Gross Income-Sect 8,10& 12

Gross income is defined as

the total amount
received by or accrued to or in favour of person
deemed to have been received by or accrued to
or in favour of a person
in any year of assessment
from a source within or deemed to be within
Zimbabwe
excluding receipts of a Capital nature

There are special inclusions to Gross income

Key Components of the GI Defn
 Sect 2 of the Act defines
Amount
 as money (hard currency) or
any other property corporeal
or incorporeal having an
ascertainable money value(CIR
VsDelfos) e.g. payment in the
form of shares or a motor
vehicle in place of actual cash
payment for work done
Amount
CIR v People’s stores elaborates on corporeal
or incorporeal (debts or rights of action)
Onus of proving amount has ascertainable
money value lies with commissioner, TP has
the burden to prove why its should not be
taxed.
 Received by
 An amt must be received for it to be
taxable. Received means rcvd by the
taxpayer, on his own behalf, for his own
benefit or by somebody on his own
benefit.
 Therefore rent received by an estate
agent on behalf of a client landlord is not
gross income in the hands of the estate
agent but in the hands of the principal.
(CIR vs Genn & co, 1955).The estate
agent is only taxable on the commission
he charges for collecting the rent on
Received by
Lessons: Loans and security deposits are not taxable.
NB, trade and security deposits are only taxable when
the customer is under no obligation to claim it back or
if the deposit is forfeitable.
Illegal receipts and thefts: the fact that money is
tainted with illegality does not mean it would not
constitute a receipt
Deposits: Whether these constitute gross income
depends on how the seller treats them.If they deposit
becomes absolute property of the seller then its gross
income and if otherwise the seller is obliged to keep it
separately and in trust for the customer its not gross
income
 Accrued To
means due and payable or entitled to.
 Income accrues when a taxpayer becomes entitled to
it or when it is due and payable to him. The TP is
taxed on the earlier of the date of receipt or accrual.
 In Lategan V C.I.R, the judge concluded that income
accrues to a person when one becomes “entitled to”
the income ,i.e that is when liability is ascertainable
and settlement is reached even if the amt remains
unpaid Section 10 (7) affirms this.
 Before including any receipt in gross income you
need to establish the date of accrual. Once this date
is established check on whether or not it falls within
the tax year you are assessing e.g. Directors fees
accrue when voted while Leave pay accrues
proportionately on the last day of each month during
Deemed recvd or accrued to
(s10)
The Commissioner will invoke provisions of
deemed receipts or accruals under the
circumstances outlined in section 10 although
the income might not have been physically
received.
 Deemed Accruals
a) Income invested, accumulated or
otherwise capitalized by the
taxpayer
b) Income which has not actually been
paid over to the taxpayer but is due
and payable to him
c) Income which has been credited to
an account, re-invested,
accumulated or capitalised on
 Deemed Accruals Cont’d
2) Partnership profits accrue to the
respective partners on the accounting
year end of the partnership
3) Income accruing to a minor child as a
result of a disposition by the parent is
taxable in the hands of the donor
parent
4) Income arising as a result of
reciprocal donations to minor children
is taxable in the hands of the parent
In favour of a person
Once an amount has been beneficially
received by or accrued to a TP, he is taxed on
such amount even though he may have an
obligation to pay it over to some other
person.
 Person includes
a deceased estate
an insolvent estate
an association of persons not being a
partnership
a local or like authority
a company
a trust only i.r.o. income the subject
of a trust to which no beneficiary is
 Source
 Income is not taxable in Zimbabwe unless it is from a
source within Zimbabwe or deemed to be from a
source within Zimbabwe (Sect 12). Whether a person
is resident or not is immaterial
 NB. This rule is the back bone of our Income Tax
Act
 Source has nothing to do with legality but has
something to do with what a practical man would
regard as the originating cause of the income and
the location of the originating cause.
 In identifying the true source of income we always
use the word ‘where’ because it gives us a particular
location. If that location is in Zimbabwe then there is
a possibility that such income becomes Gross income
Source Cont’d
Always ask yourself the following questions:
a) What is the originating cause of this
income? In CIR v Lever Brothers. This is the
work which the taxpayer has done to earn
the income, a quid pro quo which he gives
in return for the income
b) Is the originating cause in or outside
Zimbabwe
c) Can the originating cause be deemed to be
within Zimbabwe?
 True Sources of Income
Employment income Where the services are
rendered
Company dividends where the shares are
registered
Directors fees Where the head office
of the company is
located
Royalties Where the author
exercised his wit, labour
and intellect
Business profits Where the business is
conducted
 True Sources of Income Cont’d
Interest from a loan Where the credit was
provided
Annuities Where the fund is
situated
Rent from immovable Where the property is
property situated
Rent from movable In the case of long leases
property (5 years and above) the
source is the place
where the lessee uses
the asset. In the case of
short leases the source
 Deemed Source
 Income may only be deemed to be from a
source within Zimbabwe with the support of
Section 12 of the Income Tax Act; examples
 Sect 12 (1)(a) Contract concluded in
Zimbabwe for the sale of goods by a
business person.
 Sect 12 (1) (b) Income for services rendered
in pursuance of trade Zimbabwe. Residence
of the status of the person making pyment
does not matter, what matters is the nexus
between the trade carried in Zim and
services rendered out side
 Deemed Source

