The Income Tax Act explicitly exempts various types of income by statute. Section 14 of the Act provides that the amounts listed in the Third Schedule are exempt from income tax. These statutory exemptions span a wide range of entities and income types, including:

Public and Statutory Bodies: The receipts and accruals of certain government or public institutions are exempt. For example, local authorities, the Reserve Bank of Zimbabwe, the Zambezi River Authority, the Natural Resources Board, and other state-linked entities are tax-exempt on their income. Recent legislation added Zimbabwe’s sovereign wealth fund (the Mutapa Investment Fund) to the exempt list with effect from 1 January 2025. This means income of the Mutapa Fund is officially not subject to income tax, aligning with its public purpose.

Non-Profit Organizations and Charitable Institutions: Non-commercial institutions operated on a not-for-profit basis enjoy exempt status. This includes agricultural, mining or commercial societies not run for private profit, registered benefit funds, and similar bodies. Clubs, institutes and associations organized solely for social welfare, civic improvement, pleasure or recreation, or the advancement of a trade/profession are exempt provided no part of their income is distributable to members (other than as reasonable compensation). Ecclesiastical, charitable, and educational institutions of a public character (e.g. registered churches, charities, schools) are exempt on donations, tithes and other contributions they receive. Any income these institutions derive from trading or investments can also be exempt if conducted through a wholly-owned company licensed under section 26 of the Companies Act (effectively allowing charitable organizations to invest through a tax-exempt corporate structure). Likewise, friendly societies, employees’ savings schemes, and medical aid societies are exempt from tax on their receipts.

Pension and Retirement Funds: Approved pension funds are generally exempt from income tax on their investment income (originally “until such date as the Minister may specify” – no such date has yet been specified). This aligns with policy to encourage retirement savings. In a similar vein, provident and benefit funds and government-established funds (e.g. certain Treasury funds under the Public Finance Management Act) are exempt.

International Organizations and Development Funds: Income of various international and developmental organizations is exempt. For instance, any agency of a foreign government approved by Zimbabwe, or any international organization granted privileges under law, is tax-exempt on its local receipts. Organizations like the African Development Bank and African Development Fund are specifically listed as exempt. Development financial institutions and funds may also be exempt by Ministerial notice – for example, the Investor Protection Fund (securities market fund) and Deposit Protection Fund (bank deposit insurance) are explicitly exempt. The law also empowers the Minister to declare any statutory corporation’s income tax-exempt by gazette notice, and certain venture capital funds and special purpose vehicles for infrastructure development have been granted exemption to promote economic development.

Special Mining and Petroleum Projects: Separate provisions (Sections 35 and 36 of the Act) allow for tax exemptions for approved petroleum operations and holders of special mining leases. In the interest of national development, the Minister of Finance can, by statutory instrument, exempt such mining or petroleum ventures from specified taxes. This is usually done to attract investment in large-scale extractive projects. (Such exemptions are project-specific; for example, certain mining companies have enjoyed tax holiday periods under development agreements.)

The above are broad statutory categories. Next, we delve into specific exemptions relevant to employment income, investment income, certain industries, and other groups, providing practical details for each.

Zimbabwe’s tax law provides targeted exemptions for certain employment-related earnings and benefits, which reduce the taxable income of employees in qualifying scenarios. These include:

Retrenchment and Severance Packages: To cushion employees who lose jobs, part of a retrenchment or severance payment is exempt from tax. Specifically, one-third of any severance pay, gratuity or similar benefit (other than pension or cash in lieu of leave) is exempt, subject to a minimum threshold of USD 3,200 (or equivalent in local currency). In other words, an employee is guaranteed at least a $3,200 tax-free amount, and potentially more if one-third of the package exceeds $3,200. However, there is an upper cap: the exemption applies only up to a maximum of USD 15,100 in any one year. For example, if an employee receives a $9,000 retrenchment package, one-third ($3,000) is exempt – which is below $3,200, so the minimum $3,200 would be exempt. If the package is $30,000, one-third ($10,000) is exempt, and this is within the $15,100 annual limit. Any amount above the exempt portion is taxed under normal PAYE rules. (These thresholds were updated by recent Finance Acts; as of the 2025 tax year the USD 3,200/one-third formula and $15,100 cap are in effect.)

Bonus and Performance Awards: To give relief on once-off annual bonuses, the law exempts a portion of employees’ bonus income. Annual bonus or performance-related awards are tax-free up to USD 400 (or equivalent Zimbabwe dollars) per year. If an employee receives more than one bonus in a year, the total exempt portion is capped at $400. Any bonus amounts beyond this threshold are subject to tax. (Note: The bonus exemption was previously USD 700, but the Finance (No. 2) Act 2023 revised it to USD 400 for the current period.) For example, an employee earning a $1,000 year-end bonus will have $400 of it tax-free and $600 taxable. This incentive is meant to benefit lower-income employees and civil servants who often receive modest bonuses.

School Fees & Educational Benefits: Many employers (particularly schools or large companies) assist with employees’ children’s education costs. Zimbabwe’s tax code provides that half of the value of any school tuition benefit paid by an employer for an employee’s child is exempt. In effect, only 50% of employer-paid school fees is treated as a taxable fringe benefit, and the other 50% is not taxed. This exemption is limited to fees for up to three children per employee. For instance, if a mining company pays $2,000 per term for an engineer’s two children at school, only $1,000 of that per child is included in the engineer’s income for tax purposes; the other $1,000 per child is exempt. This “school fees concession” encourages employers to support education without fully taxing the benefit.

Medical Benefits: Similarly, any medical treatment provided by an employer to an employee or their dependents (for example, paying hospital bills or medical insurance) is exempt from tax. This covers medical costs paid in any form – direct payment, reimbursement, or in-kind. Additionally, contributions that an employer makes to a medical aid society on behalf of employees are exempt. These provisions mean that employer-funded health care or insurance does not count as taxable income for the employee, recognizing the social benefit of health support.

Allowances for Government and Public Service: A range of special allowances and benefits for public officials and certain employees are exempt to the extent specified by law or Presidential notice. Key examples include:

The President of Zimbabwe’s official salary and allowances paid to the President’s staff (when paid from the President’s own budget) are exempt from tax. (Likewise, any person entitled to immunities under the Privileges and Immunities Act – e.g. certain diplomats or international experts – would have exempt remuneration.)

Allowances to the spouses of the President or Vice-President for official duties are exempt, as are allowances payable to a former President’s spouse.

Parliamentary and Government Allowances: The Act allows the President to declare by statutory instrument that allowances for certain office holders be exempt. For example, if specified by the President, an allowance or portion thereof granted to Ministers, Deputy Ministers, Provincial Governors, the Speaker/Deputy Speaker of Parliament, the Leader of Opposition, Chief Whip, or Members of Parliament can be tax-exempt. Likewise, the President may specify that the value of a government-provided residence, quarters, furniture, or vehicle for a Minister/Deputy Minister or the Speaker is exempt. Furthermore, any allowance or benefit granted to any full-time employee of the State can be exempted by Presidential notice. In practice, this mechanism is used to give tax-free allowances (for housing, transport, etc.) to civil servants or security forces as part of their conditions of service. For instance, a civil service housing allowance could be gazetted as non-taxable to improve public sector remuneration.

Judicial and Military Service: Gratuities paid to Judges of the Supreme Court/High Court upon retirement are exempt. Allowances for traditional leaders (chiefs and headmen) are tax-exempt. Certain military and police allowances are also exempt, such as: active-service allowances for defense force members serving abroad, volunteer or reservist allowances for part-time military/police members, and the value of field rations provided to forces during operations. Decorative awards – any gratuity accompanying an official honour/medal (e.g. Medal for Long Service and Good Conduct, or other state honors) – are exempt from tax. During the COVID-19 pandemic, a special case was risk allowances for frontline public health personnel, which were paid tax-free for a defined 12-month period in 2020/21.

Employee Share Ownership and Other Benefits: The Third Schedule also exempts certain benefits aimed at empowerment or welfare. For example, amounts received by employees from an approved employee share ownership trust upon redemption of their shares/units in the trust are exempt (encouraging employee share schemes). Additionally, fees earned by a non-executive director that have been subject to withholding tax are exempt from further income tax (the withholding is a final tax in such cases). Finally, if a qualifying employee opts to receive a cash allowance in lieu of a company vehicle, that monetary benefit is exempt provided the employee holds a specified high-level position (such as a Commissioner or Director in the civil service) and the benefit is part of their conditions of service. This encourages standardizing benefits for senior officials by not penalizing those who choose cash instead of a car.

In summary, Zimbabwe’s tax code carves out numerous employment-related exemptions – from severance pay and bonuses to housing, schooling, and medical benefits – to support employees and public servants. Tax practitioners must carefully apply these in payroll computations to ensure only the taxable portion of remuneration is subjected to PAYE.

Investment income often enjoys special tax treatment in Zimbabwe. Dividends and many types of interest are either exempt from income tax or subject to final withholding taxes, reflecting a policy of encouraging investment and simplifying tax administration on passive income. Key points include:

Dividends from Zimbabwean Companies: Dividends paid by a company incorporated in Zimbabwe are exempt from income tax in the hands of the recipient. This means neither individuals nor companies pay normal income tax on such dividends. Instead, Zimbabwe imposes a withholding tax on dividends (often 10% for residents, 15% for non-residents, subject to treaties). The withholding tax is a final tax, after which the dividend is not included in gross income. Example: If a local individual shareholder receives a $1,000 dividend from Delta Corporation (a Zimbabwean company), the company will withhold (say) $100 tax and the remaining $900 is the investor’s net dividend. The $900 is not further taxed or reported as income by the investor, because the underlying dividend is exempt from gross income by statute. Note: This exemption does not apply to certain deemed dividends (for instance, distributions treated as dividends under anti-avoidance provisions like thin capitalization rules), which remain taxable.

Interest Income: The Third Schedule lists numerous interest-bearing instruments that are exempt from income tax, often to promote savings or government financing. Important examples of tax-free interest include:

Interest on any government-issued savings certificates or tax reserve certificates.

Interest on deposits in the People’s Own Savings Bank (POSB) – POSB is a state-owned savings bank, and interest earned by depositors is exempt to encourage low-income savings.

Interest on any loan or security issued by the State where the government specifically stipulates that the interest is tax-exempt. (This covers various government bonds or treasury bills designated as tax-free. For instance, certain Treasury Bills have been issued with a “tax free” status to attract investors.)

Interest on a State loan declared exempt by the Minister via statutory instrument. This gives flexibility for the Minister of Finance to exempt interest on strategic borrowings.

Interest on loans from specific international or development institutions: for example, interest on loans made by the European Investment Bank for Zimbabwe projects is exempt; and interest on loans to the Infrastructure Development Bank of Zimbabwe (IDBZ) by certain foreign shareholders is exempt. These incentives reduce the cost of capital for development financing.

Interest on certain special financial instruments: Class “C” building society shares (a form of permanent share in building societies) have exempt dividends/interest, as do some “agricultural bonds” issued to fund farming (specific bonds in 2000 for land resettlement were listed). Additionally, bonds like the National Fuel Company bonds issued via RBZ are exempt.

“Diaspora Bonds” – bonds marketed to Zimbabweans in the diaspora (e.g. a bond by CBZ Bank) – are exempt from tax on the interest to encourage uptake. Likewise, Agricultural Marketing Authority (AMA) bills issued after November 2011 carry tax-exempt interest.

In recent years, interest on deposits held by individuals over 55 years of age has an exemption threshold. If a taxpayer aged 55+ earns interest on any bank deposit or similar instrument, the first USD 3,000 of such interest per year is exempt. This relief for seniors applies to interest from banks, discounting instruments like banker’s acceptances, etc., and is meant to support retirees living off savings. (The $3,000 threshold is for total interest in a year and is periodically adjusted; for 2025 it remains $3,000 in USD terms.) Any interest above that threshold would be taxed (typically via 15% resident withholding tax).

Long-term Deposits: To incentivize longer-term savings, interest on any deposit of more than 12 months tenure is exempt from income tax. This encourages people to invest in fixed-term savings instruments rather than short-term deposits. Similarly, interest on certain prescribed low-cost housing savings instruments (as defined by the Minister’s regulations) is exempt as part of housing policy incentives.

Final Withholding on Interest: Apart from specific exemptions, Zimbabwe operates a system where most bank deposit interest is subject to a final withholding tax (Residents’ Tax on Interest) at a flat rate (currently 15%). The Third Schedule confirms that any interest which has had the residents’ tax on interest withheld is exempt from further tax. In practice, this means an individual who earns interest from a local bank will simply have 15% tax withheld by the bank and does not declare the interest on their tax return – the interest is excluded from gross income by virtue of that withholding. This simplifies tax compliance for interest earners.

Non-Resident Lenders: To attract foreign capital, certain interest paid to non-residents is exempt. Specifically, interest received by a person who is not ordinarily resident in Zimbabwe and not doing business here is exempt if it is interest on: loans used for mining operations in Zimbabwe, loans to the State or state-owned companies, loans to local authorities, or loans to statutory corporations. For example, if a foreign investor lends money to a Zimbabwean city council or to a miner for gold exploration, the interest that investor earns can be free from Zimbabwean tax. This exemption is conditional – it will not apply if the non-resident’s home country would not tax the interest because Zimbabwe didn’t (to prevent double non-taxation). These provisions ensure Zimbabwean borrowers can access international loans at lower cost (no withholding tax overhead) especially for key sectors.

Real Estate Investment Trusts (REITs): A recent policy measure (effective 2021) is the exemption of qualifying REITs from corporate income tax. A “qualifying real estate investment trust” that meets specific criteria (registration under the Collective Investment Schemes Act, investing mainly in real estate projects, distributing at least 80% of income to investors, having broad ownership, etc.) is exempt from income tax on its rental and property income. This essentially gives REITs a pass-through status (only the investors are taxed on the dividends). The aim is to spur real estate development by eliminating the corporate tax layer, provided the REIT distributes most of its earnings. (Investors in a REIT receive dividends which, if the REIT is Zimbabwe-incorporated, are exempt in their hands as explained above, though subject to the dividend withholding tax.)

