 3: LOAN BENEFIT CONTD

The loan was repaid on 31 August 2014.Assume
the LIBOR rate was 5.26%
Required
Calculate the lecturer’s loan benefit to be
included in the gross income.

77
 06/12/2022

SOLUTION 3: LOAN BENEFIT

Loan borrowed $6 000

Medical drugs: for sister (not exempt) -
for education of son ($1 800)
Medical treatment of spouse ($ 600)
Soft loan $3 600

78
 06/12/2022

SOLUTION 3: LOAN BENEFIT

Loan benefit =(3 600)[(5.26%+5%)-8%](8/12)

=(3 600)(2.26%)(8/12)
= $54.24

79
 7] ALLOWANCES
 Any portion of an allowance whc is not used
for the employer’s business is a free benefit
taxable in the hands of the employee.
e.g:
• Entertainment allowance
• Cellphone allowance

• Transport allowance
• Housing allowance
• etc
 ENTERTAINMENT ALLOWANCES
• This is an expense of hospitality incurred by
the employer or TP.
• Includes groceries 4 employees, drinks for
business clients, etc
• The employee is taxed on amt consumed by
him, his spouse or chn (private use).
• Office teas, staff lunch are exempt benefits;
whether there is a canteen or not.
 EXAMPLE- ALLOWANCES
 A CBZ bank mgr was given an entertainment
allowance of $1 000 by his employer.
 He used $800 to entertain bank clients .

Required
 How much is taxable income in the
employee’s hands?
 EXAMPLE- ALLOWANCES

 The taxable benefit = free benefit

= $1 000- $800
= $200
PENSION REFUNDS
 FUNDS
1. Pension Fund- Established by an employer
to benefit his employees at the time of
retirement.
2. Benefit Fund- Established by an employer to
cater for his employees in times of ill-health,
loss of employment etc
3. RAF- A contract btwn an insurance co & an
individual, whether employed or not,
whereby the latter contributes to a fund frm
whc he wl draw an annuity to supplement, or
in lieu of, any pension frm the employer.
LUMP SUM PAYMENTS (LSP): S8(1) C
• A LSP is a receipt rcd by a mbr on his
terminating mbrship of a FUND prematurely
be4 the envisaged benefits are due to
commence.
• The premature termination occurs upon:

1. Resigning
2. Withdrawal from a fund or
3. Winding up of the fund.
 TYPES OF FUNDS
• There are 3 types of funds from whc a refund
may come frm:
1. A Pension fund (or the Consolidated
Revenue Fund, [CRF])
2. A Benefit fund
3. An Unapproved pension fund or
Unapproved benefit fund
 LUMP SUM PAYMENTS (LSP)
• A LSP can also be defined as an amount of a
terminal benefit for services rendered within
Zim.
• LSP = total terminal benefits- terminal benefits
for services rendered o/s Zim:
Total Terminal benefit xx
Less:
Portion of terminal benefit relating to
period of service outside Zimbabwe (xx)
 Lump sum payment XX
 LSP & 1ST SCHEDULE

• The 1st Schedule details the amts to be

excluded from the LSP in order to arrive at the
taxable amt of such payments (receipts):
LSP CONTD

LSP Excludes:
a) A pension annuity. (receivable on
retirement)
b) Amts rcd from employer on termination of
services e.g a gratuity (thank-you payment)
c) An amount from services rendered.
d) An amount specifically excluded from a LSP
by the 1st Schedule.
e) An amount, which represents a return or
repayment of any money in respect of which
no dedn was allowed for tax purposes.
(Disallowed pension contribns).
TAX RATE FOR LSP

• A LSP is part of employment income but is taxed at

a special rate, the MTR &
• It does not attract AIDS levy.
• The MTR is the highest tax rate suffered by the TP.
• If the TP’s MTR is zero or the TP does not have
employment income, then the LSP is taxed at 20%.
• A Directive on the rate to be used on a LSP shd be
obtained frm the CG. This cd be lower than the
applicable rate.
 
 
OLD FUND, FCR & NEW FUND

• A LSP is also called a pension refund.