 Sect 12 (1)(c)Income from a

source outside Zimbabwe which
accrues to an employee, who is
ordinarily resident in Zimbabwe,
during a period of temporary
absence from Zimbabwe, a
period not longer than 183 days.
d) Income earned for services rendered
to the Zimbabwe government
Deemed source
e) Pension or annuity from services rendered
 Sect 12 (2)Foreign interest and foreign
company dividends accruing to a person
ordinarily resident in Zim. Sect 16 (1)(n) of
the ITA, precludes recipient of such
income from deducting expenditure
incurred in earning such income. NB
 Section 12 (3)An annuity from a source
outside Zimbabwe where the person
acquired the right to the annuity while
ordinarily resident in Zimbabwe
Deemed source
Royalty- deemed to be from a source within Zim if
or to the extent that such income is recieved or
accrues as a result of the use of , privilege to use or
right of use of intellectual property within
Zimbabwe. Royalties for the use of a patent, design ,
trademark, copyright, model, secret formula, motion
picture film or television film in Zim or the imparting
of knowhow for the use the afro-mentioned items
Sect 12 (5) Recoupment- recouped capital
allowances in respect of F A sold outside Zim if
capital allowances in respect of those assets were
claimed in Zim
 Year Of Assessment
means the period of 12 months beginning on 1 st

January in any year i.r.o. which tax is to be

charged, levied and collected in terms of this Act,
and includes any period within such a year of
assessment.
 Capital Receipts
Gross Income excludes any amount so received or
accrued, which is proved by the taxpayer to be of a
capital nature. While the burden of proof is on the
taxpayer officers are advised not lean on this always. The
following metaphor can help distinguish between
revenue and capital receipts:
Capital receipts may be referred to as the tree while
revenue receipts may be regarded as the fruit. From a
house one may get rent. The rent being the fruit of the
‘tree’ (house) is revenue in nature.

How would you treat proceeds from the sell of the rent
earning property?
 Capital Receipts Cont’d
A rough guide to determine whether
income is of a revenue or capital nature
would be the in source of receipt test as
follows: -

If the amount flowed from the asset but the asset
remained in ownership it should be considered as
revenue.

If the amount flowed from the sale or exchange of

an asset it should be considered as capital.
Capital receipts Cont’ d
Thus the disposal of fixed capital e.g assets
results in non taxable receipts.
Various tests have been used by courts to
distinguish between capital and revenue &
some of these are
The intention
Mixed intention
Change of intention
Capital receipts cont’d
The method of financing the asset or disposal
The holding period
Occupation of the taxpayer
Activities of the TP prior to acquisition of the
asset
Recurrent test.
Operation of business in a scheme of profit
making and continuity.
Other tests. Nature of asset, income&
transaction
EXERCISE: capital /revenue
Proceeds from disposal of a house by an
individual
Proceeds from sale of shares by a stock
broker
Proceeds from the sale of a house by a
property development company
Insurance proceeds
Receipt in lieu of restraint of trade agreement
Compensation and damages
Gifts and inheritance.
 Capital Receipts
examples

insurance policy proceeds,

goodwill,
lottery wins,
inheritance , gifts
proceeds from sale of fixed assets
sale of shares (excludes share
dealers)
Gross Income – Special
Inclusions
Gross income as earlier defined
excludes items of a capital nature
Specific/ special inclusions are
items of a capital nature that the
Commissioner has seen fit to
consider as revenue, Section 8
(1) refers.
 a) Annuities- Section 8(1) (a)
Annuity defined - An annuity is defined as a
repetitive annual payment paid to a particular
person for life or for some period.