Other Investment-Related Exemptions: There are a few other notable exemptions:

Export Incentives: Any export promotion grant or trade development subsidy paid by the State to an exporter is exempt from tax. Similarly, the RBZ export incentive credits (bonuses on forex receipts) that were given to exporters and remittance receivers in recent years are exempt. (This refers to the Export and Foreign Remittance Incentive Scheme introduced around 2016, where exporters got a bonus in local currency for bringing in forex – those bonus amounts are tax-free.)

Industrial Park/SEZ Developers: Income of an industrial park developer or a company in a Special Economic Zone can be exempt for an initial period. The Third Schedule exempts receipts of an industrial park developer from the operations of the park for the first year of establishment and the next four years. Similarly, separate legislation provides tax holidays for approved investors in Special Economic Zones (e.g. a 5-year tax holiday for qualifying new investments in certain zones). These are targeted incentives rather than permanent exemptions.

Sale of Certain Rights/Certificates: If an exporter sells or transfers a duty rebate certificate (granted under an export incentive scheme) to another party, the amount received is exempt. This was to facilitate a secondary market for duty-free certificates without tax friction. Also, amounts derived from approved employee share ownership trusts (as mentioned earlier) on sale of shares back to the trust are exempt.

In sum, Zimbabwe’s tax law exempts most domestic investment returns (like dividends and many interest sources) from normal taxation. For taxpayers, it’s important to identify if a particular interest or dividend falls under an exempt category. If it does, it is excluded from gross income and not subject to the 25.75% tax, though it might be subject to withholding tax at source. These exemptions reflect an underlying “participation exemption” approach: profits are often taxed at the company level, and dividends to shareholders are not taxed again in full; and interest is either taxed via a final withholding or exempt if it meets certain public-interest criteria.

The agriculture and mining industries are vital to Zimbabwe’s economy, and the tax framework provides certain sector-specific exemptions to support them. While farming and mining profits are generally taxable like any business, the law carves out a few exempt income items unique to these sectors:

Not-for-Profit Farming & Mining Entities: As noted under statutory exemptions, any agricultural, mining or commercial society/institution operated for the benefit of its members without pecuniary profit** is exempt from tax. This typically covers farming unions, commodity associations, or mining research institutes that are mutual or non-profit in nature. For example, a farmers’ association that collects member subscriptions to provide research and training (with no profits distributed) would not be taxed on those subscriptions or other income. This encourages collective efforts in farming and mining communities.

Small-Scale Miner Financing: To encourage investment in the mining sector, interest earned on certain loans to miners is exempt as mentioned earlier. Specifically, if a loan is made to a small-scale gold miner for the purposes of mining or exploration, the interest on that loan is exempt from tax for the lender. A “small-scale gold miner” is defined (generally by reference to size of operations) – essentially targeting artisanal or micro miners. This provision helps such miners access funding, since the lender’s returns (interest) won’t be eroded by tax. It’s an incentive for banks or investors to lend to mining projects that might otherwise be deemed high-risk.

Special Mining Lease Operations: Large mining projects operating under Special Mining Leases (usually big exporters in platinum, gold, etc.) may receive bespoke tax exemptions. Under Section 36 of the Income Tax Act, the government can exempt holders of special mining leases from income tax or other taxes via statutory instrument. In practice, companies with special mining leases often negotiate fiscal stability clauses – for example, platinum mines have in the past been granted lower tax rates or exemption from certain taxes as part of investment agreements. These are ad hoc rather than blanket exemptions, but it’s a notable facet of mining taxation in Zimbabwe. (Such arrangements are publicly known and sometimes controversial for giving tax breaks to mining firms.)

Mining Development Funds: Certain government-established funds related to mining are exempt. The receipts of the Mining Industry Loan Fund or similar might fall under statutory exemptions if not profit-oriented (though not explicitly listed in Third Schedule, there is provision for the Minister to exempt statutory corporations/funds). One clear example in recent law is the Agricultural Development Fund (for compensating former farm owners) which is exempt – by analogy, any mining community development fund set up by law could be exempt if so specified.

Farming Loans and Bonds: Interest on specific agricultural financing instruments is exempt. We saw that interest on certain “Agricultural bonds” issued by the Agricultural Finance Corporation or commercial bank consortiums (for land resettlement programs) is tax-free. Also, loans to small farmers might indirectly benefit from exempt interest if structured through those instruments. While this is an interest exemption (covered above), it is indeed sector-targeted (agriculture). Additionally, with effect from late 2011, interest on Agricultural Marketing Authority bills (which fund buying of grain, etc.) is exempt.

Income from Communal Land Products: The law provides a very specific exemption in the Third Schedule: income from the sale of traditional beer is exempt to the extent it is used for the mandated community purposes under the Traditional Beer Act. This is a historical curiosity aimed at rural brewing schemes – effectively, if a licensed person brews traditional beer and, as required by law, uses the proceeds for community benefit, that income isn’t taxed. While not mainstream commercial farming, it touches on communal farming communities.

It’s important to note that, beyond these explicit exemptions, most farming and mining income is taxable, but these sectors are supported through other tax measures – chiefly special deductions and allowances rather than outright exemptions. For instance, farmers get investment deductions (Seventh Schedule) for expenditure on farm improvements and machinery, and miners get capital redemption allowances (Fifth Schedule) and royalty credits. Those reduce taxable income but are not “exempt income” per se. Also, certain presumptive taxes apply in lieu of income tax for small operators (e.g. small-scale miners can pay a presumptive tax on gold deliveries). But as far as gross income exemptions go, the list above captures the main items.

In summary, sector-specific exemptions for farming and mining are relatively limited – mostly focusing on non-profit sector organizations and facilitating financing (through interest exemptions). The heavy lifting for tax relief in these industries is done by preferential tax rates or capital allowances rather than exclusions from gross income.

Non-Governmental Organizations (NGOs), charitable trusts, religious institutions, and certain public bodies enjoy favorable tax-exempt status in Zimbabwe, provided they meet the stipulated criteria. Many of these have been touched on earlier, but we consolidate them here:

Charitable and Religious Organizations: As noted, any ecclesiastical, charitable or educational institution of a public character is exempt from income tax on its core receipts. This typically covers churches, registered charities, missions, schools and hospitals run by not-for-profit entities. For these entities, donations, offerings, tithes, and grants are not taxed. However, if such an institution engages in trade or investment, those receipts would normally be taxable – unless they are conducted through a structure that the law permits. The Act allows the institution to establish a wholly-owned company (non-profit company under a special license) to carry out trading or investment, and if the Minister responsible for the Companies Act issues the requisite license, the income of that company is also exempt. For example, a church might own a bookstore or a farm; ordinarily business income from those would be taxable, but if structured properly under this provision, the profits can be tax-free so long as they are used for the church’s objectives. This ensures charities can sustain themselves without tax leakage, while preventing abuse by separating commercial activities under regulatory oversight.

Private Voluntary Organizations (PVOs): Most NGOs in Zimbabwe are registered as PVOs under the PVO Act. These would generally fall under the definition of charitable institutions of a public character, as they operate for public benefit (health, education, relief, etc.) with no private profit motive. Therefore, registered PVOs’ receipts (donor funding, grants) are exempt from tax. Many NGOs also get specific written tax exemptions or tax clearances from ZIMRA confirming this status. It’s important for NGOs to restrict any unrelated business activities or properly segregate them to maintain tax exemption on the main funds.

Educational Institutions: Public schools, universities, and approved educational trusts are not taxed on tuition fees or donations. For example, the receipts of a trust running a rural school would be exempt. If a school runs a tuckshop or boarding house, those could be considered trading income; often these are overlooked for tax or treated as integral to the institution’s function, but strictly speaking if substantial, the institution might need the licensed company structure to shelter it. In practice, most educational institutions (especially government or mission schools) operate fully tax-exempt.

Hospitals and Clinics (Non-profit): Similarly, mission hospitals and not-for-profit clinics’ income (patient fees, donor funds) are exempt. In fact, there’s a specific provision exempting the value of any housing or transport allowance provided to staff of a mission hospital or rural health clinic – this helps such institutions attract staff by providing tax-free in-kind benefits like accommodation.

Public Bodies and Local Authorities: Government departments do not pay income tax (the government isn’t a taxable “person” under the Act for its ordinary functions). In addition, local authorities (municipalities) are explicitly exempt on all income. This means city councils, town boards, rural district councils, etc., do not get taxed on rates, service fees, or other income. Other public bodies exempt by name in the Third Schedule include the Reserve Bank of Zimbabwe (central bank), the former People’s Own Savings Bank, the Zambezi River Authority, and certain statutory funds. Moreover, the Minister can declare any statutory corporation to be tax-exempt (with or without conditions on which income is exempt). Over the years, various state-owned enterprises have benefited from such exemptions, especially if they were not-for-profit or engaged in developmental activities. A recent example, as mentioned, is the Mutapa Investment Fund (sovereign wealth fund) which from 2025 is treated as tax-exempt by statute.

Trade Unions and Employee Benefit Funds: Trade unions are specifically exempt from income tax on their receipts. This recognizes their non-profit role representing workers. Likewise, benefit funds (funds established to pay benefits like scholarships, welfare grants to members) are exempt, as are medical aid societies (which are essentially non-profit insurers for health). Pension funds we discussed earlier are tax-exempt on investment income; they are often trust entities serving employees, so their exemption ties in with the general principle that contributions and fund growth are untaxed, with only pension benefits potentially taxed when paid out (and even then, as we will see, many pension benefits are themselves exempt).

Religious Bodies and Traditional Leaders: In addition to churches’ general exemption, any allowances paid by the State to traditional chiefs or headmen are exempt (as noted in employment exemptions). Also, any grants from government to religious institutions (for example, a grant to a mission school or hospital) would not be taxable in the hands of the institution.

In practice, to qualify for these NGO/public body exemptions, an organization usually must be properly constituted and approved (e.g., registered as a PVO or enacted by law, etc.). The burden of proof is on the organization to show it falls within an exempt category if ever queried. Tax case law in Zimbabwe has reinforced that the “public character” of a trust or institution is key – its founding documents should restrict activities to charitable purposes and prohibit private gain. One should also note that having an exempt status does not excuse these entities from other taxes (for example, NGOs still pay VAT on goods/services and employees’ PAYE). But for income tax, these exemptions are comprehensive – they free NGOs and public bodies from corporate income tax obligations, allowing more resources to go toward their missions.

Zimbabwe’s income tax system is fundamentally source-based. This means that only income with a source in (or deemed in) Zimbabwe is subject to Zimbabwean tax, regardless of the taxpayer’s residency. In contrast, pure foreign-source income is generally not taxed in Zimbabwe (unless specific deeming rules apply). Key points to understand:

Residents vs Non-Residents: The residential status of a taxpayer does not by itself bring foreign income into the tax net. A Zimbabwean resident earning income wholly from activities outside Zimbabwe usually faces no Zimbabwean tax on that foreign income (but might be taxed in the source country). Conversely, a non-resident who earns Zimbabwe-source income can be taxed in Zimbabwe (typically via withholding at source). As one authoritative explanation states: “All receipts arising from a source within Zimbabwe are taxed, irrespective of the residential status of the taxpayer. Income arising from sources outside Zimbabwe is taxable only if its source is deemed by legislation to be within Zimbabwe.”. In other words, a local resident’s foreign investment income or salary from an overseas job is outside the scope of Zimbabwean tax law unless a specific provision deems that foreign income to have a local source or unless it is remitted in a way that triggers another tax (Zimbabwe currently does not have a general remittance tax on individuals).

Deemed Source Provisions: To prevent avoidance and ensure fairness, the Income Tax Act includes some deeming rules that tag certain foreign transactions as Zimbabwean source. For example, amounts received by a Zimbabwean company that are recoveries or recoupments of previously deducted expenses are deemed Zimbabwe-source even if the recovery is from abroad. More recently, income of foreign e-commerce or broadcasting companies derived from Zimbabwean customers is deemed to be from a local source (as seen in Section 12(6) and (7) of the Act) – this was to tax digital services consumed in Zimbabwe. But aside from such specific cases, there is no blanket taxation of worldwide income for residents. A practical implication: If a Zimbabwean resident has, say, a rental property in South Africa, the rent is sourced in South Africa and is not taxed by ZIMRA; the taxpayer would pay tax in South Africa and not include that rent in their Zimbabwean return. Similarly, interest earned offshore (e.g. in a foreign bank) is generally not taxable in Zimbabwe unless it falls under a deeming rule.

Agreements and Treaties: Zimbabwe has several Double Taxation Agreements (DTAs) with other countries. These treaties sometimes allocate taxing rights such that certain income of a resident might be taxed only in the other country and thus effectively exempt in Zimbabwe. For instance, a DTA may state that pensions or government service income are only taxable in the source country. Additionally, the Third Schedule provides that if the Government of Zimbabwe enters into an agreement with another government that entitles a person to an income-tax exemption, and Zimbabwe adopts it, then that person’s income is exempt. This covers technical assistance agreements or diplomatic accords – for example, salaries of expatriates paid by a foreign government under an aid project can be exempt in Zimbabwe under the terms of that agreement (this is mirrored in domestic law: Third Schedule paragraph 4(1a) exempts salary income if a person is entitled to tax exemption by an agreement between Zimbabwe and another country). Likewise, under the Privileges and Immunities Act, certain employees of international organizations (UN agencies, etc.) are exempt from local tax on their earnings.

Foreign Employment Income: Zimbabwe does not have a general “foreign employment income exemption” like some countries do (e.g. a time-apportionment exemption). If a resident individual works abroad and the income is for services rendered entirely outside Zimbabwe, that income is foreign-source and thus not taxable in Zimbabwe by the source principle. If part of the work is done in Zimbabwe, however, that portion could be viewed as local source. In the public sector, we saw that government employees on overseas duty get specific exemptions (allowances for duties outside Zimbabwe are exempt). For private sector employees, any taxation would depend on source – typically, days worked in Zimbabwe vs abroad. Many Zimbabwean professionals who have emigrated or work abroad find that their foreign salaries are only taxed in the foreign country, not by Zimbabwe. (They must, however, be careful about exchange control and formally changing residence if needed – but purely from an income tax view, foreign earnings are out-of-scope unless brought into Zimbabwe as part of a local business.)