• The refund can be paid out of an old fund,
FCR or a New Fund.
1] OLD FUND [FUR]

• Also called a Fund wt unchanged rules [FUR]

• One to whc a mbr joined before 1/7/60
• LSP frm an old fund is not taxable.
 2] FUND WT CHANGED RULES [FCR]
 An old fund whose rules changed after 1/7/60;
i.e.
 Mbr joined before 1/7/60 but rules were later
changed.
 Reduce the LSP wt what TP wd have got had
rules not changed.
 3] NEW FUND
• A fund wch a mbr joined after 1/7/60 or whc
was formed after 1/7/60.
• The focus is on new funds only since we are
no longer getting live cases relating to old
funds or FCR (where members joined prior to
01/07/1960).
TAXABLE PORTION OF A LSP FRM A NEW FUND

The Method of taxation depends on type of

fund fm whc the benefit is pd; Is it a Benefit
Fund or Pension Fund.
1] NEW BENEFIT FUND
Lump sum amt rcd frm a new BF XX
Less:
Statutory deduction (1,800)
 Purchase of a RAF on retirement (X)
Transfer to another BF (X)
Transfer to a PF (X) taxable
portion of new BF XX

• N.B. Under a new Benefit fund, 3 transfers to

a PF, BF or RAF are allowed.
2] NEW PENSION FUND (OR NEW CRF)

The taxable portion shall be determined as

follows:

Lump sum amt rcd frm a new PF X

Less:
Purchase of a RAF (X)
Transfer to a PF (X)
taxable portion of new PF XX
 3] UNAPPROVED FUNDS
• If the LSP is from an unapproved Fund, then
the employee’s own contributions are capital.
• However, the interest credited to the member’s
own account; together with the employer’s
contribution is taxable
• To arrive at the taxable portion :

Lump sum payment frm Unappvd fund X

Less: Member’s own contributions (X)
taxable portion of Unapprvd fund X
 LSP 4 SERVICES O/SIDE ZIM
 Any such terminal benefit is not taxable in
Zim unless it accrues to:
a. A resident of Zim rendering services to the
state.
b. A resident rendering services o/side Zim
during a period of temporary absence- a
period(s) not exceeding 183 days in any yr of
assessment.
 EXAMPLE 1 - LSP

 Lot (40) resigned from Dunlop Ltd in 2014

and was paid $12 000 as terminal benefit by a
BF he joined in 2002.
 He used $3 000 to purchase a RAF from Old
Mutual and transferred $2 000 to Mbada PF.

Required:
Calculate his GI.
 SOLN - LSP
Type of Fund?: New BENEFIT Fund.

LSP rcd 12 000

Less: Statutory dedn (1 800)
Transfer to BF (-)
Transfer to PF (2 000)
Purchase of RAF (3 000)
Taxable portion of LSP frm new BF 5 200
 EXAMPLE 2: LSP
• Tinotenda submitted the following information
relating to the 2014 tax yr:
• Lump sum payment receipt 100,000
• Transfer to a pension fund 20,000
• Transfer to a benefit fund 12,000
• Amount used to purchase an
annuity on retirement 33,000
• Member’s own contributions 40,000
• Disallowed contributions 5,000
 EXAMPLE 2: LSP
Required:
Calculate the amount to be included in gross
income assuming the above mentioned LSP is
from a:
a. Pension Fund

b. Benefit Fund
c. Unapproved Fund
SOLN2A: LSP IS FRM A PF
LSP from Pension Fund
LSP 100,000
Less: Disallowed contributions (exc 5,000
frm defn of LSP)
95,000
Less: Purchase of annuity 33,000

Transfer to Pension fund 20,000 53,000

Gross Income (s. 8(1)(c) 42,000

SOLN2B: LSP IS FRM A BF
LSP 100,000
Less: Disallowed contributions 5,000
95,000
Less: Statutory deduction 1,800
Purchase of annuity 33,000
Transfer to Pension fund 20,000
Transfer to Benefit fund 12,000 66,800

Gross Income (s. 8(1)(c) 28,200

SOLN2C: LSP IS FRM AN UNAPPROVED FUND

LSP (no adjustments for disallowed 100,000

contributions since all were
disallowed)
Less: Own contributions (40,000)

Gross Income (s. 8(1)(c) 60,000

BENEFIT FUND
Payment Details Old FCR New F
Fund
LSP rcd Exempt X X
Less:
Greater of Y or 1 800 (X) (1 800)

Transfer to BF (X) (X)