Characteristics
a) It provides for an annual payment, even if divided
into instalments;
b) It is repetitive, payable from year to year, at any
rate, for some period and;
c) It is claimable from one person to another.
 a) Annuities Cont’d
Types Of Annuities:
An ordinary annuity purchased from an insurance
company
An annuity by way of a gift or legacy

An annuity granted as consideration for the sale of

a business or an asset or surrender of a right.
Pension for services rendered
 i) Purchased Annuity
A purchased annuity is taxable to the extent of the
interest content, which is spread over the expected
annual payments. This means the cost/ purchase
price of the annuity is not taxed as quite often the
TP would have used his after tax income to purchase
the annuity.

I = (P x N) – A
N
 Purchased Annuity
Cont’d
I = interest content of annuity that is taxable;

P = the gross annual annuity receivable;

N = number of payments expected (this may be

a definite period or, in the case of an annuity
payable for life, a number of years based on the
life expectancy of the annuitant);

A = the purchase price of the annuity (cost), that

was not allowed as a deduction.
 Practice Question
A taxpayer used $200,000 from his
income to purchase a retirement
annuity fund policy with Old Mutual.
The policy matured on 1st July 2024
and from there then he started
receiving an annuity amounting to
$10,000 per month. His life
expectancy was estimated at 6 years.

How much is to be included in gross

income during the tax years ended
31st Dec 2024and 31st December 2025
 Solution
P = 10,000 x 12 = 120,000
N = 6 Yrs
A = $200,000

[(10,000 x 12) x 6] – 200,000

6

Interest per annum = 86,667

Interest per month = 7,222

Year ended 31/12/2024

July – December= 7,222 x 6 = 43,332
Year ended 31/12/2025
Full year = 86,667
ii) Sale Of Business /
Asset

Treatment same as for a

Purchase Annuity
iii) Annuity from Gift /
Legacy
This type of an annuity is either
taxable in full or not taxable in full
depending on where the fund is
situated. A widow’s pension, which
is one example of this type of an
annuity, is not taxable in Zimbabwe
if it is situated outside Zimbabwe
even though her late husband may
have rendered services in this
iv) Annuity Pension From Services
Rendered

Annuity in respect of services may be

in the form of contributions to a
pension fund or from non contributory
pensions. In this case the annuity is
taxed in full provided
• there is no cost attached to the
annuity
•Contributions made towards the
pension were allowed in full.(what if
contributions were restricted ?)
Example
Susan received a monthly annuity of $2000 in
the form of pension from a pension fund
with effect from 1 Oct 2024. Her estimated
life expectancy is 10 years, during her tenure
a total of $ 70 000 of her pension contribution
was disallowed
RQD
Calculate her taxable income for the year
ended 31 Dec 2024
b) Income From Services Rendered

A special rate of tax shall be

applied to re-engagement or
extended service gratuities
payable to members of the police,
army or Air Force. The tax
chargeable on such amounts is
calculated in the same way as for
lump sum payments – refer to
section 14(4) of the Finance Act for
the calculation of tax thereon.
Irregular receipts from services
rendered: Section 8(1)(b)
These are gross income amounts in addition
to an employee’s remuneration, which are
connected with employment or services
rendered. These include remuneratory gifts,
back pay, bonus, awards, cash in lieu of leave
and gratuitous receipts from employer
except ex gratia payments to a deceased
employee’s widow as these are of a capital
nature as she rendered no services
 c) Lump Sum Payments
– Section 8(1)(c)
These are payments arising from a
member’s withdrawal or the winding
up of:
a) A Pension fund or contributions to the
Consolidated Revenue Fund
b) A Benefit fund
c) An Unapproved pension/benefit fund

All Lump Sum Payments (L.S.Ps) are charged to tax

at a special rate, that is the highest marginal tax
rate upto 50%
 excludes
a) An annuity, pension or amount from
services rendered, or
b) An amount received or accrued by way of a
Lump Sum Payment referred to in the 1st
Schedule.
c) An amount, which represents a return or
repayment of any money in respect of
whose payment, a deduction was not
allowed under this Act.