Non-Residents’ Zimbabwe Income: Non-resident persons are taxed on Zimbabwe-source income usually through withholding taxes. For example, non-residents’ tax on dividends, interest, fees, and royalties are levied at specific rates when those payments are from Zimbabwean sources. Some incentives mentioned earlier eliminate or reduce those withholdings (e.g. in Special Economic Zones, non-residents’ tax on fees, royalties, and dividends can be waived to attract investment). If a non-resident provides services entirely from abroad and those services are not utilized in Zimbabwe, the payment might be considered foreign source and not subject to the local withholding – in fact, an incentive exists stating fees to non-residents for services not locally available are exempt from the 15% withholding tax. Double Taxation Agreements also can override domestic law to exempt certain incomes of non-residents (for instance, a DTA might say no tax on independent professional services under certain conditions, etc.). Generally, however, a non-resident earning any Zimbabwean-source income that is not explicitly exempt will face withholding (and cannot avoid it by claiming foreign residence, except via a DTA relief).

Foreign Investment Income in the Hands of Residents: Dividends from foreign companies and interest from foreign banks – since they are foreign-sourced – are typically not taxed by Zimbabwe. There is no controlled foreign company (CFC) regime for individuals (Zimbabwe does have some anti-avoidance for companies, but not an explicit CFC law). So, a resident who invests on an overseas stock exchange or bank will not include that foreign dividend or interest in Zimbabwean taxable income (however, they also won’t receive any local tax credits for foreign tax paid since it’s not taxed at all by Zimbabwe). One caveat: if a resident’s sole reason for earning certain income abroad was to evade tax, the authorities could seek to apply anti-avoidance principles – but generally, the law respects the source concept.

Relief for Double Tax and Credits: For types of income that are taxable in both Zimbabwe and another country (due to differing source rules or residency claims), Zimbabwe’s law allows a foreign tax credit up to the amount of Zimbabwean tax on that income. This is not so much an exemption as a credit mechanism to prevent double taxation. In practice, this is invoked for business income or employment income when a resident earns abroad but still is deemed taxable here (a rare case). More commonly, DTAs simply allocate taxing rights. Zimbabwe’s network of DTAs (with countries like South Africa, UK, China, Mauritius, etc.) provide for reduced withholding rates on cross-border dividends, interest, and royalties, and can protect certain incomes of expats.

In essence, foreign income exemptions in Zimbabwe are a by-product of the source-based system. If the income is truly foreign-source, it is automatically exempt from Zimbabwean tax by not being part of “gross income” as defined. Tax practitioners must therefore carefully determine the source of income. The definition of source follows court precedents (e.g. the Lever Bros case cited in Zimbabwean law, looking to the “originating cause” of the income). If the originating cause (the work done, the asset used, etc.) is outside Zimbabwe, then the income is foreign and generally excluded from tax here. This contrasts with a residence-based tax system and is an important feature of Zimbabwe’s tax framework for the 2025/26 year.

(Advanced note: The source-basis has been subject to some evolution – for instance, certain residents are taxed on some foreign passive income in limited cases, and currency reforms have affected definitions of local vs. foreign currency earnings. But as a rule, Zimbabwe mainly taxes domestic income. Always check if any new Finance Act provisions “deem” a particular foreign income as local – beyond those mentioned, none general have been introduced up to 2025.)

Zimbabwe provides generous exemptions for various pensions, social welfare payments, and compensation for injury or death, recognizing these as relief measures rather than ordinary income. Key exemptions in this category include:

State Pensions and War Pensions: All standard government pensions and social welfare pensions are exempt. For example, any pension or allowance paid under the Presidential Pension and Retirement Benefits Act (to former Presidents or their dependents) is exempt. War veterans’ pensions and war widow’s pensions are tax-free – the Act specifically exempts war disability pensions and war widows’ pensions, as well as gratuities paid to war veterans under the War Veterans Act schemes. Additionally, pensions paid under the Old Age Pensions Act (a social grant for the elderly) are exempt from income tax. In short, any government social security payout or military service pension is not taxable.

Compensation for Injury or Death: Any amount paid as compensation for personal injury, disease, or death is exempt, whether paid under an employment law or any other law. This means if someone receives a lump-sum for a workplace injury (e.g. from the Workers’ Compensation Fund or employer liability), or insurance payout for disability, that amount is not treated as income. Similarly, payments under the War Victims Compensation Act to those injured in the liberation war are exempt, and any payments to victims (or families) of specific disasters (like the Wankie coal mine disaster relief fund) are exempt. The rationale is clear: these receipts are to indemnify or support someone after loss or injury, and taxing them would defeat their purpose.

Private Insurance and Benefit Funds: Consistent with the above, if an individual receives a benefit due to injury, sickness or death from a trade union, benevolent fund, medical aid society, or insurance policy, that benefit is exempt from tax. For example, a payout from a medical aid society for a medical procedure, or a life insurance death benefit paid to a family, is not taxable income to the recipient. This ensures that such benefits – often effectively self-insurance or mutual aid – are fully available to cover the needs that arose from the insured event.

Retirement and Pension Commutions: In addition to routine monthly pensions, special tax treatment is given to pension withdrawals and commutations. If a person retires or withdraws from a pension before age 55, a portion of any lump sum they receive is exempt. Specifically, for a person under 55, up to USD 1,500 or one-third (whichever is greater) of the lump sum commuted pension is exempt, up to a maximum lump sum of $10,000 (with a proportional cap of $1,500 on any larger amount). If the person is aged 55 or above, by contrast, any pension paid from a pension fund or the Consolidated Revenue Fund is entirely exempt. This is a significant provision: it means once an individual reaches 55 and begins to draw a pension (whether a private occupational pension or a government pension), those pension receipts are not taxed at all in Zimbabwe. The intent is to provide tax relief to retirees. (It’s worth noting that this effectively encourages preservation of pension funds until at least age 55; those who cash out earlier get a smaller exemption.) Additionally, there is a rule that even for those under 55, if a pension lump sum is “deemed” an annuity and paid out, the first $60,000 per year of such annuity is exempt. In practical terms, most standard pension commutations and annuities end up largely or wholly tax-free under these rules, especially after indexing adjustments by Finance Acts.

Gratuities to Uniformed Forces: We covered earlier that long-service awards (medals) for the military and police come with exempt gratuities, and that includes specific ones like the Fire Brigade Long Service Medal or Police Medal for long service. Furthermore, any gratuity paid to a member of the Police Force upon retirement after long service is exempt. The same goes for retrenchment gratuities (discussed in Employment exemptions) and for judges’ terminal gratuities – all designed to recognize service without a tax penalty.

In effect, the tax law excludes virtually all forms of state-provided social security and mandated compensation from taxation. The only related items that might be taxable are those not covered by specific exemption – for example, a retirement gratuity from a private employer that is not a pension fund withdrawal (however, that would likely be treated as a severance and fall under the retrenchment exemption rules).

From a planning perspective, individuals should be aware of these exemptions to avoid unnecessary withholding or to claim refunds. For instance, if a 56-year-old is drawing a private pension, that pension should be paid out without PAYE, since it’s exempt – if PAYE was deducted in error, the individual can reclaim it. Likewise, taxpayers should document the nature of any compensation payment (e.g. court judgment for damages, insurance payout) to show it fits an exempt category. The law places the onus on the taxpayer to prove an amount is exempt, so keeping award letters or contracts that cite the legal authority (like War Victims Compensation Act, etc.) will support the exemption claim.

Conclusion: Determining taxable income involves subtracting all exempt income from gross receipts. Zimbabwe’s framework of exemptions – spanning statutory bodies, NGOs, specific employment benefits, investment returns, sector incentives, and social security payments – reflects policy objectives (social welfare, investment promotion, public benefit) built into the tax law. As of the 2025/2026 tax year, these provisions are up-to-date with the latest Finance Act adjustments (such as revised bonus and retrenchment thresholds, new entities like the Mutapa Fund exemption, and continuing COVID-related reliefs).

For an advanced tax learner, it is crucial to not only memorize the list of exemptions but also understand their scope and legislative intent. Always refer to the Income Tax Act’s Third Schedule for the authoritative list and check Finance Act amendments for any updates. By correctly applying these exemptions, one ensures that only the properly taxable income is subjected to tax, while incomes deemed by Parliament to be outside the tax base (for reasons of public policy or practicality) are rightfully excluded. This knowledge is essential for effective tax planning and compliance in Zimbabwe’s tax regime.

Finance Act 13 of 2023 (No. 2 of 2023) – amendments to bonus and retrenchment exemption thresholds.

ZIMRA – Public Notice on Finance Act 2023 Highlights (Jan 2024), confirming bonus exemption of USD $400 and retrenchment exemption limits.

ZIMRA Act and Regulations – Privileges & Immunities Act [Chapter 3:03] and various statutory instruments granting exemptions to international organizations and projects.

Africa Portal – Tax Exemptions in Mining – commentary on the use of tax exemptions for mining companies.

[PDF] Should Zimbabweans worry about tax exemptions? - Africa Portal

TBB 2023 - Zimbabwe

Introduction: Under Zimbabwe’s Income Tax Act (Chapter 23:06), certain types of income are explicitly exempt from income tax. Section 14 of the Act provides that all amounts listed in the Third Schedule are exempt from income tax. In simple terms, these exemptions exclude specific receipts or accruals from a taxpayer’s gross income when calculating taxable income. This lecture note will comprehensively explain the various categories of exempt income in Zimbabwe (updated to 10 February 2025), drawing from Section 14 and the Third Schedule of the Income Tax Act. Each exemption is discussed with clear examples and context, focusing only on income tax exemptions (not VAT, CGT or PAYE, except where linked). Relevant insights from Sabelo Nare’s Tax Law & Practice and case law are integrated to enhance understanding, while avoiding outdated provisions. By the end, readers should have a solid grasp of which incomes are tax-free in Zimbabwe and the policy reasons behind these exemptions.

1. Income of Government and Local Authorities: The most straightforward exemptions involve government entities. Receipts and accruals of local authorities (municipalities, rural district councils, etc.) are wholly exempt from income tax. This means any income earned by a city council or rural council (e.g. fees, charges, or investments) is not subject to income tax. Similarly, the income of the Government itself is not taxable – for example, revenue collected by government ministries or departments forms part of public funds and is not viewed as income of a taxable person. This reflects the principle that one arm of the State does not tax another.
2. Statutory Corporations and Parastatals: Many parastatal organizations (statutory bodies and government-owned companies) enjoy tax-exempt status to support their public functions. The Third Schedule paragraph 1 specifically lists entities whose receipts are exempt, including the Reserve Bank of Zimbabwe (central bank) and certain statutory authorities. For example, the income of the Reserve Bank – interest earnings, fees, etc. – is not taxed, recognizing its role in public finance. Other examples are the Zambezi River Authority (which manages water resources jointly with Zambia) and the Environment Management Board, both named as exempt entities. These bodies carry out statutory mandates and exempting their income avoids diverting public resources back to the fiscus via taxes.
3. Foreign Government Agencies and International Organizations: Zimbabwe also honors exemptions for certain foreign and international bodies, usually under reciprocity or host agreements. Paragraph 3 of the Third Schedule exempts income of any agency of a foreign government approved by the Minister. For instance, foreign aid agencies operating in Zimbabwe might be exempt by statutory instrument (e.g. an old notice exempted “United Nations Organization and Agencies” in 1999). International organizations granted privileges and immunities under Zimbabwean law (Privileges and Immunities Act [Chapter 3:03]) are also exempt. Additionally, all organizations listed in the International Financial Organizations Act (like the World Bank or IMF) are exempt, as are regional development banks such as the African Development Bank and African Development Fund.

Agreements between Zimbabwe and other governments can confer tax exemption as well. If Zimbabwe signs a bilateral agreement (for example, a technical aid agreement) that provides certain income is tax-free, and that agreement is approved under the International Treaties Act, then any person entitled to exemption under it is covered by Third Schedule paragraph 3(g). This is a catch-all provision ensuring Zimbabwe honors international agreements on tax treatment. A recent example is an exemption for income related to the Deka Pumping Station project funded by foreign partners, enacted via statutory instrument in 2023. In short, many diplomatic, aid, or development project incomes are exempt from Zimbabwean tax, reflecting international practice.

Case Law: It is worth noting that while government and parastatal bodies are exempt, employees of those entities are not automatically exempt. Section 14(2) explicitly states that the salaries and wages of people employed by an exempt entity (like a local authority or statutory corporation) are still taxable in the employees’ hands. The tax exemption covers the entity’s own revenues, not the pay to its staff. For example, a city council’s income is tax-free, but a council employee’s salary is ordinary taxable employment income. This was confirmed in Zimbabwe Revenue Authority v FC Platinum (2022) where the Supreme Court noted that an organization’s exemption can be forfeited if it changes its form – in that case, a football club initially qualifying as a tax-exempt “social club” lost the exemption after registering as a company limited by guarantee (companies, even non-profits, are treated differently under the Act). The principle is that form and operational conditions matter for an entity’s exemption.

Apart from governmental bodies, Zimbabwe law exempts a range of non-profit, charitable, educational, and mutual organizations. The policy goal is to support these entities that operate for public benefit or social welfare rather than private profit.