Transfer to BF (X) (X)
Purchase of RAF (X) (X)
Taxable Portion nil X X
PENSION FUND
Payment Details Old FCR New F
Fund
LSP rcd Exempt X X
Less:
Y (Y) N/A
Transfer to BF N/A N/A
Transfer to BF (X) (X)
Purchase of RAF (X) (X)
Taxable Portion nil X X
 LETTER “Y”
• Represents an amt whc wd have been rcd by
the TP, had rules not changed.
• For a FCR Benefit Fund, the deduction is the
greater of “Y” and $1 800.
• For a FCR Pension Fund, the deduction is
“Y”.
 EXEMPTIONS ON
EMPLOYMENT INCOME
 EXEMPTIONS [S14 & 3RD SCH]
 Exemptions are accruals and receipts of
revenue nature, which are free of income tax.
 Section 14(1) a.r.w. 3rd Schedule sets out the
receipts and accruals, which are excluded
from being taxed i.t.o. the ITA.
 Some of the exemptions for an employed TP
are listed below:
 06/12/2022

EXEMPTIONS FOR EMPLOYED PERSONS

1. All individuals providing services for the
state are exempted on benefits granted to
them by the state.
2. Bonus including performance related bonus
not exceeding $1 000.
3. The salary and benefits paid to the President
and his domestic workers.

113
 EXEMPTION-EMPLOYED PERSON 06/12/2022

4. Any benefits or allowances (bt not salary)

granted to a minister, spouse of President or
a Vice Presidents in respect of state duty, the
leader of opposition party etc.
5. An allow payable to a chief or headman
6. Value of a scholarship, bursary paid on
behalf of a student to a college, school or
university provided that any such amount is
not paid as compensation for services
rendered by the student or his/her near
relative. 114
 06/12/2022
EXEMPTION-EMPLOYED PERSON
7. Benefits granted to persons employed by a
licensed investor, up to 50% of total
remuneration.
8. the first $10 000 or 1/3 of an approved
retrenchment package whichever is greater,
subject to a maximum exemption of $20
000.

115
 06/12/2022
EXEMPTION- PRESIDENTIAL PENSION

 Any pension or allowance payable to any

President of Zimbabwe and which is provided
to him upon his retirement is exempted from
tax.

116
 06/12/2022

PENSION FOR SPECIFIED GROUPS

• Certain groups of people have been specified
in the Act to be exempted frm tax on any
pension:
a) War disability pension

b) Pension or compensation to any person or his

dependants as is paid by Wankie Disaster
Relief Fund.
c) War Veteran gratuity with effect from 1997

117
COMPENSATION FOR INJURY, SICKNESS OR DEATH

• Any receipt or accrual received by a person,

his/her spouse, dependants or his/her
deceased estate as compensation for injury,
sickness or death is not taxable provided that
such amounts are paid by:
a) A trade union
b) Benefit fund or
c) An insurance company in respect of a policy
covering death, accident or sickness
d) A medical aid society
118
 06/12/2022
EXEMPTION: MEDICAL AID BENEFIT

 Para 8- Medical benefit- The value of any

medical treatment + transport & medical aid
contribution paid by the employer on behalf of
an employee or his dependants.
 Any value of medical aid and traveling costs
to obtain medical treatment as is paid by an
employer is free of income tax in the hands of
the employee, whether provided to the
employee, or any dependant of the employee.

119
EXEMPTION: MEDICAL AID BENEFIT CONTD
 Also exempted are medical aid
contributions to an approved medical aid
society paid by an employer on behalf of his
employees or dependants of an employee.
 06/12/2022
DIVIDENDS FROM LOCAL COMPANIES
 Dividends from any company, incorporated in
Zimbabwe, which is liable to pay tax, are free
of income tax in the hands of the recipient.
 However, all dividends from companies
exempted from paying tax i.e. building
societies, benefit funds are taxable in the
hands of the recipient.

121
 06/12/2022

DIVIDENDS FROM LOCAL COMPANIES(CONTD)

• NB: Withholding tax of 15% is charged on all
dividends accruing from a company
incorporated in Zimbabwe, which is liable to
pay tax on its profits,
• whether the dividend is paid to a resident or
non-resident of Zimbabwe.

122
 06/12/2022

INTEREST FOR LOCALS

To be exempted is any interest received on:
a) Sums deposited with POSB account
b) Any tax reserve certificate issued by
ZIMRA.
c) Any loan raised by the state i.e. treasury
bills, agribonds etc
d) Class C permanent shares issued by a
building society

123
 06/12/2022

MAINTAINANCE - ALIMONY

 Amount paid for the maintenance of wife,

husband or dependents in terms of the court is
exempted from tax in the hands of the
beneficiary.