A gratuity (thank-you payment) is also

excluded as it is brought into gross income
under Section 8(1)(b)
 Difference between ‘Terminal
benefit’ and ‘Lump Sum Payment’

Terminal benefit XXXX

Less: Proportion thereof
relating to period of XXXX
service outside Zimbabwe
Lump Sum Payment XXXX
 LSP Calculations Cont’d
b) Unapproved Funds:

Lump sum payment

xxxxxxx
Less: Member’s own contributions
xxxxxxx
Gross Income
xxxxxxx
Lease premiums & lease
improvements-Section 8 (1)
(d&e)
Lease premiums case law: COT VS DESA
COT VS REX TEA ROOM
The premium is taxed in full in the hands of
the lessor or landlord
What is a “benefit”
An amount that substitutes for a personal
expense.
Personal expense refers to an amount
received from employer which the taxpayer
derives a personal benefit ( satisfaction ) or
covers an expense incurred as a result of a
personal decision ( e.g. loans)
What is a taxable benefit
The taxation of in-kind benefit depends on
the relevant tax policy criteria which relies on
some cardinal principles e.g. of :-
Equity : would not taxing the benefit give rise
to serious inequities? Would it not be viewed
as not fair ?
Neutrality : would not taxing the benefit lead
to distortions in the forms of compensation ?
What is a taxable benefit
(cont.)
Administrative efficiency: is taxing the
benefit administratively practical – exclude
small gifts on appropriate occasions,
subsidized meals and recreational facilities.
 f) Fringe Benefits- sect
8(1)(f)
are advantages or benefits from
employment or other gainful
occupation
they exclude ‘passage benefits’
received or accrued on:

a) taking up employment and

b)termination of services
if it is the first such benefit enjoyed
 Fringe Benefits Cont’d
 These benefits shall be valued as
follows:

1. in the case of the occupation of

quarters or the use of furniture by
reference to the value to the
employee.

2. in the case of all other benefits by

 Advantage or Benefit
a) means
i) board
ii) occupation of quarters or residence
iii) use of furniture or motor vehicle
iv) use or enjoyment of any other
property whatsoever including a loan
v) an allowance
granted to an employee, his spouse or
child by or on behalf of the employer
in cases where such payment has
nothing to do with the employer’s
business
Examples of benefits
Motoring benefits
School fees benefit
Loan benefit
Housing benefit
Passage benefit
Entertainment allowance
Shares awarded to an employee
Educational assistance
Free or subsidized meals
Clothing benefit
Data and Airtime for use at the home or outside work premises

With effect from 1 January 2022, the

definition of advantage or benefit now
includes the provision of data and airtime
given by the employer to the employee for
use at the home or outside work premises.
The deemed benefit is pegged at 30% of the
cost to the employer.
Data and Airtime for use at the home or outside work premises