1. Agricultural, Mining, and Commercial Societies (Non-Profit): The receipts of any agricultural, mining or commercial institution or society that is not operated for the private pecuniary profit of its members are exempt. This covers traditional “chambers of commerce” or farmers’ unions and the like – organizations formed to advance a sector’s interests without distributing profits. For example, a grain farmers’ association or a small miners’ cooperative (if run as a true non-profit society) would not be taxed on membership fees or other income. This exemption encourages industry-level collaboration and research by relieving member-funded bodies from tax. In ZIMRA v FC Platinum (above), the football club had argued it was a non-profit sporting association; the court scrutinized its structure and funding, signaling that clubs/societies must remain non-profit in both purpose and legal form to qualify.
2. Clubs, Institutes, and Associations – Social Welfare or Recreation: Similarly, clubs, societies or associations organized solely for social welfare, civic improvement, pleasure or recreation, or the advancement of any profession or trade, qualify for exemption so long as they do not distribute profits to members. This would include charitable organizations, social clubs, professional institutes, sports clubs, etc., provided any surplus they make is plowed back into the organization’s objectives and not shared by members. For instance, a charitable club running a fundraising fair or a sporting club with canteen revenue would not be taxed on those earnings, as long as the money stays within the club’s welfare or recreational purpose. A caveat from case law is that incorporation can jeopardize this status: If such an association registers as a company limited by guarantee, it might be viewed as a different vehicle. An editor’s note in the Act, citing ZIMRA v FC Platinum, warns that once a non-profit club became a company (even without shareholders), it lost the automatic exemption. Thus, non-profit entities must be careful to retain their character (e.g. remain trusts or unincorporated associations) to remain exempt.
3. Charitable and Educational Institutions: Ecclesiastical, charitable, or educational institutions of a public character are exempt on their receipts. This covers churches, public charities, and schools/colleges or universities (especially private ones) that operate as public benefit organizations. The law, however, distinguishes between donations and trading income of such institutions. Specifically, for a church or charity, donations, tithes, offerings and similar contributions from benefactors are exempt, and even income from investments or trade is exempt if it is carried out by a wholly-owned company of that institution licensed under the Companies and Other Business Entities Act. In other words, a charity can run a commercial business through a company it owns (with a ministerial license under Section 76 of the Companies Act) and that company’s profits will also be exempt, provided they ultimately serve the charity’s purposes. This structure prevents abuse by requiring ministerial approval. Notably, if a charity operates a regular business without such a license, that business income would be taxable despite the institution’s general exemption. The aim is to encourage charities to seek approval and transparency for any large-scale commercial ventures.
4. Employees’ Savings Schemes and Friendly Societies: The law exempts certain mutual benefit organizations. Employee savings schemes or funds approved by the Commissioner are exempt. These are typically workplace savings pools or thrift funds for employees. Likewise, friendly societies and medical aid societies (which are member-owned insurance or health funds) have their income exempted. For example, a medical aid society (non-profit health insurer) does not pay income tax on members’ contributions or investment income, allowing it to keep premiums low and pay more in claims. This reflects their quasi-charitable role in providing social support (healthcare, mutual aid).
5. Public Funds and Pensions-Related Funds: Any fund established by the Treasury under the Public Finance Management Act is exempt. This means government-created funds for specific purposes (disaster funds, sovereign wealth funds, etc.) are not taxed on their earnings. Additionally, pension funds themselves are exempt from tax on their investment income until a date the Minister may specify. In practice, pension contributions and fund earnings are tax-exempt to encourage saving for retirement (Zimbabwe has long maintained this exemption, and no termination date has been set by the Minister, so pension funds remain exempt vehicles).
6. Trade Unions and Trusts of a Public Character: All trade unions’ receipts are exempt, recognizing that unions exist for members’ collective benefit and often are non-profit. Similarly, trusts of a public character (public charitable trusts) are exempt. A “trust of a public character” generally means a trust established for charitable, educational, religious, or similar public purposes. The Supreme Court in The Endeavour Foundation & UDC Ltd v COT (1995) dealt with such an entity and helped define what qualifies. In that case, a trust for disabled persons (Endeavour Foundation) was deemed of a public character, so its income was exempt. The involvement of a company (UDC Ltd) as a donor did not taint the trust’s public character. The principle is that if the beneficial activities are for the public (not private beneficiaries), the trust’s income is tax-free.
7. Financial Stabilization Funds: Zimbabwe’s Third Schedule also exempts certain funds meant to protect financial consumers and investors. For instance, the Deposit Protection Fund (now the Deposit Protection Corporation Fund under Chapter 24:29) was listed as exempt, ensuring that funds collected from banks to insure depositors are not eroded by tax. Likewise, the Investor Protection Fund for securities markets (created by securities regulations) is exempt. These funds are essentially insurance pools — exempting them maximizes the resources available for their protective purpose. Another example is the Insurance and Pensions Housing Company, established to finance home loans for pensioners and insured persons with state guarantee; its income was exempted from 2014. And in 2021, the law exempted the Agricultural Development Fund, a fund to compensate dispossessed farmers under the Global Compensation Deed. These targeted exemptions illustrate how tax law supports policy initiatives (financial stability, social housing, post-land-reform compensation) by not taxing the vehicles created to address them.

In summary, a broad array of non-profit organizations, mutual societies, and public-benefit funds are free from income tax in Zimbabwe. This encourages their activities and acknowledges that they do not operate for profit distribution. Students should note, however, that if any of these entities engage in unrelated for-profit business, those activities might fall outside the exemption unless structured properly (e.g. via a licensed subsidiary). The exemptions are intended for genuine non-profit endeavors.

(Important: The exemption for these entities does not extend to any salaries or remuneration paid by them to staff or members – those remain taxable to the recipients. Only the entity’s own income (donations, fees, investment returns, etc.) is exempt.)

While most employment income is taxable, Zimbabwean law carves out numerous exceptions for specific salaries, allowances, and other employment-related receipts. These typically concern high offices of State, diplomats, or special circumstances like retrenchments and bonuses. We will break down the key employment income exemptions found primarily in paragraph 4 of the Third Schedule.

1. Presidential and Vice-Presidential Remuneration: The President of Zimbabwe’s official salary and emoluments are exempt from income tax. This is a common provision in many countries, reflecting both practical and ceremonial considerations. It ensures the Head of State’s remuneration (paid from the Consolidated Revenue Fund) is not clawed back by taxation. In addition, any salary paid to a member of the President’s staff that is paid directly by the President is exempt. This could cover, for example, special advisors or personal staff whose salaries come out of the President’s budget.
2. Privileges and Immunities – Diplomats: Any person entitled to exemption from tax under the Privileges and Immunities Act [Chapter 3:03] also has their salary exempt. This covers foreign diplomats in Zimbabwe and certain officials of international organizations. For example, a United Nations official or foreign embassy staff who have diplomatic immunity will not pay local income tax on their earnings – the Act’s Third Schedule confirms this tax immunity. (This aligns with international convention that host countries do not tax diplomats’ salaries). The Third Schedule used to include a subparagraph exempting specified expatriate staff of certain companies under investment agreements, and indeed there was a notice for Konoike Construction Company in 2019 exempting its expatriate staff. However, a recent amendment repealed the generic provision that had allowed such exemptions. Now, most foreigners’ salaries are taxed normally unless a diplomatic/aid treaty applies. In practice, Zimbabwe sometimes enters specific agreements for large projects where foreign staff salaries are tax-exempt; those are covered by the earlier-mentioned treaty exemption clause (para 3(g)) or special statutory instruments.
3. Senior Government Officials’ Allowances: A range of allowances paid to top government officials are exempt if specified by the President via statutory instrument. For Members of Parliament, Ministers, Provincial Governors (a role in the former constitution), the Speaker and Deputy Speaker of Parliament, the Leader of the Opposition, and Chief Whips – any allowance that is designated in a Statutory Instrument as exempt will be tax-free. Typically, these are expense allowances or sitting allowances given to legislators and ministers. For instance, the President could issue a Statutory Instrument declaring that a certain portion of MPs’ sitting allowances or committee allowances are not taxable. Indeed, in 1980 an SI was issued exempting certain parliamentary allowances. Similarly, the cash value of government-provided housing, quarters, furniture, or vehicles for Ministers or the Speaker can be exempt if the President so specifies by notice. This means that if a Minister is given an official residence or car, the benefit of that does not count as taxable fringe benefit if an exemption notice is in place. (An editor’s note observes a minor wording issue in the law about this provision but it does not affect the substance).
4. Gratuities for High Offices: Certain one-time payments to officials are exempt. For example, a gratuity paid to a judge of the Supreme Court or High Court upon retirement is tax-exempt. Judges often receive a lump-sum gratuity as part of their service conditions, and this ensures they are not taxed on that amount (similar logic to the President’s salary being exempt). This provision was introduced in the late 1990s when judges’ conditions were reformed.
5. Traditional Leader Allowances: Allowances payable to Chiefs or Headmen in their official capacity are exempt. Chiefs and headmen (traditional leaders in rural areas) receive stipends from the government. The exemption means, for instance, a village head’s monthly allowance or a chief’s allowance is not taxed, allowing these community leaders to receive the full benefit of what are usually modest payments.
6. Military and Police Service Allowances: There are specific exemptions for certain military or police service-related payments:
7. Allowances for State Employees Working Outside Zimbabwe: If a government employee is sent on duty outside the country, any allowance paid by the State to cover their cost of living or expenses abroad is exempt. The law specifies that an allowance for duties outside Zimbabwe, or that portion of an allowance that covers the excess cost of living abroad over normal local living costs, is tax-free. For example, if a civil servant is posted to a foreign mission or attending long-term training abroad, they might receive a foreign service allowance or per diem – that part of their income is not taxed. This ensures the employee isn’t out-of-pocket for necessary expenses and aligns with international practice for diplomatic postings.
8. Scholarship and Student Support Income: A scholarship, bursary, or any educational grant to a full-time student is exempt. This includes payments of tuition, school/university fees, or a stipend for educational purposes. However, the exemption does not cover any part of the payment that is truly remuneration for services (past, present, or future) by the student or their relative. In other words, if an employer “sponsors” an employee’s child with a bursary in return for a work commitment, that might be seen as part of employment compensation. Pure scholarships – e.g. a university scholarship granted on merit or need – are fully tax-free for the student. This encourages education by not taxing educational assistance.
9. Bonus Payments to Employees: To provide relief to workers, especially around the end of year, Zimbabwe exempts a portion of annual bonuses. Any bonus or performance-related reward paid to an employee or agent is exempt up to US$700 (or the equivalent in local currency at the time) per year. If multiple bonuses are paid in a year, their total exemption is still capped at $700. This figure was updated by the Finance Act, 2024. For example, if an employee earns a $500 Christmas bonus, it’s fully exempt; if they earn a $1,000 bonus, $700 is exempt and $300 is taxable. This provision has been adjusted over time for inflation and currency changes – in early 2010s it was $500 then $1,000, but as of 2025 the limit is back at $700. The idea is to allow a 13th check or incentive bonus without full tax, benefitting employees and stimulating spending.
10. Severance and Retrenchment Packages: When employment is terminated, often a severance or retrenchment package is paid. Zimbabwe provides a generous exemption to soften the tax impact of job loss. At least one-third of any severance or gratuity payment (or US$3,200, whichever is greater) is exempt from tax, subject to a maximum exempt amount of US$15,100. In practice, this means if a retrenched employee gets, say, $9,000, one-third (which is $3,000) would be exempt, but since $3,200 is greater, they’d exempt $3,200. If someone gets $60,000, one-third is $20,000; however, the law caps the exemption to the first $15,100 of the package (amounts above that are taxable). These thresholds were amended by the Finance Act 13 of 2023 in line with currency changes. This exemption applies only for retrenchments, i.e. involuntary loss of employment due to downsizing, etc., not normal resignations. It excludes any payment in lieu of leave or pension payout. Essentially, it covers cash severance and “golden handshake” portions. The purpose is to cushion terminated employees by letting them keep a significant portion tax-free. This has been a feature since dollarization (with different limits).
11. Other Exempt Allowances: A few other miscellaneous allowances are worth noting:

A monthly personal allowance paid to rural district councillors or urban councillors is exempt. Councillors get a small personal stipend for their public service (separate from sitting fees), and this is tax-free up to a certain limit set in the Rural District Councils Act and Urban Councils Act.

Mission Hospital Staff allowances: To encourage skilled staff to work in rural areas, the law exempts the value of any housing or transport allowance (or free housing/quarters) provided to staff of a mission hospital or rural clinic. A “mission hospital” is defined as one run by a religious organization or a rural district council. For example, if a nurse at a remote mission hospital is given free accommodation and a transport stipend, those benefits are not taxed. This incentive, introduced in 2003, helps rural health institutions attract and retain workers by increasing the effective take-home value of their compensation.

COVID-19 Risk Allowances: A recent temporary exemption was for risk allowances paid to frontline public sector health personnel during the COVID-19 pandemic (for 12 months from 1 April 2020). During that period, doctors, nurses and other health workers fighting COVID-19 who received special risk pay did not have those amounts taxed. This was part of the government’s pandemic response to maximize the support to those workers.

Non-Executive Directors’ Fees: Although not an “allowance” in the employment sense (directors are not employees), it’s worth noting here: fees earned by a non-executive director are exempt from income tax to the extent that a withholding tax has been deducted from them under the Thirty-Third Schedule. In Zimbabwe, companies must withhold a final tax on fees paid to non-executive directors. The Third Schedule confirms that such fees are not then subject to normal income tax in the director’s hands. Essentially, the withholding tax (a flat rate) is the final tax, and the income is exempt from further taxation. This prevents double taxation and simplifies compliance for directors.

In sum, Zimbabwe’s income tax law exempts many forms of employment-related payments, especially those associated with public service, hardship, or social policy objectives. High office holders (President, judges, MPs) get exemptions for their official emoluments; employees in general benefit from relief on bonuses and retrenchments; and certain frontline or rural staff allowances are spared to incentivize those roles. Always remember that these exemptions are specific – if an item of income isn’t explicitly listed in the Third Schedule or a Gazette notice, it remains taxable.

As touched on above, education-related payments are given special tax treatment. To reiterate: scholarships, bursaries, and tuition payments for students are exempt from income tax. This means if a student receives a scholarship covering their university fees and a stipend, the student is not taxed on that support. The rationale is clear – such funds promote human capital development and are not “earned income” but rather support for education.

The only limitation is that this exemption does not cover remuneration disguised as a scholarship. The Third Schedule explicitly excludes “an amount accruing to the student by way of remuneration for services rendered or to be rendered by the student or a near relative of the student”. For example, if a company offers an employee’s child a “scholarship” but in return the employee must continue working for the company (or the student must work for the company after graduation), the payment might be viewed as compensation/benefit to the employee and not a true scholarship. Such an amount could then be taxable as part of the employee’s income (or the student’s income if they are effectively working). Genuine scholarships – with no strings attached besides academic performance – are fully tax-free.