124
 By
EXEMPT: ENTERTAINMENT ALLOWANCE

 Any amount received as entertainment

allowance as is used by an employee on the
business of employer is exempted in the hands
of an employee.
 However, where the taxpayer has used the
amount for private purpose it is a taxable
benefit under section 8(i) (f).
 In both cases, i.e. whether used for business or
private, an employer is not granted a
deduction for entertainment expe.
125
EXEMPTIONS CONT’D
Para 4: Specific Individuals
a) Salary & benefits of president
b) Fringe benefits (allowances) to VP, minister,
deputy minister ,MP & councilor. chief &
headman.
c) Allowances granted to civil servants
d) Allowances to Chief & headman
e) Remuneration paid to employees of the UN
and its agencies
 EXEMPTIONS CONT’D
a) Para 4(o)-Bonus up to $1 000 .
b) Para 4(p)-The greater of $10,000 or a ⅓ of
an approved retrenchment package
(severance package) up to $60,000.
[approved by minister of labour]
c) Para 4(q) The fringe benefits accruing to a
person employed by a licensed investor
[investor in an EPZ].
Proviso: The exemption shall not exceed 50% of
the TP’s remuneration from employment.
 EXEMPTIONS CONT’D
•Para 4(s) Reward paid to whistle blowers by
ZIMRA
 Para 4(t)-Housing and transport for staff at a
mission hospital and rural clinic
 Para 4(v)-The 1ST $3,000 of rental income
accruing to persons who have attained the age
of 55 yrs.
 Para 6(h)- Specific Pension -Pension from a
pension fund or the Consolidated Revenue
Fund accruing to persons who have attained
the age of 55 yrs before 1 Jan of the current
tax yr.
 EXEMPTIONS CONT’D
 Para 8- Medical benefit- The value of
medical treatment + transport & medical
aid subscription paid by the employer on
behalf of an employee or his dependants.
 Para 9- Local company dividends- div pd
by a company registered in Zimbabwe.
 Para 10A Interest- POSB, Class C
permanent shares, Local bank and
building society interest .
EXEMPTIONS CONT’D

 Para 10(1)(o)-the 1st $3,000 income from

banker’s acceptances and other discounted
instruments, accruing to persons who have
attained the age of 55.
 Para10(1)(n)-$3,000 being interest from
local financial institutions accruing to
persons who have attained the age of 55.
 Para12- Alimony rcd i.e maintenance is not
taxed in the hands of the receiver.
 Para15 -Entertainment allowance spent on
employer’s business.
 DEDUCTIONS TO
EMPLOYMENT INCOME
 DEDUCTIONS: PERSONAL TAXATION
• The ITA allows only 3 deductions to
individual tax payers:
 Pension contributions [15(2) h]
 Arrear pension contributions [15(2) i]

 Membership subscriptions [15(2) m]

N.B. TP’s own contributions to medical aid is

not allowable to the individual, but a medical
aid tax credit is calculated based on the
individual’s own contributions and on defined
medical expenses incurred.
15(2)H & 6TH SCH- PF, NSSA,BF & RAF CONTRIBUTIONS

 Payments made by the employer on behalf

employees are allowable in the hands of the
co.
 Similary, employee’s own contributions are
allowable to the individual employee.
 The amts allowable are determined in
accordance wt the 6th Schedule.
 The restrictions are per employee, per annum.
Restricted to the lesser of 7.5% of annual
emoluments OR $5 400 p.a. OR contributions
made.
 E.g If TP’s salary was $24 000 and he
contributed $4 000 to a PF, dedn =lesser of 4
000 & (7.5% x 24 000). Dedn = 1 800.
 6TH SCH- PF, NSSA,BF & RAF CONTRIBUTIONS, CONTD

 1 PF (inc NSSA) [para 15] $5 400

 1 RAF [para 16] $5 400
 2 or more PFs [para 18(2)] $5 400
 2 or more RAFs [para 18(2)] $2 700
 Any combination of a PF & RAF
[para 18(2)] $5 400
 BF(s) $1 500
 NSSA is part of a PF.
 W.e.f 1 June 2013, NSSA is calculated at 3.5% of
the insurable amt up to $700, thus maximum NSSA
contribution is $300 (at $25 per month).
 NSSA was 3% of basic salary up to $200, until 31
May 2013.
15(2)I ARREAR PENSION FUND CONTRIBUTIONS