Note: There is no deemed benefit if the

employer proves to the Commissioner that data
and airtime was all used for the purposes of
business. Records pertaining to business
transactions should be kept by the employer in
order for the benefit not to be taxed. The primary
record to be maintained shall be the Call Log
Statement provided by the telecommunications
service provider and such other records as the
employer may maintain which show the usage of
the data or airtime. The onus of proof will lie
with the employer at all times.
Passage benefit
Passage benefit covers the cost borne by the
employer for journeys made on taking up
employment and any other journey made by
the employee, his spouse and children in so
far as it is made for the purpose of the
employer’s business.
The 1st journey on taking up employment and
first journey on termination of employment,
with each employer are excluded from the
person’s gross income
Passage benefit example
Miss Sibanda travelled to Tanzania for a 24
day business trip. Her stay was extended by
further 8days because she had to attend to a
personal matter. The employer paid$39 500.
Calculate Miss Nyoni’s taxable income
Assume her extended stay was 2 days,
calculate the taxable income
Example
NB, a trip which accounts for less than 10% of
its time on the business of the employer is
regarded as a 100% private trip. The business
time is considered incidental to the trip and
vice versa.
Edgars gave Nosipho, one of its Directors, a
holiday allowance of $ 100 000 for him to take
a tour during his annual leave. Musa however
only spent $40 000 of the holiday amount and
pocketed the remaining $60 000.
What is Musa’s taxable income
Benefits continued
The company paid $200 000 to cover a
holiday and a business meeting. Mpho spent
80% of her time on the business meeting.
How much is Mpho’s taxable income?
Entertainment and subsistence allowance-
becomes gross income in the employee’s
hands to the extent that it is not expended on
the employer’s business.
Loan Benefit
Where the employer gives a loan to an
employee amounting to ZWL$8000 or more, a
benefit will only arise where the interest
charged on the loan is less than 15%. The
prescribed rates for US$1000 or more loans
are based on the London Inter-Bank Rates
(LIBOR) plus 5%.
The LIBOR Rate can be obtained here:
https://www.zimra.co.zw/domestic-taxes/lond
on-interbank-offered-rates-libor
Loan Benefits
 Benefit is P(A- B)
A is 5% plus LIBOR p.a (London Interbank
offered Rate)
B is the interest rate paid on the loan by the
employee. The benefit is apportioned where the
loan tenure is less than a year
Benefit calculated by computing the difference
between the rate charged by the employer and
the prescribed rate multiplied by the loan
amount and the number of days in which the
loan is enjoyed.
Example
A lecturer at NUST, was granted a loan of $ 60 000
by his employer on 1 Jan 2023 at 8% p.a. He
utilised the loan as follows:
20% for the purpose of medical drugs for his sister
30% for the education of his son at MSU
10% for medical treatment of his wife
The rest was used to complete construction of his
house
The loan was repaid on 31 Aug 2023. Assume Libor
rate of 23.57%. Compute the taxable benefit.
Benefits examples
NB* a loan write off also constitutes a taxable
benefit and should be brought into gross
income and subjected to PAYE.
There is no taxable benefit i.r.o of loans
granted for education of the TP,spouse, chn;
technical training of TP, spouse or chn and
medical treatment of TP, spouse or chn
Furniture- annual benefit is 8% of cost of
furniture items
NB*Any allowance tax in full except portion
utilised for employer’s business.
Example
Miss Samantha , a marketing manager with
Econet was given a loan of $20 000 in beginning
of April 2023. She is supposed to pay back the
loan together with interest(charged at 3% p.a) at
the end of the year. Libor is 22.5%.
Calculate his taxable benefit for the year
2023
John obtains a car loan of $70000 with an interest
of 7% p.a on 1 Jan 2023 from his employer.
Calculate the deemed benefit arising from
the loan. Assume Libor is 22.5%
Housing benefit
Housing: The value for a free use of a residence or
quarters granted by the employer is the residence or
quarter’s open rental. In municipal areas- market
value & outside municipal areas value determined as
12,5% of salary or 7% of cost of house
NB, use the 12.5% of the employee’s basic salary
when not given open market value, 7% only when
examiner
NB, For valuation of quarters or residence other
than those mentioned above respective employers
may engage and agree with ZIMRA before
determining the benefit.
Exercise
Patronella recently got married and her employer
decided to lease him a fully furnished house in the
Burnside area in Byo. As part of the lease
agreement, she is supposed to pay a monthly
rental of $ 600, the market rentals for similar
unfurnished houses is $ 1500/month. The flat
being leased to Patronella was furnished at a cost
of $ 200 000. During the year 2023, she occupied
the flat for the full year.
Calculate the total deemed benefit to be
included in gross income for Patronella for
2020
Motoring benefits
Value based on “cost to the employer”
Cost to the employer is a deemed cost
provided for in the Finance Act Cap 23:04.
Calculation based on engine capacity of the
vehicle provided by the employer.
Not subject to apportionment between
business and private use
However can be reduced proportionately if
employee uses the vehicle for only part of the
year.
Deemed motoring benefits
Engine capacity USD $
Up to 1500cc $ 625
1501- 2000cc $ 83o
2001- 3000cc $ 1250
Over 3000cc $ 1660
NB where an employer is a registered
operator the motoring benefit constitutes a
taxable supply and should be included on the
VAT 7 return for the respective period.
Example
Mpho is employed by CB Ltd as a Finance Director. On
1 April 2024 the company bought her brand new Isuzu
with a3000cc engine capacity as her company car,
which she has been using from April 2021 to date.
Mpho also received a fuel allowance of $ 5000 during
the year 2024 which she used for the employer’s
business. Since 1 Jan 2024 She is also enjoying the use
of company house with market rentals pegged at
$1200/m for which she pays $400/m as rent. The house
is fully furnished at a cost $150000.
Calculate her taxable benefit for 2024
* NB
Fuel
Where an employee enjoys the benefit of a
motorcar with free fuel, the value of the
fringe benefit of such fuel must be included
as part of gross income of the employee from
employment. The taxable benefit only relates
to the cost of fuel incurred by the employer
on the personal errands of the employee.
Mileage allowance
Mileage allowances to employees who use
their own car on business journeys. The
business mileage should be recovered using
AA rates and any excess is a benefit to the
employee. No tax payments on
reimbursements for use of own car.
Wisdom used his own car for business
purposes and travelled 1500 kilometres and
his employer paid him a mileage allowance of
$2/km. The AAZ rates are currently $1/km.
Calculate the taxable benefit
EXERCISE
Norman used his own car when he went
to Masvingo for tax presentation on
behalf of his employer, SD,
Accountants. He travelled 500km. The
employer gave him an allowance of
$615 to cover his fuel and wear& tear
on the car. You are told that the all
inclusive AA rate is 50cents per km,
compute Norman’s taxable income.
Example
Vanessa was granted a car , enginee capacity
3500cc, by her employer. She used the
vehicle on 1 Feb 2024 to 31 Dec 2024 and
did a personal mileage of $ 15000km of the
total mileage of 33 000km. Fuel consumed for
the period amounted to $ 9 000