Foreign Scholarships: Often students receive scholarships from foreign universities or international programs. Those amounts, if paid to the student in Zimbabwe or on their behalf, also fall under this exemption. There is no restriction that the scholarship be from a local source. Thus, a Zimbabwean student on a DAAD (German Academic Exchange) scholarship or a Chinese government scholarship doesn’t pay tax on those funds.

Educational Awards: Occasionally, awards or prizes (like a cash prize for the best student in a subject) are given. These one-off educational awards would also be considered scholarships or gratuities in respect of education and should be exempt as well, by the same reasoning.

In summary, the tax system does not hinder educational funding – students can use the full value of scholarships and bursaries for their studies. This is a straightforward but important exemption category encouraging the pursuit of education.

Individuals receiving pensions or compensation for injury/death are often in vulnerable positions (retirees, disabled persons, widows, etc.). Zimbabwe’s tax law provides extensive exemptions for these kinds of incomes, reflecting social policy to support the elderly and victims of mishap. We group these under pensions and compensation exemptions.

1. Presidential and Vice-Presidential Pensions: As noted earlier, under paragraph 5 of the Third Schedule, any pension or retirement allowance paid in terms of the Presidential Pension and Retirement Benefits Act [Chapter 2:05] is exempt from tax. This covers the pensions of former Presidents and Vice-Presidents (and their qualifying dependants). Also, any services or facilities provided to a former President under that Act (for example, use of an official vehicle, housing, office staff given to an ex-President) are not taxed as benefits. Essentially, the retirement package of a Head of State or Deputy is entirely tax-free, ensuring they receive the full benefit of what law grants them after office.
2. War Pensions and Veterans’ Benefits: Zimbabwe has a history of exempting pensions related to war service or impairment from war. Under paragraph 6, all war disability pensions and war widows’ pensions are exempt. If someone was disabled due to war (for example, a veteran of the liberation war receiving a monthly disability pension) or if someone is receiving a survivor’s pension as a widow of a war veteran, those are tax-free. Additionally, any pension paid under a scheme for war veterans (established by the War Veterans Act) is exempt, and the one-time gratuity that was paid to war veterans in terms of the War Veterans (Benefits Scheme) Regulations, 1997 was also exempt. (War veterans of the 1970s liberation war received a lump-sum gratuity and monthly pension in the late 1990s; these were specifically tax-exempt). Even though the War Veterans Act has been replaced by the Veterans of the Liberation Struggle Act in 2020, the principle remains – those benefits are not taxed.
3. Social Pensions (Old Age Pension): The Third Schedule exempts any pension payable under the Old Age Pensions Act. This refers to the social welfare pension given by government to destitute elderly persons. Although the Old Age Pensions Act (from 1974) provided minimal support and has effectively been superseded by other social welfare schemes, the exemption ensures that if the State gives a small pension to an indigent elderly citizen, it’s not reduced further by tax. (These pensions are usually below the tax threshold anyway, but the law explicitly protects them).
4. Injury, Disease, or Death Compensation (Employment): Any award, benefit or compensation paid under any law for injury, disease, disablement, or death suffered in employment is exempt. This covers payouts from worker’s compensation insurance. For example, if a miner is injured and gets a lump sum or monthly payment from the Workers’ Compensation Fund, that is not taxed. The idea is that compensation for loss of capacity or medical injury is not income or “gain” – it’s restitution – and taxing it would undermine the support to the victim. So whether it’s a statutory workers’ compensation scheme or an employer’s liability payout under law, it’s tax-free to the recipient.
5. Pensions for the Elderly: Importantly, any pension paid from a pension fund or from the Consolidated Revenue Fund to a person who is 55 years of age or older is exempt from income tax. This is a major exemption: it means once an individual reaches 55, their regular pension receipts (from a private employment pension or a state pension) are entirely tax-free. Introduced in 2005, this provision acknowledges that retirees have a fixed income and deserve full use of their pensions. For example, if a 60-year-old retiree receives a monthly pension of $200, they pay no tax on it (regardless of the amount).
6. Retrenchment Package Pensions (Under 55): In the context of retrenchment (job loss), sometimes the payout includes or is structured as a pension or annuity (for example, an employer may buy an annuity for the retrenched employee). Paragraph 6(h1) addresses this: If an employee under age 55 is retrenched and receives an annuity or commuted pension as part of the package, the law exempts one-third of that amount or US$1,500 (whichever is greater), up to a maximum package of US$10,000. In effect, this is analogous to the severance exemption but for the pension component of a retrenchment. The current figures (after 2023 updates) allow at least $1,500 tax-free from such an annuity, and only apply the exemption to a package not exceeding $10,000. Additionally, only the first $1,500 per year of assessment of any such deemed pension is exempt if it’s paid over time. This is a bit complex, but simply: if a younger worker is retrenched and gets an immediate or deferred pension due to that, there is a tax break on part of it, though less generous than the over-55 full exemption. The policy likely aims to equalize the treatment somewhat for those who unexpectedly got a pension early due to retrenchment.
7. War Victims and Other Special Compensation: We already covered war victims compensation and Wankie Disaster Fund above (as they are in para 6). For completeness: those are fully exempt as noted. The reasoning is compassionate in nature.
8. Benefits from Benefit Funds, Unions, Insurance for Injury/Death: Paragraph 7 of the Third Schedule provides a sweeping exemption: any amount paid as a benefit for the injury, sickness or death of a person to that person or their dependants/estate is exempt if it is paid by (a) a trade union, (b) a benefit fund, (c) under an insurance policy for accident or sickness, or (d) by a medical aid society. This means, for example, if a trade union has a welfare fund that gives a funeral grant to a deceased member’s family, that grant is not taxed. Or if a person has an accident insurance policy and receives a payout due to injury, that payout is tax-free. Even a medical aid society reimbursing medical expenses is essentially giving a benefit due to sickness – the reimbursement is not taxable income to the patient. Essentially all insurance or mutual benefits for personal injuries or death are non-taxable. This is logical because those payments either indemnify for losses or provide relief in distress, and taxing them would be unfair (and would defeat the purpose of insurance).

Zimbabwe’s law here is quite comprehensive, covering even union payouts and informal benefit funds. For instance, some communities have benevolent societies that collect money for bereavements – any disbursement from such a benefit fund to a bereaved family is exempt. The takeaway is any support payment related to personal injury, illness, or death, from whatever benevolent source, is kept out of the tax net.

To illustrate, Sabelo Nare notes that any amount accruing as a benefit for injury, sickness or death paid by a benefit fund, insurance, medical aid or trade union is exempt. This aligns exactly with the Third Schedule’s paragraph 7 above.

In conclusion, Zimbabwe’s tax exemptions strongly favor pensioners, war veterans, and those receiving compensation or benefits due to injury or death. Regular pensions for senior citizens are entirely exempt, and virtually all forms of compensation for personal loss are exempt. This reflects a social welfare-oriented tax policy, aiming to protect those who can least afford tax.

(Note: Although pensions are exempt after 55, any commutation of pension (a lump sum taken in exchange for a pension) before 55 would fall under the (h1) partial exemption rules. After 55, commutations would just be part of the exempt pension. Also, it’s implied that withdrawal benefits from pension funds (when one changes jobs, for instance) would be taxable, except if taken at retirement age or under retrenchment conditions as specified. Many of these nuances are handled through the PAYE system or special provisions beyond the Third Schedule’s scope.)

Zimbabwe’s income tax law contains numerous exemptions for interest income and other investment returns, mainly to encourage savings, attract investment in government bonds, and avoid double taxation of certain income. Below we outline the key interest and investment-related exemptions in the Third Schedule.

1. Local Company Dividends: Perhaps the most important general exemption is that dividends paid by a company incorporated in Zimbabwe, which are chargeable to income tax at the company level, are exempt in the hands of the recipient. In other words, if you receive a dividend from a local company’s taxed profits, you do not pay income tax on that dividend (it is, however, often subject to a separate withholding tax called resident shareholders’ tax at a lower flat rate). This rule prevents double taxation of the same profit (first as company profit, then as shareholder income). The Third Schedule makes an exception for certain deemed dividends (for instance, dividends arising from tax avoidance transactions under section 26(2) or 28(2) of the Act) – those remain taxable. But ordinary dividends declared by companies out of their after-tax profits are exempt for shareholders. For example, if you hold shares in Delta Corporation (a Zimbabwean company) and it declares a dividend of ZWL 100, you do not include that in your gross income for tax – it’s exempt. This aligns with Nare’s summary: “Dividends received by a person from a local company” are tax-free, ensuring capital income isn’t taxed more than once.
2. Interest on Government and Certain Approved Bonds: The Third Schedule paragraph 10 exempts various categories of interest income, particularly from government or government-approved debt instruments. Key examples include:
3. Interest for Senior Citizens (Over 55): To encourage savings by older individuals, Zimbabwe provides that the first US$3,000 of interest income per year accruing to a taxpayer aged 55 or above is exempt. This covers interest on any deposit with a financial institution (like a bank or building society), and equally for any income from bankers’ acceptances or similar discounted instruments. Essentially, if you are 55 or older, your bank interest up to $3,000 a year is tax-free. If, say, you have savings accounts and Treasury bills yielding $2,500 interest in total, you pay no tax on that. If you earned $5,000 interest, $3,000 is exempt and only $2,000 is taxable.
4. Other Specific Interest Exemptions: A few more line items in paragraph 10 and subsequent additions include:
5. Interest Already Subject to Withholding (Residents’ Tax on Interest): In addition to the above, paragraph 10A provides a general rule that any interest from which residents’ tax on interest (RTI) has been withheld is exempt from further income tax. RTI is a final withholding tax (usually 15%) that banks and financial institutions deduct from interest paid to individuals. Paragraph 10A essentially avoids any confusion by stating such interest is not subject to normal tax in addition. For the taxpayer, it means once the bank withholds the 15%, the interest is net of tax and does not need to be declared. This prevents double taxation and simplifies administration. It is similar to the earlier mention that non-executive directors’ fees with withholding are exempt – the concept is the same: final withholding tax replaces normal tax, so the income is listed as exempt in the Third Schedule to signal it’s not part of taxable income calculation.
6. Interest Paid to Non-Residents (Certain Loans): Paragraph 11 provides an incentive for foreign lenders: if a person who is not ordinarily resident in Zimbabwe and has no local business earns interest on specific types of loans, that interest can be exempt. The qualifying loans are:
7. Capital Gains on Investments (contextual note): While not part of Third Schedule (which is income tax), it’s worth noting for completeness that certain investment incentives also include capital gains and withholding tax exemptions (e.g., Special Economic Zones or BOOT projects often had exemptions on dividends, royalties, etc.). Sabelo Nare’s text around page 52-53 hints at special investor incentives where profits for first 5 years are exempt or withholding taxes don’t apply. Those are specific project-based exemptions outside Third Schedule and not the focus here, but students should be aware that beyond the general law we’ve covered, Zimbabwe occasionally gives project-specific tax holidays or incentives (by separate legislation).

Recap: The main takeaways for interest/investment income are: local dividends – exempt; most interest from government or incentivized instruments – exempt; first $3,000 interest for seniors – exempt; interest already hit with final tax – exempt from more tax; certain foreign loan interest – exempt. These provisions are designed to avoid double taxation and spur investment and saving. They demonstrate how tax policy can be fine-tuned to direct financial flows – for example, by exempting interest on a housing bond, government hopes more people will invest in that bond and thereby fund housing projects.

Finally, the Third Schedule includes some miscellaneous exemptions that don’t fall neatly into the above categories. These often relate to export incentives or unique transactions. We highlight them here:

1. Export Trade Incentive Payments: Paragraph 14 exempts any amount paid by the State to an exporter of goods under an export trade development scheme, except a refund of duty. In the past, the government has run export incentive programs – for instance, paying exporters a bonus in local currency for every US dollar earned (to encourage export growth). A recent example was the Export Bonus Scheme around 2016-2018, where the Reserve Bank gave exporters a incentive (initially 5%, later higher) in “export bonus” digital credits. Paragraph 16 of the Third Schedule actually speaks to this: it exempts the “export incentive premium” paid by the RBZ on export earnings or diaspora remittances. This was introduced when Zimbabwe maintained an Export Incentive scheme via bond notes; effectively, the bonus paid (in bond notes or RTGS) to exporters and individuals remitting money was tax-free. The law was updated in 2017 and 2018 to ensure these incentives (backdated to 1 June 2016) were exempt. Thus, if a tobacco farmer got a 5% bonus from RBZ for exporting tobacco, that bonus wasn’t taxed as income. These incentives closed the gap when the local currency was weak, and making them tax-free increased their effective value. Generally, any government grant to stimulate exports is exempt so that it fully achieves its purpose.
2. Traditional Beer Sales for Community Fund: Paragraph 13 provides an interesting narrow exemption: income from the sale of traditional beer (commonly “opaque beer” or homemade brews) is exempt to the extent the money is used for the purposes required by the Traditional Beer Act. Under that Act (now repealed and functions taken by local authorities), specific communities or local authorities brewed beer and the proceeds had to fund community projects (like maintenance of beerhalls, roads, or council projects). The exemption meant as long as the beer sale profits were devoted to those public purposes, they weren’t taxed. Essentially, it ensured that community development funds from traditional beer brewing were plowed back and not diminished by tax. Today, opaque beer brewing is largely commercial (Delta’s Chibuku etc., which is taxed normally), but historically this clause mattered for local councils. It’s a relic but still in the Act. It underscores the principle: if by law income must be used for public benefit, then the tax law correspondingly exempts it.
3. Certain Allowances Expended on Employer’s Business: Paragraph 15 exempts any amount received by an employee as an allowance under Section 16(1)(m) of the Act, to the extent the employee spends it on the employer’s business. Although a bit cryptic, this addresses things like travel and subsistence allowances for work trips. Section 16(1)(m) (in the disallowable deduction list) effectively limits the employer’s deduction for such allowances unless they are spent on business. Correspondingly, this Third Schedule item ensures the part of an allowance that is used for business (not personal benefit) isn’t taxed in the employee’s hands. For example, if an employer gives you a $500 travel allowance and you use $400 on hotels and fuel for work, that $400 is exempt (since it was spent on business), and only the $100 excess (if retained) might be taxable. The burden is typically on the employee to account for the spending. In practice, many employers use per diem rates; if the rates are reasonable, often the entire allowance ends up effectively used or treated as used for work, so it isn’t taxed. This provision prevents double-benefit for the fiscus: the employer can’t deduct non-business portions, and the employee conversely isn’t taxed on business portions – it’s symmetric treatment ensuring fairness.
4. Industrial Park Developer Profits: Paragraph 17 exempts the receipts and accruals of an “industrial park developer” from an industrial park for the first five years of operation (from establishment or Minister’s approval) and half of them for the next five years. This incentive was introduced to attract investment in industrial parks (designated zones where multiple industries operate with shared facilities). The law as of 2025 shows an exemption for 5 years; previously such developers also enjoyed reduced tax (15%) for the subsequent 5 years. Indeed, Nare’s text indicates a concessionary rate after the initial tax holiday. However, the Third Schedule now simply mentions the exemption period (the Finance Act 2018 repealed the portion about the 15% rate later, making it a full holiday for 5 years only). The exemption starts either when the park is established or approved by the Minister – whichever is earlier – and lasts five years. For example, if a company builds an industrial park in 2023 and is approved as an Industrial Park Developer, its rental income and other earnings from operating the park would be tax-free for five years. This is an economic development incentive aimed at infrastructure providers.
5. Sale of Duty-Free Import Certificates: Paragraph 18 exempts any amount an exporter receives from selling or transferring a duty exemption certificate. Exporters in Zimbabwe can earn the right to import certain inputs duty-free (as a rebate) through export incentive schemes. The law allowed those certificates to be traded – an exporter who couldn’t use an import rebate could sell it to another importer. To facilitate that market, the proceeds from selling such a certificate are not taxed as income. This was inserted in 2000 when such schemes were common. The rationale: the certificate is essentially an entitlement to a tax (duty) saving; converting it to cash shouldn’t itself trigger income tax, otherwise it lessens the benefit of the incentive. So if an exporter sells an import duty exemption certificate for $1,000, they keep the $1,000 tax-free.
6. Employee Share Ownership Trust Redemptions: Paragraph 19 exempts amounts an employee receives from an approved employee share ownership trust (ESOT) when the trust buys back or redeems the employee’s stake. In many indigenization or empowerment initiatives, employees are given or can buy shares in a trust which holds shares in the company. If the employee leaves or after some years the trust buys back the units, that payout could be large. This provision makes that payout exempt (assuming the ESOT is an “approved” one per the law). It was introduced in 2001 after empowerment schemes started, and confirmed in 2002. A High Court case, Old Mutual Zimbabwe Ltd v ZIMRA (2016), involved an ESOT and likely clarified aspects of this exemption. Essentially, the law treats the gain employees get from such empowerment share disposals as tax-free, perhaps considering it a capital realization or simply as a further incentive for employee ownership. This is fairly specific but important in corporate empowerment contexts.
7. [Repealed] Power Generation Projects: Paragraph 20 (which is now repealed) had provided an exemption for receipts from a specific power generation project. It was introduced in 2018 (likely for a joint venture power project) and then removed in 2020, perhaps after the project arrangement changed. While it no longer applies, it exemplifies the practice of writing project-specific exemptions into the Third Schedule. Though gone now, if similar big projects occur (e.g., new electricity plants by private firms), the government might again grant an exemption via Finance Act.
8. Alimony: Lest we forget, an earlier paragraph (which appears mis-numbered in our sources but is clearly intended) exempts alimony (maintenance) payments. Alimony received by a former spouse pursuant to divorce or maintenance order is not taxable. This makes sense: the paying spouse typically gets no deduction for personal alimony, and the receiving spouse doesn’t count it as income. It avoids hardship on divorced individuals, especially where maintenance is simply a redistribution of family income. Nare’s summary indeed lists alimony as exempt. (Note: Child support would likewise not be taxable as it’s not income of the recipient in their own right, it’s a fiduciary receipt for the child’s benefit).
9. Miscellaneous small exemptions: Other items not already covered in prior sections but present in Third Schedule include: any amount won in a lottery or betting transaction that is required to be paid to the State (like a portion of lottery proceeds that by law go to a fund) – but this is more a feature of who receives it than an exemption class; and possibly some legacy items from older laws that are now moot. However, our comprehensive review above has touched on virtually all significant paragraphs of the Third Schedule.

To conclude this section, Zimbabwe’s Third Schedule is something of a catch-all for special cases where income is not taxed, often for policy reasons. Export incentives, empowerment schemes, and community funds are all represented. For a tax student, it’s important to recognize why each of these exists: generally, to avoid negating the effect of another government policy or to encourage certain economic behavior. If the government gives with one hand (say an export bonus or an empowerment share scheme), the tax law ensures it doesn’t take away with the other. Thus, the Income Tax Act and broader economic policies work in tandem.

Zimbabwe’s income tax exemptions under Section 14 and the Third Schedule form a complex but purposeful tapestry. They range from broad exclusions for governmental and charitable entities, to targeted incentives for investment, to social justice measures for veterans, retirees, and those in need. The categories of exempt income can be summarized as:

Government, local authority, and certain parastatal incomes – to preserve public funds for public use.

Income of non-profit organizations, trusts, clubs, and charities – to support social, educational, and charitable work without the burden of tax.

Specific public or strategic funds and institutions (e.g. pension funds, trade unions, housing funds, etc.) – aligning tax with public policy.

Employment-related exemptions for high offices of state and public sector allowances – to appropriately compensate officials and avoid taxing reimbursive allowances.

Educational scholarships and bursaries – encouraging education by not taxing support for students.

Pensions and compensation payments (war pensions, injury compensation, pensions for over-55s) – ensuring vulnerable groups’ incomes are protected.

Interest and investment income exemptions – from local dividends (avoiding double tax), to interest on government securities (to spur investment), to senior citizens’ interest and rental exemptions (supporting retirees), and incentives for foreign loans (to attract capital).

Export and miscellaneous incentives – including export bonuses, industrial park holidays, and others to drive economic development without tax friction.

Importantly, outdated monetary thresholds have been updated or removed. We have avoided repealed provisions (for example, an old threshold of US$5,000 for retrenchment in 2010 has since changed to US$3,200 and 1/3 with a $15,100 cap). The law as of Feb 2025 reflects the current USD and ZWL environment after multiple Finance Acts adjusted these figures. One must always check the latest Finance Act for any new exemptions or changes – for instance, the bonus exemption was updated in late 2024, and the senior interest exemption updated in late 2023.

Throughout, we saw case law providing interpretive guidance. The FC Platinum case (2022) underscored that organizational form and adherence to non-profit distribution are key for club/association exemptions. The Endeavour Foundation case (1995) clarified what constitutes a public charitable trust. The Old Mutual ESOT case (2016) likely dealt with the employee share scheme exemption. These cases are part of Zimbabwe’s tax jurisprudence ensuring the spirit of exemptions is respected and not abused.

For a student or practitioner, it’s useful to approach any income by asking: is this listed in the Third Schedule? If yes, it’s exempt; if not, it’s probably taxable (unless another specific statute says otherwise). This list is exhaustive as per Section 14(1) – only items in the Third Schedule (and amounts specifically exempted by other statutes or agreements) are tax-free; everything else is within the tax net.

In sum, Zimbabwe’s income tax exemptions serve clear purposes: promoting public welfare, encouraging investment and savings, and avoiding unfair taxation. They turn the tax system from a blunt revenue instrument into a nuanced policy tool. A student new to tax should appreciate how each exemption reflects a conscious choice – whether to help a widow, attract a dollar, or reward a scholar, the law deems certain income as not income at all for tax purposes. Studying these exemptions not only helps in computing tax correctly but also provides insight into the nation’s economic and social priorities as codified in tax law.

Case Law: ZIMRA v FC Platinum SC 22-44 (2022) (noted in Third Schedule editor’s notes); Endeavour Foundation & UDC v COT SC 95-95; Old Mutual Zimbabwe Ltd v ZIMRA HH-143-16. These cases illustrate application of exemptions in practice.

Income tax “exemptions” are specific types of income that are not subject to tax under the Zimbabwe Income Tax Act. Unlike deductions (which subtract expenses from income), exemptions completely exclude certain receipts or accruals from taxable income. They reflect policy decisions to avoid taxing particular entities or transactions – for example, to prevent double taxation, to encourage public benefit activities or investment, or to ensure fairness for certain individuals. Section 14 of the Income Tax Act [Chapter 23:06] is the key provision on exemptions, and it works together with the Third Schedule of the Act, which itemizes the exempt amounts. In general, Section 14(1) provides that all amounts listed in the Third Schedule are exempt from income tax. However, Section 14 also contains important limitations: Section 14(2) clarifies that employees of many exempt organizations do not get their salaries tax-free (the exemption of the organization’s income doesn’t extend to wages or pensions paid to staff). And Section 14(3) provides that certain investment income exemptions (for dividends and interest in paras 9–11 of the Third Schedule) do not shield any annuity payments derived from those exempt amounts. With that framework in mind, we can examine each category of exempt income as updated to 10 February 2025, drawing on current legislation, Finance Act updates for 2025, and relevant case law illustrations.

Paragraph 1 of the Third Schedule exempts the receipts and accruals of various public authorities and institutions. These include all income of:

Local authorities (e.g. city councils, town boards) – meaning that municipal revenues like rates or service fees are not subject to income tax. For example, the City of Harare’s income from property taxes and utilities is exempt from tax. However, as noted, if the city pays salaries to its employees, those salaries are taxable in the employees’ hands despite the city’s income being exempt. This ensures employees of councils pay PAYE like anyone else, a point reinforced in Section 14(2).

The Reserve Bank of Zimbabwe (RBZ) – the central bank’s earnings (such as interest on its loans or investments) are exempt. This recognizes the RBZ’s public role.

The Zambezi River Authority, a statutory authority managing the Zambezi, and the Environment Management Board (successor to the former Natural Resources Board) – their income is exempt. These are cross-border or public agencies (the Zambezi Authority is jointly owned by Zimbabwe and Zambia) whose revenues (e.g. dam management fees) aren’t taxed.

The People’s Own Savings Bank (POSB) – a state-owned savings bank – is exempt. POSB’s interest income and fees are not taxed, supporting its mandate to provide affordable banking.

The RBZ’s wholly owned asset management arm, ZAMCO (Zimbabwe Asset Management Corporation) – which was formed in 2014 to take over non-performing loans – is also exempt. This incentivized ZAMCO’s cleanup of bad debts during the financial sector stabilization.

The Victoria Falls Stock Exchange (VFEX) – a special securities exchange for trading in US dollar instruments – is exempt. VFEX was established in 2020 to attract foreign investment; making its income tax-free (for example, listing fees or trading income) was meant to enhance its viability.

Any qualifying Student Accommodation SPV – specifically, an SPV initially wholly owned by the Infrastructure Development Bank of Zimbabwe (IDBZ) which partners with private investors to build on-campus housing – is exempt on its receipts. This exemption (added in 2020) encourages private capital to support public university accommodation by granting a tax holiday to the project company.

All the above bodies thus do not pay income tax on their revenues – essentially a form of government or public-sector immunity from tax. The policy rationale is that these entities carry out public functions (governance, central banking, infrastructure, etc.) and taxing them would just shift resources within the public sector. It is worth noting that employees of these entities remain fully taxable on their earnings (the law prevents an unintended perk where, say, a city council employee could claim their salary is part of the council’s exempt income – Section 14(2) closes that loophole).

In addition, the Minister of Finance has power to declare other statutory corporations exempt by Gazette notice. Under Paragraph 2(j) of the Third Schedule, “any statutory corporation which is declared by the Minister, by notice in the Gazette, to be exempt” enjoys tax exemption. The Minister may also limit an exemption to certain income streams of that corporation. In practice, this power has been used to exempt entities like the Zimbabwe Revenue Authority (ZIMRA) itself (by General Notice 364 of 2001) and others such as the National Oil Infrastructure Company (pipeline company in 2016) and the Rural Electrification Agency (2018). Those notices mean, for example, that ZIMRA does not pay income tax on fees or interest it earns (consistent with it being the tax authority), and the pipeline company’s toll fees can be tax-free to keep fuel transport costs lower. Again, employees of these bodies do not get tax-free salaries by virtue of this – only the entities’ own receipts are exempt.

A large group of exemptions is aimed at non-profit institutions and public benefit organisations, reflected in Paragraph 2 of the Third Schedule. These exemptions recognize that certain associations, though not government, operate for social good or mutual benefit rather than profit. Key categories include:

Agricultural, mining and commercial societies not operating for the private profit of members. This covers industry associations or commodity associations that use their funds for sector development or member services, not to enrich members. For example, the Commercial Farmers’ Union (CFU), Zimbabwe National Chamber of Commerce (ZNCC), or the Chamber of Mines are cited examples. Their membership fees, grants or other income are exempt from tax. However, if such a society were to start distributing profits to members, it would fail the exemption test.

Clubs, societies, institutes or associations organized solely for social welfare, civic improvement, pleasure, recreation, or the advancement of any profession or trade – provided they do not permit distribution of profits to members (other than reasonable remuneration for services). This exemption typically covers recreational clubs (sports clubs, hobby clubs), charitable social clubs, professional associations and the like. For instance, a sports club that operates a clubhouse and uses any surplus only to improve facilities (and never pays dividends to its members) would not be taxed on club subscription fees or bar income. A Supreme Court case, ZIMRA v FC Platinum (22-SC-044), illustrated the limits of this: a football club (FC Platinum) lost its tax exemption after restructuring as a company limited by guarantee, which the court viewed as departing from the traditional “club” structure. The lesson is that to qualify, an organization must truly operate non-profit – if it takes on a form that could allow profit distribution (even on winding up), it may be deemed taxable. (The court noted that once the club became a company – even a guarantee company – it ceased to fall within the exempt club category.) So long as a club remains a bona fide non-profit entity with no member benefiting from profits, its ordinary revenue (membership dues, donations, etc.) is exempt.