 Arrear payments for a prior yr are allowable as

long as they do not exceed $1 800 p.a per
individual.
 S15(2)S- MEMBERSHIP SUBSCRIPTIONS
 Continued mbrship to professional, business,
trade & technical associations.
 Allowed to inds & corporates (e.g mbership to
ZNNC).
 Subs need nt be related to the trade being
carried on, e.g A CA who is now a farmer can
still claim annual subs to ICAZ.
 Subs for social clubs are not allowed. They are
of a pvt nature.
 Life mbrship is disallowed. It gives a LT
benefit.
 PROHIBITED
DEDUCTIONS
 STATUTORY PROHIBITIONS
1. The cost incurred by the TP in the
maintenance of himself, his family and
establishment i.e Domestic (private)
expenses.
2. Contributions to unapproved funds.
Deductions are allowed only to Approved
funds.
STATUTORY PROHIBITIONS CONT’D
N.B Domestic exp includes:
a) Wages for a maid
b) Travel from home to place of business

c) Travel between two businesses which are

distinct in nature.
3. Any loss or expense which is recoverable
from insurance.
4. Tax expense
5. Penalties and fines
6. Bond raising and cancellation fees
TAX CREDITS
 TAX CREDITS
1. A relief to a natural person on both i.t.o.
Finance Act, section 11-13.
2. A dedn to the original tax exp obtained by
applying the tax tables
3. From the TP’s calculated income tax expense,
we deduct the credits applicable if any.
4. Credits are restricted to the tax payable be4
applying the credits i.e Credits can not
exceed the tax payable.
 TYPES OF CREDITS [4]
1. Elderly Person’ Credit [s10]
2. Disability Credit [s11]
3. Blind Person’s Credit [s12]
4. Medical Exp Credit [s13]
N.B Credits are granted to natural persons
on all forms of taxable income:
a) Employment Income
b) Trade (Buz) Income

c) Investment Income
 ELDERLY PERSON’S CREDIT
1. $ 900 p.a [$75/m]
2. Available to a TP who is aged 55. If TP
turns 55 in current yr of assessment, the
elderly person’s credit is prorated.
3. I.t.o. Finance Act, this is the only credit
that is apportionable on a time basis if
the period of assessment is less than 12
months.
(ACCA examiner apportions all credits)
 BLIND PERSON’ CREDIT
1. One whose eyesight is so defective during
more than half the period of assessment and
2. Is unable to perform any work for which
eyesight is essential.
3. TP is entitled to $ 900 p.a [$75/m] for his
own blindness and an equal amt for his non
working & blind spouse. [TP is not granted a
Cr for a blind chd]
 BLIND PERSON’ CREDIT CONTD
1. Transferable to the spouse of a blind person
where the TP does not have sufficient income
tax liability to absorb the credit.
2. A spouse excludes a separated, divorced, an
unmaintained partner or a wife (other than
the 1st) in a polygamous marriage.
 PHYSICAL & MENTAL DISABILITY CREDIT
1. Disabilty shd be permanent & substantial.
Implies a degree >/= 50%
2. Not granted to a blind person
3. Not claimable by non residents
4. TP can claim:
a. His own disability credit
b. Disability credit for disabled , spouse
c. Disability credit for each disabled chd of his
 DISABILITY CREDIT CONTD
5. Where both parents ve taxable income, the
disability credit for a disabled chd is given to
the father.
6. A chd includes a legally adopted or step chd.
 MEDICAL EXP CREDIT

1. 50% of expenses incurred. 2. Covers:

a. The purchase, hire or repairs of Invalid
appliances & fittings for the TP, his spouse or
chn (artificial limp, leg calipers or crutch,
spectacles, contact lenses, wheel chair, any
special fitting to a car, bed, bathroom or toilet
to suit the use by a disabled TP)
b. Medical or dental consultation’s fees and
SHORTFALLS.
c. Prescribed drugs & medicines.
d. N.B. Non prescription drugs are excluded.
MEDICAL EXP CREDIT CONTD

d. Hospital accommodation, treatment &

ambulance fees, X rays, lab tests & blood
transfusion for the TP, his spouse or chn
e. TP’s own contributions to a medical aid i.r.o.
TP, his spouse or minor chn.
3. No credit is granted on expenses tht are
recoverable from any source e.g a medical aid,
employer etc.
4. Medical exp credit (other than medical
contributions) is not granted to a TP who incurs
the exp at a time during the tax yr he is not
ordinarily resident in Zimbabwe.
 TRANSFERABILITY OF CREDITS BTWN SPOUSES