Compute her taxable income for the year

Benefits cont’d-Sale of MV to
employee
Sale of motor vehicle to an employee- a benefit
may arise if the vehicle is sold at a discount.
The benefit is the difference between the fair
market price of the property and its discounted
price. In this case it will be A-B
A is the market value at the time of sale to the
employee.
NB, the benefit is exempt from tax if sold to an
employee who is over 55 years at the date of
sale of the vehicle.
Exercise
Mr Mpofu, the 60 year old managing director
of Edgars Stores Ltd was using a Toyota hilux
twin cab as his company vehicle with an
engine capacity of 3000cc. On 1July 2023 the
company made a decision to sell the car to Mr
Mpofu for $ 20 000. The market price of the
car was $27 000.
Calculate Mr Mpofu’s taxable benefit
Benefits cont’d-
Allowances/incentives
Allowances/ incentives granted by employer or on
their behalf by employer constitutes gross income
An allowance is gross income in the hands of the
employee to the extent that he fails to expend it for
the purposes of the employer’s business transaction.
The area where this arises is that of entertainment
allowances where the employee remains liable on any
unspent amounts, the whole amount of the
entertainment allowance is taxable in the hands of the
employee since paragraph 15 of the 3rd schedule
exempts the portion spent on the employer’s business.
Example
A Bakers inn manager was given an
entertainment allowance of $ 8000 by his
employer. He used $ 6000 to entertain the
company’s clients.
How much is taxable in the manager’s
hands?
Bonus or Performance Award
The tax free threshold for employee bonus
and performance awards was increased to
ZWL$500 000 with effect from November
2022 from ZWL$100 000
NB in November 2023, Bonus tax-free
threshold increased to ZWL7500 000 with
effect of from 1 November 2023 (US$700)
and is USD400 OR ZWL equivalent with
effect from I January 2024.
There 2024 we use USD400
Specific inclusions continued
Free or subsidized lunches or vouchers
entitling an employee to a meal provided by
the employer constitutes a taxable benefit -
no benefit arises if supplied by employer to
employee during business hours or extended
working hours eg night shifts or entertaining
business clients on behalf of the employer.
Continued
Subscriptions for social or sports club by
employer on behalf of employee is taxable
Where the subscriptions are for an
employee’s professional membership of an
association, these are exempt from tax.
Where the employee pays on his own. He
gets a full deduction of the expenditure.
Clothing benefit- ordinarily not gross income
if clothing is protective clothing
Continued
Mobile phone usage- if expenditure is fully
used for business, amount will not be gross
income as long as business usage can be
proved and justified failure of which it will
constitute gross income.
Grossing up benefits- employer wishing to
pay tax for employee or grosses up employee
benefits’ , the Act brings into income the
gross up the tax paid by employer on behalf
of employee
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 employer is a
school and the employee’s child is admitted at
the school without paying fees or pays
discounted fees, the foregone fees is the
taxable benefit. Additionally, any school fees
discounts or reductions granted because of
the employer-employee become a taxable
benefit in the hands of the employee.
continued
School fees benefit- Where an employer pays
school fees on behalf of the employee, spouse or
children that is a benefit to the employee.
In the case of an employee who is a member of the
teaching or non teaching staff of a school, Para
8(3) of the 3rd schedule to the Act provides for the
exemption of 50% of the amt /value of a school
benefit applicable to not more than 3chn of the
taxpayer.
NB if free education is provided at a school owned
by the employer to all pupils, no amount accrues to
an employee in respect of free places allocated to
his children.
School fees benefit continued
In the past school fees benefit was tax free but
with effect from 1Jan 2013, it is proposed to
specifically include the benefit into gross
income.
For teachers and non teaching staff- the
benefit is in respect of a waiver of the whole or
a portion of fees payable by the member of
staff.
In the hands of teaching and non teaching staff
the whole or portion waiver is gross income
continued