Ecclesiastical, charitable, or educational institutions of a public character – essentially churches, registered charities, and schools or colleges. The law, however, draws a line between their donative income and any business income. Paragraph 2(e) says that such an institution’s income is exempt if it consists of things like donations, tithes, offerings or other voluntary contributions, or any other receipts not arising from trade or investment by the institution. In other words, the core charitable receipts – e.g. church offerings, school donations, grants – are tax-free. If the institution does have income from a business or investment activity, that portion is not automatically exempt, unless it is structured in a particular way. There is a further provision (often called the “business carve-out”): if the charity or church owns a company and that company carries on a trade or investment for the benefit of the institution, and the company is licensed under section 26 of the old Companies Act (now section 76 of the Companies and Other Business Entities Act) as a non-profit company, then the receipts of that company are also exempt. This allows, for example, a church to have a wholly-owned company running a mission farm or a school trust running a textbook store, and the profits remain exempt provided a charitable company license was obtained. The intention is to let charities conduct income-generating projects tax-free if they meet strict oversight conditions (licensing). If they do it informally without such a structure, the tax exemption won’t cover the business income. A practical example: a charitable orphanage relies on donations (exempt). If it also operates a small factory to train and employ youths, and it incorporates that as a company limited by guarantee licensed under section 76, the factory’s profits are exempt too. But if it ran the factory within the orphanage without that setup, the factory profits would likely be taxable (since that’s “income from trade carried on behalf of the institution” outside the narrow licensed-company scenario). Notably, Trusts of a public character – which often covers charitable trusts – are separately mentioned as exempt in Paragraph 2(l). The Supreme Court case The Endeavour Foundation & UDC Ltd v COT (1995) concerned such an exemption. In that case, a trust (Endeavour Foundation) was held to be a public charitable trust and thus exempt from tax on its income, even though it had a corporate donor (UDC Ltd) involved. The case affirmed that as long as a trust’s purposes are charitable/public and no private beneficiaries exist, its income falls under this exemption.

Trade unions are exempt under Paragraph 2(k). For example, the Zimbabwe Congress of Trade Unions’ subscription fees and other income aren’t taxed. This recognizes unions as member-benefit organizations where funds are used for workers’ welfare and representation, not profit.

In all these cases, the common thread is no private profit motive. The law ensures that genuine non-profits – from churches and charities to clubs and unions – can use all their funds for their missions rather than losing some to taxes. It’s a social policy choice to encourage philanthropy, education, religion, and community activities. If any such entity strays from its non-profit nature (e.g. starts distributing profit shares, or fails to get a required license for its business arm), it jeopardizes the exemption.

Paragraph 2 also exempts various funds and financial schemes that serve social or developmental purposes:

Benefit funds and friendly societies: These typically refer to mutual benefit organizations like burial societies, benevolent funds, or other member-funded insurance-like schemes. Paragraph 2(b) exempts “benefit funds” and Paragraph 2(g) exempts “friendly, benefit or medical aid societies”. For example, a workplace benevolent fund that pays grants to ill or deceased employees’ families would not be taxed on the investment income or contributions it receives. Similarly, medical aid societies (non-profit health insurance pools) are exempt on their subscription income and any surplus. The idea is to keep healthcare and mutual aid costs lower by not taxing these pools.

Employees’ savings schemes or funds approved by the Commissioner are exempt. This caters to things like employer-sponsored thrift or share purchase schemes where employees contribute savings. If a company sets up, say, an employee housing savings fund and it’s approved by ZIMRA, the fund’s interest earnings or other income won’t be taxed, so the full benefit goes to the employees.

Pension funds are expressly exempt – “pension funds, until such date as the Minister may specify by notice” remain tax-free (Paragraph 2(i)). Importantly, to date no such taxing date has been specified, so effectively all registered pension funds in Zimbabwe do not pay income tax on their investment income. This is a crucial incentive for retirement savings: contributions into approved pension funds are generally tax-deductible for employees, and the fund’s own income (interest, dividends, capital gains) grows tax-free. Only when benefits are eventually paid out to individuals might tax apply (and even then, as we’ll see, many pension benefits are separately exempt). The exemption for pension funds has been in place for decades – even through various reforms, the Minister has refrained from invoking any end date, reflecting a policy to encourage and protect retirement funds. (Note: The old provision was repealed and re-enacted in 1999, but still with the “until Minister’s notice” condition. As of 2025 no notice has lifted the exemption.)

Funds established by the Treasury under the Public Finance Management Act are exempt (Paragraph 2(h)). This refers to special funds created by government for specific purposes (for instance, a National Disaster Fund, or an Educational Fund set up by the Finance Ministry). If the government pools money in a statutory fund for public use, that fund’s income (like interest or donations received) is not taxed. Essentially the government isn’t taxing itself; it ensures every dollar in those funds goes to the intended public purpose. An example is the National Disaster Fund for drought/relief: any interest it earns on its account would be exempt from income tax.

Certain statutory insurance and protection funds: For instance, Paragraph 2(m) had exempted the Deposit Protection Fund (a fund insuring bank deposits). Although that specific fund was later dissolved and replaced by the Deposit Protection Corporation in 2012, the principle remained that such funds should not be eroded by tax. Likewise, Paragraph 2(n) exempts the Investor Protection Fund established under the Securities Act (to compensate investors in stock market insolvencies). This means the fund built from levies on securities trades, which is there to reimburse defrauded investors, isn’t taxed on its income – preserving it entirely for its protective purpose. (This was inserted in 2014 after the Fund was created by SECZ.)

A more recent addition is Paragraph 2(o), which exempts the Insurance and Pensions Housing Company (IPHC). This is a company created (around 2014) to mobilize financing for housing, guaranteed by the State, with shareholders being the Ministry of Finance, the Insurance and Pensions Commission (IPEC), and associations of pension and insurance firms. In essence, the industry and government set up a special-purpose vehicle to fund home building for home-seekers. By exempting its income, the law aimed to lower its costs and encourage it to provide affordable housing finance.

Another new exemption, Paragraph 2(p), covers the Agricultural Development Fund – specifically a fund established to raise money to compensate former farmers under the Global Compensation Deed (for improvements on land acquired during land reform). This was added by the Finance Act 7 of 2021. The Fund’s receipts – which might include levies or donations earmarked for farmer compensation – are exempt. This ensures the fund can accumulate and pay out the compensation in full, untaxed, as part of Zimbabwe’s commitments to farmers under the compensation agreement.

In summary, these exemptions for funds and schemes reinforce social insurance and development policy. Pension and provident funds get tax relief to maximize retirees’ eventual benefits. Medical and benefit societies are relieved of tax to keep member costs down. Government-created funds and investor protection pools are kept whole for their special purposes. And even newer vehicles like housing finance companies and compensation funds are given breathing room via tax exemption to achieve national policy goals.

It should be noted that if any of these funds veer from their intended function – e.g. a pension fund engaging in unapproved business or a medical society demutualizing into a profit company – their exemption might cease (either by law change or because they no longer meet the definition). But as long as they operate within their defined sphere, they remain outside the tax net.

Zimbabwe honors certain international and diplomatic immunities via Paragraph 3 of the Third Schedule, which exempts income of specified foreign governments or international bodies, as well as incentivizes foreign investment finance. Key provisions are:

Foreign government agencies approved by the Minister (para 3(a)). This allows the Minister to gazette a notice exempting any agency of a foreign government. For example, the Income Tax (Exemption from Income Tax) (Foreign Government Agencies) Notice, 1981 listed certain foreign aid agencies as exempt. Typically, this has been used for entities like USAID or aid branches of other governments operating in Zimbabwe – their operational funds won’t be taxed, reflecting reciprocity and to encourage aid. Similarly, para 3(b) covers international organizations with privileges under the Privileges and Immunities Act that are approved by the Minister. In practice, organizations like United Nations agencies, the World Health Organization, etc., are exempted via statutory instrument (e.g. SI 417 of 1999 exempted the UN and its agencies). This is consistent with diplomatic practice – international bodies and their officials typically aren’t subject to host country tax. Indeed, Section 14(1a) and (a)(iii) of the Act, discussed later, also give effect to treaty-based exemptions for officials.

International financial institutions: Paragraph 3(c), (d), (e) enumerate entities like those referred in the International Financial Organizations Act [Chapter 22:09], the African Development Bank, and the African Development Fund. These institutions (e.g. IMF, World Bank under the first category, and AfDB, ADF) usually have treaties guaranteeing they pay no local tax. Thus, any interest, project income, or other receipts they derive in Zimbabwe are exempt. For instance, if the African Development Bank lends money to Zimbabwe and earns interest, that interest is free from Zimbabwean tax by law. This encourages such institutions to operate in Zimbabwe without tax hindrance, aligning with international agreements.

The South African Reserve Bank is explicitly exempt (para 3(e1)). This is a bit unusual, but historically SARB was involved in certain bilateral arrangements; exempting its receipts ensures no Zimbabwean tax complications in those dealings.

Foreign development finance organizations approved by the Minister (para 3(f)). This is a broad category: any foreign organization that provides development finance in Zimbabwe can be exempted to the extent of receipts from an approved project. For example, a foreign NGO or development bank funding a water project could be granted exemption on any interest or fees it earns from that project. This mechanism helps lower the cost of foreign capital for development – the foreign lender doesn’t have to factor in Zimbabwean tax on the income from the project, making it more likely to offer cheaper finance. Approval is case-by-case via Ministerial certificate.

Income subject to international agreements (Government-to-Government): Paragraph 3(g) provides that if Zimbabwe’s Government enters an agreement with another country and, upon recommendation of the Public Agreements Advisory Committee, adopts that agreement, any person entitled to an income-tax exemption under that agreement shall indeed be exempt. In plain terms, this is a catch-all to honor tax exemptions promised in international treaties. A recent example is given in the Act: the Deka Pumping Station and River Water Intake System Upgrade Project agreement with another government came with a tax exemption, and SI 244 of 2023 was issued to give effect to it. Thus, if Zimbabwe signs a deal – say with China – that a Chinese contractor’s fees on a funded project will be tax-free, this provision enables that. It prevents conflict between domestic law and international obligations by automatically exempting the income once the agreement is properly adopted. (The Finance (No.2) Act 10 of 2022 updated this paragraph to align with the new procedure under the International Treaties Act.)

Foreign loans to the RBZ: Paragraph 3(h) exempts interest paid by RBZ to any foreign bank or financial institution on loans or credit facilities extended to RBZ under Section 9(1)(m) of the Reserve Bank Act. Essentially, if RBZ borrows from a foreign bank for its mandates (e.g. to maintain currency stability or fund critical imports) and that particular subsection (9(1)(m)) is invoked, the interest the RBZ pays is not taxed in Zimbabwe. This encourages foreign banks to lend to the RBZ, since they receive interest gross. It’s a sovereign borrowing incentive.

Apart from these diplomatic and aid-related exemptions, Paragraph 3 also includes two important investment vehicles that enjoy tax exemption:

Qualifying Venture Capital Companies or Funds – Paragraph 3(i) (as substituted in 2019) provides that a venture capital fund or company meeting certain criteria will be exempt on its income. The law lays out conditions: the venture capital outfit and the investee must be Zimbabwean and tax-compliant; it must invest in genuinely productive businesses (not passive property deals, financial services, or other excluded sectors); it cannot invest in listed companies or control the investee (only provide growth capital); and equity (not debt) should be the primary mode of financing. If all conditions are met, the receipts and accruals (e.g. interest, dividends, capital gains) of the venture capital fund are exempt from income tax. The goal here is to stimulate venture capital – high-risk investment in sectors like agriculture, mining, manufacturing, tourism or other critical areas – by allowing the fund to operate tax-free (meaning it can pass more returns to investors or accept lower returns). For example, if a qualifying venture fund earns a profit by later selling its stake in a start-up, that profit is not taxed. This exemption, first introduced in the late 1990s and refined in 2019, aligns with economic policy to drive entrepreneurship and new enterprises.

Real Estate Investment Trusts (REITs) – Paragraph 3(j) establishes an exemption for qualifying REITs. A REIT, broadly, is a vehicle for collective investment in rental real estate. The exemption was introduced in 2020 to promote development of a property investment market. To prevent abuse, the law sets strict qualifying criteria: the REIT must be registered under the Collective Investment Schemes Act and dedicated to owning and managing real estate; it must derive at least 80% of its income from real estate and distribute at least 80% of taxable income as dividends each year; it should have a broad investor base (minimum 100 shareholders after the first year, with no five or fewer individuals owning more than 50%, except that pension funds can hold more); and it must be listed on a recognized stock exchange. If these conditions are met, the REIT’s income is exempt from corporate income tax. The logic is to avoid double taxation (once at property company level and again on investors) and to encourage investment in real estate development. For example, suppose a qualifying REIT owns several commercial properties and earns US$1 million in rent, distributing 90% to its investors. Because of the exemption, the REIT pays no income tax on the rent; investors might then pay tax on the dividends they receive (unless they too are exempt like pension funds). This makes REITs an efficient conduit for property investment. The Finance Act 7 of 2021 adjusted some REIT rules (like permitting pension funds to own all shares). By 2025, Zimbabwe has seen the establishment of REITs on the VFEX to channel capital into real estate, leveraging this tax exemption.

Overall, the international and investment exemptions reflect Zimbabwe’s openness to cooperation and investment. They ensure that foreign aid and diplomatic missions can function without tax friction, and that key investment funds (venture capital, REITs) can flourish under favorable conditions. It’s a balancing act – offering tax immunity to encourage beneficial activities while embedding qualifying criteria to prevent misuse.

Beyond organizations, the law exempts certain income earned by individuals, particularly in official capacities. These are listed in Paragraph 4 of the Third Schedule, which, in numerous subparagraphs, spares various offices or allowances from tax. The aim is often to respect the dignity of high offices, avoid taxing state-granted benefits, or not to diminish certain public service rewards. The main exemptions in this category include:

The President’s salary and allowances: The salary and emoluments paid to the President of Zimbabwe, in respect of his office, are exempt. Likewise, any salary paid to a member of the President’s staff that is paid directly by the President himself is exempt. In practice, the President’s official salary (set by the Salary and Allowances Act) is not subject to PAYE. This exemption underscores the special status of the Head of State. Additionally, any allowance payable to the spouse of the President or a Vice-President for duties carried out on behalf of the State is exempt. For example, if the First Lady receives a travel allowance for representing Zimbabwe abroad, that allowance is tax-free. Similarly, an allowance paid by the State to the spouse of a former President is exempt, reflecting respect for former first families. These spousal allowances were inserted in the late 1990s to ensure such payments (often for protocol or charitable work) are not eroded by tax.