1. Spouses are assessed separately, subject to

transferability of blind & disability credits
btwn married persons, where the entitled
spouse has no income or has insufficient
income to claim the credit.
2. The elderly person & medical exp credits are
not transferable & fall away if not used by the
entitled spouse.
3. In tax computations, in order to minimise the
tax liability of a TP, Claim the non-
transferable credits first.
SUMMARY ON TAX CREDITS

Elderly Blind Medical Disabled

Person Person Expenses Person

Credit 900 900 Half the 900

amt paid
by
taxpayer

Apportionment Yes No No No
Of Credit on
death or
insolvency
SUMMARY ON TAX CREDITS
Elderly Blind Medical Disabled
Person Person Expenses Person
Transfer No Allowed No Allowed
between
spouses

Blind child No Grant

disability
credit
(zimra)
Disabled child Grant
disability
credit
SUMMARY ON TAX CREDITS
Elderly Blind Medical Disabled
Person Person Expenses Person

Not ordinarily Grant Grant Grant No

resident credit credit credit credit
on-
Medical
aid conts
only
Blind taxpayer Grant No
credit credit
SUMMARY ON TAX CREDITS
Elderly Blind Medical Disabled
Person Person Expenses Person
Medical Grant
expenses for a credit
child who is no only i.r.o
longer a minor Invalid
appliances
/ fittings
Eligibility TP
turns 55
TP dies or Prorata Grant N/A Grant in
becomes in full full
insolvent
 TAX CONCESSIONS FOR THE ELDERLY

 For the purposes of these concessions, an

elderly person is a person aged 55years or
more.
Exemption from Income Tax:
1. The first $3 000.00 p.a on rental income

2. The first $3 000.00 p.a on income earned

from bankers acceptances.
3. The first $3 000.00 p.a on income earned
from interest on deposits to financial
institutions.
 TAX CONCESSIONS FOR THE ELDERLY CONTD
4. Pension received from a pension fund or the
Consolidated Revenue Fund.
5. The car benefit on acquisition of vehicle,
where an employer disposes of a motor
vehicle to an employee aged 55 whether on
termination of employment or during
employment.
 CALCULATION OF
THE TAX EXPENSE
 CALCULATION OF TAX EXPENSE
• To calculate the Tax expense; use the PAYE
tables on the taxable income from
employment.
• Taxable Income is calculated as follows:

GI – Exemptions-Deductions.
 ‘CALCULATION OF GROSS INCOME’

Total Amount xxxxx

Less:

a) Capital Receipts/Accruals xxxxx

b) Revenue receipts/accruals from a source

xxxxx
outside Zimbabwe

c) Accruals/Receipts Falling Due Before the

Commencement Or After End of The Tax xxxxx
Year

Gross Income xxxxx

CALCULATION OF TAXABLE INCOME’

Gross Income X
Less Exemptions (X)
INCOME X

Less Deductions (X)

TAXABLE INCOME/ (Assessed loss) X
 FRAMEWORK FOR CALCULATING TAXABLE
INCOME FROM EMPLOYMENT
 Total employment Income
(sect 8(1)b, f, c, a, etc X
 Less Exempt income

(Sect 14 & 3rd schedule) (X)

 INCOME X

 Less Allowable deduction (sect 15) (X)

 TAXABLE INCOME X
2015 MONTHLY PAYE TABLE
Tax Bracket ($) Size of band Tax rate
1-300 300 0
301-1 500 1 200 20%
1 501-3 000 1 500 25%
3 001-5 000 2 000 30%
5 001-10 000 5 000 35%
10 001-15 000 5 000 40%
15 001-20 000 5 000 45%
20 001 & above - 50%
 2015 ANNUAL PAYE TABLE