NB, the teacher or non teaching staff would

then be granted an exemption of 50% of the
value of the benefit up to a maximum of 3
children. The exemption applies to a school
benefit granted by a schl defined in terms of
the Education Act (Chapter 25:o4).
A scholarship, a bursary, a payment in respect
of tuition fees paid on behalf of a student at a
schl, college or university is tax exempted
unless provided for as a result of services
rendered by the person or his relative.
provident and
retirement annuity
funds
Pension Fund Benefit Fund RAF
Withdrawal So much of the lump sum as does So much of the lump sum as So much of the lump
not exceed ZWL 18,000 plus any does not exceed ZWL 18,000 sum as does not exceed
amount that is paid into a plus any amount that is paid ZWL 18,000 plus any
retirement annuity fund or pension into a retirement annuity amount that is paid into
fund. fund or pension fund. a retirement annuity
fund or pension fund.
Retirement Up to 1/3 of the total value of a Fully taxable. Up to 1/3 of the total
pension that is commuted is not value of a pension that is
taxable. The monthly pension commuted is not
(annuity) payable to persons 55 taxable. The monthly
years and over is exempt from tax. pension (annuity)
payable to persons 55
years and over is exempt
from tax.
Death The total lump-sum is tax free. The total lump-sum is tax The total lump-sum is
free. tax free.
RETRENCHMENT PACKAGE
Reduction of retrenchment package
exemption from a maximum and minimum of
USD12,500 and USD10,000 to USD5,033 and
USD3,200,respectively in 2024

Therefore, Maximum is 5033 and minimum

USD3200 in 2024
Commutation of pension from
a PF or Consolidated Revenue F
Sect 8(1)(r) brings into gross income “any amt so
rcvd or accrued by way of commutation of pension
or annuity wc is payable from the CRF or a PF other
than RAF, if the pension or annuity itself would not
have been subject to income tax”.
NB* a commutation implies giving up part or all of
the pension payable from retirement in exchange for
an immediate LSP
When one elects to commute his pension, a
third of his pension entitlement is treated as
capital in nature, wc is non taxable. Any
pension recvd thereafter is taxable in full
Example
Mr Dube aged 51 retired on 2 May 2024. When he
retired he elected to commute his pension. As a
result he received LSP amounting to $ 360 000.
From 1 June 2024, Mr Dube will be entitled to $
4000 monthly pension. His pension entitlement
prior to electing commutation was $ 820 000
Calculate his taxable income in 2024
NB* a pension accruing to a person over the age of
55years is tax exempted. Person should have
attained 55 yrs before the commencement of the
tax year to qualify for the exemption (Para 6(h) of
the 3rd sch
Commutation of pension from
a RAF- Sect 8(1)(n)
Sect 8(1)(n) provides the inclusion into gross
income “any amt rcvd or accrued by way of
commutation of a pension or annuity, the
right to which was acquired by virtue of
contributions first made on or after the 1 st of
Aug 1970 and which is payable by a RAF, to
the extent that it exceeds the amount that
would have been payable had 1/3 only of the
total value of the pension or annuity been
commuted”.
Special inclusions
Lump sum commutation receipts Sect 8(1)(n)- Any
portion above one third commutation from
retirement annuity fund or pension is taxable. TP
elects to receive LSP in year of retirement and
reduced streams of equal pension until death. Take
1/3 of pension entitlement to arrive at taxable
income in the 1st year of receiving LS amount. NB*
TP must elect .
Mandla retired on 30 September 2024, and will be
receiving a LSP of $650 000 from the RAF as
pension. His pension entitlement is $2570 000.
How much is taxable in his hands?
EXample
Mr Bonny aged 51 retired on 2 May 2024.
When he retired he elected to commute his
pension. As a result he received a lumps um
payment amounting to $ 58 000. From 1 June
onwards Mr Bonny will be entitled to $ 300
monthly pension. His pension entitlement
prior to commutation was $ 90 000.
Advise him on his taxable income.
Shares option schemes- S 8(1)
(t)
A share option scheme is a plan which gives
the holder of the option a right, but not
obligation to buy shares in a company for a
certain price called the exercise prices, subject
to meeting certain specification conditions, e.g
completion of certain period in service
It is a scheme which is meant to provide an
incentive of motivating and retaining
managerial staff. A share option is therefore an
advantage or benefiting respect of employment
service, office other gainful occupation.
Share option cont’d
The option must be valued at the date of accrual.
There is no accrual unless the option is
exercisable by the employee.
Where the option cannot be exercised until the
employee has completed services for a stipulated
period of time, the date of accrual is date on
which the condition is fulfilled. The taxable
benefit is computed as follows:
A-(B+C)
NB This is the taxable benefit per share, multiply
by no of shares to get the full benefit.
Share option
A-(B+C)
A= market value of shares at the time of exercise
B= exercise price or strike price
C= the inflation allowance on strike price
C= (D-E) x B
E
D= consumer price index (inflation rate) on the
date of share option exercise
E= Consumer price index (inflation rate) on the
date of share option offers
Example
Mr X offered 100 000 shares by his employer
(Z Ltd ) at a price of $. 50 per share and
should remain in the employment of ZLtd for
5 years and assume he did and that on that
date the consumer price index had moved
from 1.2% to 1. 65% (time of offer to time of
option). Advise Mr X of his taxable income, if
the share price on the date of exercise is
$1.50
Solution
A= $1.50/share
B=$0.50/share
C=$0.19 i.e (.50(1.65-1.20)/1.2o)
Benefit= 100000(1.5-(.50+.19)= $81 000
The above only applies to an option acquired by
the employee after 1Feb 2009. Different rules
apply to an option acquired prior to 1 Feb 2009
but exercised after this date (s22K of the Finance
Act). On such an option the tax liability to the
employee is 5% of the market valu e of the shares
prevailing on the date of the exercise of the option
Cont’d
This tax is final and is settled in accordance with
PAYE rules- although it does not necessarily pass
through payroll it must be remitted to ZIMRA on the
1oth of the following month following that of
deduction.
Debra, Assistant Telecoms Manager with Shoes Ltd
was offered an opportunity by her employer to acquire
shares under a share option scheme on 31 Jan 2008 at
a time when the shares were valued at Z$30m. She
exercised her right and acquired the shares on 20 Nov
2013 when the shares were valued at US$50 000. The
all items CPI were 116 and 805 for Jan 2008 & Nov
2013 respectively
Cont’d
$50 000 x5%=$ 2 .500
The share option benefit is exempt where the
employee share ownership scheme or trust has
been approved by the Minister of Indigenisation
and Empowerment.
In terms of para 19 of the 3rd Schedule to Act, an
amt rcvd by or accrued to or in favour of an
employee participating in approved share
ownership trust from the sale to or redemption by
the Trust of any stock, shares, dentures or other
interest of the employee in the trust is exempt
from tax. NB*
Specific inclusions continued
Sect 8(1)(m)- grants and subsidies
Free or subsidized lunches- no benefit arises
if supplied by employer to employee during
business hours or extended working hours.
Recoupments- Sect 8(1)(j)
Recoupment is tax profit on the sale of an asset fo
which capital allowances were being claimed in terms
of section 15(2)(c).
It is brought into gross income in terms of s8(1)(j)
It represents a recovery of capital allowances
previously granted
It becomes the lower of the potential recoup& CA
previously granted.
The following framework is used:
Proceeds xxxxx
Less ITV xxxxxx
Potential recoupment xxxxxxx
Recoupments cont’d
Actual Recoupment is limited to capital
allowances previously granted.
Where an asset had its cost restricted for
purposes of calculating allowances e.g PMV),its
SP must also be restricted for purposes of
calculating recoupment:
Deemed SP= Deemed cost x Actual SP
 Actual cost