Tax Bracket ($) Band Size Rate Tax Cum Tax

0- 3 600 3 600 0 0 0
3 601-18 000 14 400 20% 2 880 2 880
18 001-36 000 18 000 25% 4 500 7 380
36 001-60 000 24 000 30% 7 200 14 580
60 001- 120 000 60 000 35% 21 000 35 580
120 001-180 000 60 000 40% 24 000 59 580
180 001-240 000 60 000 45% 27 000 86 580

240 001 & above - 50% - -

 HOW TO USE THE PAYE TABLE
1. Identify the tax bracket in whc the taxable
income of the TP falls into.
2. Take the cumulative tax for the prior tax
bracket. X
3. Add tax on the “differential” X
4. Total tax expense X
 CALN OF TAX ON THE “DIFFERENTIAL”:
1. Calculate the Differential = the excess of the
taxable income over the “Upper limit” of the
prior tax bracket.
2. Apply the tax rate of the taxable income to
the differential.
EXAMPLES

Calculate the Tax Expense on the ff annual

Taxable Incomes:
1. 27 000
2. 2 900
3. 256 000
4. 89 000
 TAX EXP ON 27 000
1. Tax bracket of taxable income: 24 001 – 60 000
2. Prior bracket: 12 001 – 24 000
3. Cum Tax of prior bracket: 4 800
4. Upper Limit of prior bracket:24 000
5. Differential = 27 000-24 000=3 000
6. Tax rate of taxable income bracket: 30%
7. Tax expense on differential
=30% x 3 000 900
TOTAL TAX EXPENSE 5 700
 TAX EXP ON 2 900
1. Cumulative tax for the prior tax bracket:
NIL
2. Add tax on the “differential” NIL
3. Total tax expense NIL

N.B.
4. Differential =NIL
5. Tax rate of taxable income bracket is 0%
 TAX EXP ON 256 000
1. Cumulative tax for the prior tax bracket: 92 100

2. Add tax on the “differential” 8 000

3. Total tax expense 100 100

N.B.
4. Differential =256 000-240 000=16 000

5. Tax rate of taxable income bracket is 50%

6. Tax on differential =50%*16 000=8 000
 TAX EXP ON 89 000
1. Cumulative tax for the prior tax bracket: 15 600

2. Add tax on the “differential” 10 150

3. Total tax expense 25 750

N.B.
4. Differential =89 000-60 000=29 000

5. Tax rate of taxable income bracket is 35%

6. Tax on differential =35%*29 000= 10 150
FRAMEWORK FOR CALCULATING TAX LIABILITY FROM EMPLOYMENT INCOME

Tax exp [per PAYE tables] X

Less Credits (X)
Tax exp before surcharge AA
Add Aids Levy = 3% x AA X
Tax expense after surcharge X
Less PAYE (withheld by employer) (X)
Tax Payable/ (refundable) X
 RESPONSIBILITY OF
EMPLOYERS
RESPONSIBILITY OF EMPLOYERS

Any resident or non resident employer, who

employs one or more members of staff whose
gross pay, including benefits and allowances,
exceeds $300 per month (or the daily, weekly
or annual equivalent), is required to:
1. register with the relevant Regional Manager
of the Zimbabwe Revenue Authority
(ZIMRA).
RESPONSIBILITY OF EMPLOYERS CONTD
2. Employers who have been placed under the
FDS have the responsibility to deduct the
correct amt of PAYE for the year.
3. Remit such PAYE to ZIMRA by the 10th of
the month following the deduction.
4. Employers are responsible for under-
deductions as well as late payment of PAYE.
5. Interest is charged and penalties of up to
100% of the unpaid tax can be imposed on
the employer.
 RESPONSIBILITY OF EMPLOYERS
6. In the FDS, PAYE is a final tax on
employment income & employees are not be
required to complete tax returns.
7. Exceptions- change of employers, started or
stopped working during the yr or directed by
ZIMRA to submit return.
 DEEMED SOURCE

• Foreign div: Special rate (No levy) 20%

• Foreign Interest: Corporate tax rate 25.75%
 WHAT IS EMPLOYMENT INCOME?

 This is income earned by an individual in

respect of services rendered under any contract
of employment and any amount received due
to the cessation of employment. (during
employ & on cessation)
 Includes benefits: occupation of quarters or
residence (housing benefit), the use of
furniture or motor vehicle, allowances, loan
 It also includes lumpsum payments i.t.o
s8(1)c.
 and Pension Annuities i.t.o s8(1)a.