Example
A tax payer purchased the following assets in
2021 tax year, a PMV for $ 15 000,
Machinery $ 40 000. During the 2023 tax
year he sold them for $ 9000 and $ 45 000
respectively
Calculate her recoupment. Assume the TP
claimed SIA
 e) Other Gross Incomes
h. Valuation of Trading Stock other
than Farm Trading stock
k. Compromise / Concession to a
Debtor
EXERCISE
a) Anderson is employed as a garbage collector. At
Christmas each he often finds cartons of cool rinks
and other groceries that have been left by
residents in gratitude for the terrific job he does
each year.
b) As a result of an accident on her way to work in
April 2020, Donald was seriously injured. After
some 4 weeks in Mater dei Hospital, he was
declared permanently incapable of continuing his
employment. She received the following payments:
Sick supplement pay by employer – 6 weeks $6000
Contd
Proceeds from private sickness and accident
policy 6 weeks at $300/week
Guaranteed sum under an insurance policy
for loss of a limb $20 000
Gratuity on retirement $12 000
Out of court settlement by a 3rd party
insurance company of a driver of the car
involved in the car accident of $ 10 000
c)
Cont’d
 Anne is managing Director of Fox and Fun
Ltd, a company which repairs cutlery. F & F
was successfully taken over in June 2024, and
an agreement was reached in which Anne is
paid $100 000 in return for her resigning
from the office of managing director and
entering into a restrictive covenant in which
she agrees not to be engaged in any capacity
in the business of repairing cutlery in
Masvingo for a period of five years.