Officials with Privileges and Immunities: Any person whose salary is exempt by virtue of the Privileges and Immunities Act [Chapter 3:03] is of course exempt (Paragraph 4(a)(iii)). This typically covers diplomats and officers of international organizations. For instance, a United Nations official based in Harare, or an ambassador of a foreign country, will have their official earnings exempt under that Act, and Paragraph 4 confirms it. Additionally, Section 14(1a) (inserted in 2023) explicitly exempts salaries of persons entitled to exemption under a government-to-government agreement. For example, if Zimbabwe hosts foreign experts whose salaries are paid by their home government and an agreement provides those salaries aren’t taxable in Zimbabwe, that now has direct effect. This was likely to cover technical assistance personnel (like foreign engineers working on a bilateral project) without needing each case to rely on general treaty principles. A concrete case: Zimbabwe has a deal with Japan that JICA experts’ salaries are not taxed locally; Section 14(1a) and Third Schedule para 4 give that legal effect.

Members of Parliament and Ministers’ allowances: Certain political allowances can be exempt if so specified. Paragraph 4(b) allows the President to issue a statutory instrument declaring that any allowance granted to a Minister, Deputy Minister, provincial governor (a role under the former constitution), the Speaker or Deputy Speaker of Parliament, the Leader of the Opposition, or a Chief Whip or MP is exempt. The President can even make it retrospective. In practice, a Parliamentary Allowances and Benefits Notice (SI 458 of 1980) was issued to exempt some allowances, and later notices have updated the list (for example, certain fuel or constituency allowances could be exempted). As of 2025, core components of an MP’s remuneration (basic salary) are taxable, but specific allowances such as those for parliamentary business, if gazetted, become tax-free. This reduces the tax burden on public office-holders for the expense-related portions of their compensation. Additionally, Paragraph 4(c) exempts the value of any government-provided housing, quarters, furniture or vehicle to a Minister or the Speaker, if specified by the President by notice. This means if ministers are given official residences or vehicles, a statutory instrument can declare that benefit non-taxable. Indeed, SIs in the 1980s exempted housing and transport benefits for ministers and other senior officials. Without this, those benefits would be valued and taxed as fringe benefits. The policy here is that these are provided for official convenience and protocol, and taxing them would effectively reduce an official’s net compensation, which the government chooses to avoid.

Civil service allowances: Paragraph 4(c1) is a broad provision allowing any allowance or benefit granted to a State employee to be exempt if the President so specifies by statutory instrument. This has been used for various cases – for example, an SI in 1984 exempted certain judges’ allowances, and another in 1994 exempted certain public service travel allowances. In 2012, as noted in the training notes, an instrument was issued to exempt teacher’s incentives (top-up allowances paid by parents) by deeming them State-granted. Essentially, the President can respond to remuneration issues in the civil service by declaring certain benefits tax-free. This tool was used to ensure, for instance, that when parents were paying teachers extra in hard currency during economic crisis, those amounts weren’t taxed – encouraging teachers to stay in service.

Traditional leaders: Paragraph 4(e) exempts any allowance payable to a Chief or Headman in that capacity. Chiefs and headmen (community traditional leaders on government stipend) thus receive their monthly allowances tax-free. This is a long-standing privilege recognizing their semi-official status and often modest remuneration.

Security forces’ special allowances: Several subparagraphs relieve certain payments to part-time or wartime security personnel. Paragraph 4(f) exempts any allowance paid for overseas service by a member of the Defence Forces if that service is declared “active service”. This would apply, for example, to peacekeepers or troops in a war zone – their foreign service stipends would not be taxed, acknowledging the hardship and national service element. Paragraph 4(g) then exempts specific small allowances for those who serve part-time in the military or police reserves: a quarterly allowance for volunteer reserve officers, a “volunteers allowance” for Defence Forces volunteers, and an annual allowance for members of the Police Constabulary (reserve police). These are token payments for citizens who serve in auxiliary capacities, so the law exempts them likely to encourage such service.

War and bravery awards: Paragraph 4(h) and (i) address gratuities accompanying certain medals. A gratuity given with the award of the Fire Brigade Long Service Medal or the Medal for Long Service and Good Conduct (Military) is exempt. Likewise, a small gratuity to a police officer who earns a long-service medal is exempt. These are one-time honoraria given to long-serving uniformed personnel – by exempting them, the law ensures the full honor is enjoyed without a tax deduction. It’s more symbolic than financially significant, but it aligns with the practice of not taxing symbolic rewards. Similarly, Paragraph 4(l) exempts any gratuity given with the grant of an honour or award under the Honours and Awards Act. So if a citizen receives, say, the Order of Merit along with a monetary award, that money is tax-free, reinforcing that it’s a gift from the nation in recognition of service.

Foreign service allowances: Paragraph 4(j) exempts allowances paid by the State to employees for working outside Zimbabwe. Specifically, if a government employee is posted abroad or sent on duty travel, any allowance covering their extra cost of living is exempt to the extent it exceeds what they would have spent at home. For example, a diplomat or a soldier on an external mission often gets a foreign service allowance; the law ensures they are not taxed on the portion that genuinely compensates higher expenses or hardship abroad. Only any savings beyond that threshold could be taxed (though in practice the formula usually makes the allowance exactly equal to estimated excess cost, rendering it fully exempt).

Accommodation and ration benefits in the field: Paragraph 4(k) exempts the value of rations provided to members of the Defence Forces or Police while “in the field” on operations. So if soldiers are deployed on an operation and given food rations, the value of that food isn’t treated as a taxable benefit. It would be impractical and poor for morale to tax a soldier for his combat rations, hence the exemption.

This category of exemptions is diverse but centered on government-related incomes. In short, Zimbabwe chooses not to tax the remuneration of its top office holders (President, etc.), nor certain allowances of officials, nor modest payments to volunteers and honorees. The policy intent is often to maximize the effectiveness of these payments (a tax on a government allowance is somewhat circular, and exempting it can be seen as effectively increasing the net pay to what government intended to give). It can also reduce administrative burden (small stipends and medal gratuities are easier handled if no PAYE is needed).

Importantly, these exemptions are specific – a salary or allowance is only exempt if it squarely falls in the described category or has been gazetted by the President. For instance, an ordinary civil servant’s salary is not exempt; only those allowances explicitly targeted (like a housing allowance if an SI says so) would be. The default for employment income is taxation under PAYE unless carved out here.

Two particularly notable exemptions in Paragraph 4 that have broad relevance to many employees (not just officials) are the bonus exemption and the severance pay exemption, which we address next in detail given their significance and recent updates.

To provide relief to employees, Zimbabwe’s law exempts part of annual bonus payments and part of retrenchment packages from income tax. These provisions are highly pertinent to the average worker and have been frequently adjusted by Finance Acts, including the 2024/2025 updates.

Bonus Exemption: Paragraph 4(o) exempts any bonus or performance-related reward paid to an employee up to a certain threshold. Currently, the threshold is US$700 (or the equivalent in local currency) per year. If an employee receives more than one bonus in a year, it’s the aggregate of bonuses that is capped at US$700 exemption. This means: the first $700 of bonus income is tax-free; any bonus amount beyond $700 is taxable in the normal way. For example, suppose in December 2024 an employee earning in USD receives a performance bonus of $600 – that entire $600 would be exempt from PAYE. If another employee gets a $1,000 bonus, $700 is exempt and only $300 is taxable. This exemption has been in place (with varying limits) for many years to encourage employers to pay bonuses and to give employees a tax break during the festive season. Initially set much lower, it was increased to US$700 with effect from November 2022, and remains at $700 for USD earners (for ZWL earners, it’s the ZWL equivalent at interbank rate). The Finance (No. 2) Act 2024 confirmed the US$700 threshold. This is particularly important as a cost-of-living support measure in an economy with high inflation – it ensures at least a portion of any annual bonus (often used for school fees or holiday expenses) is untaxed. Employers still must report the bonus, but when calculating PAYE, they deduct the exempt amount.

Retrenchment and Severance Exemption: Paragraph 4(p) addresses amounts paid to an employee on cessation of employment due to retrenchment (workforce reduction). It exempts whichever is the greater of US$3,200 or one-third of the severance package, up to a maximum defined amount. This provision has been adjusted by the Finance Act 13 of 2023 (effective 1 Jan 2024) to its current levels. Let’s break it down: if an employee is retrenched, they might receive a severance payment, gratuity, or similar terminal benefit (excluding normal pension or cash in lieu of leave). Under para 4(p), the employee can exclude at least US$3,200 from tax; if one-third of their total package is higher than $3,200, they can exclude that one-third, capped at US$15,100 total exemption. Furthermore, if the employee was remunerated in Zimbabwean dollars, the law deems an equivalent USD value for these thresholds by using the interbank rate (so they still get the benefit at prevailing exchange rate). The US$15,100 overall cap (also updated in late 2023) means that no matter how large the severance, the maximum tax-free portion is $15,100. For example, say an employee is retrenched in 2025 with a severance package of US$9,000. One-third of that is $3,000, which is less than $3,200, so by the rule “whichever is greater, $3,200 or one-third,” the employee can exempt $3,200 (the minimum). If another employee gets $30,000, one-third is $10,000, which is greater than $3,200. That $10,000 is under the $15,100 cap, so the employee can exempt $10,000. If a very senior employee got, say, $60,000, one-third would be $20,000, but the cap is $15,100 – so they can only exempt $15,100 and the rest is taxable. The phrase “or 1/3, whichever is greater, of the amount… up to $15,100” encapsulates this. This retrenchment exemption reflects compassion for those losing jobs – it softens the tax blow on any golden handshake, allowing them to keep a larger portion to tide them over unemployment. Notably, until 2020 this exemption required the retrenchment to be under an approved scheme, but from 2021 that condition was removed, broadening the relief to all retrenchments. The Finance Acts of 2022 and 2023 then boosted the dollar thresholds in response to inflation and currency changes. Employers apply this exemption via PAYE at termination – only the taxable portion of severance is taxed, and they issue a tax directive.

It’s important that these two exemptions (bonus and severance) apply regardless of the reason for payment (except severance must be retrenchment-related; normal retirement or resignation packages might not qualify unless under retrenchment). They also interact with currency: if someone is paid in ZWL, the law deems them “remunerated in foreign currency” if they fall under certain Finance Act provisions (like Finance (No. 3) Act 2019 for USD equivalence) so that they still get these USD thresholds.

Real-life example (bonus): Tendai, who works for a mining company and is paid in USD, receives a performance bonus of US$500 in December – none of it is taxed, as it’s below $700. His colleague Rudo gets a US$1,200 bonus – she will enjoy $700 tax-free and only $500 is subject to PAYE. If another colleague is paid in Zimbabwe dollars equivalent to US$800 at the time, she also gets the exemption up to that equivalent of $700. This effectively gives all these employees a higher net bonus to take home.

Real-life example (retrenchment): Suppose a company is downsizing and gives a retrenched employee a lump sum of ZWL equivalent to US$9,600. One-third of 9,600 is $3,200 – exactly equal to the minimum threshold. So $3,200 is exempt, and the balance $6,400 is taxable (after conversion to USD for tax calculation). If another long-serving employee gets US$45,000, one-third is $15,000 – which is under the $15,100 cap, so $15,000 exempt, $30,000 taxable. A very high executive gets $90,000; one-third $30,000 would exceed the cap, so “only” $15,100 is exempt and $74,900 taxed. While the cap might not fully shield big packages, for most ordinary workers the one-third rule means a substantial portion of a modest package (and at least $3.2k) is tax-free – a meaningful cushion when facing unemployment.

Zimbabwe’s Finance Act 13 of 2023 (the 2024 Budget) specifically raised the retrenchment exemption from previous levels (it was formerly lower, e.g. $1,000 or so at one point and a lower cap) to keep pace with currency depreciation and maintain real value. The bonus exemption in local currency is likewise adjusted as needed, though the US$700 figure has held for those earning in hard currency.

In sum, these employee-focused exemptions demonstrate an effort to balance the tax system’s revenue needs with equity and social protection. A bonus is often viewed as a once-off reward; taxing it fully could dampen morale, so a standard chunk is forgiven. A retrenchment package is given at a difficult moment; exempting a portion recognizes that the individual needs as much of that money as possible to re-establish themselves. Many countries have similar provisions, but Zimbabwe’s are notable for being clearly quantified in USD terms in the statute (reflecting the multi-currency environment).

Certain pensions and compensatory payments are exempt under Paragraph 5 and 6 of the Third Schedule, in line with the principle that incomes derived from personal injury, old age, or similar social circumstances should not be eroded by tax. These include:

Presidential pensions and benefits: Paragraph 5(a) and (b) exempt any pension or allowance payable in terms of the Presidential Pension and Retirement Benefits Act [Chapter 2:05], as well as the value of any service or facility provided under that Act. In effect, a former President’s pension and perks (office, security, vehicles, etc.) are not taxable. This is to honor the office and ensure former Heads of State receive their full retirement package without tax deductions. It’s comparable to how some countries treat their ex-leaders’ pensions as honoraria.

War veteran and military pensions: Paragraph 6 deals with a range of pensions related to war service or injury. It starts by exempting any war disability pension and any war widow’s pension. These refer to pensions paid to veterans who were injured in war and to spouses of deceased war veterans, often under the War Veterans Act. Additionally, any pension or gratuity paid under the War Veterans Act schemes is exempt. (The law references section 7 of the War Veterans Act – which had established a pension scheme – and regulations under it for war veteran gratuities.) Although that Act was replaced by the Veterans of the Liberation Struggle Act in 2020, the exemption still captures those benefits. The idea is straightforward: payments made in recognition of war service or as compensation for war injuries are not taxed. If someone fought for the country and now receives a modest monthly war veteran pension or a one-time demobilization gratuity, the tax system lets them keep it all.

Social welfare and injury compensation: Paragraph 6(e) exempts any award, benefit or compensation (including a pension) to any person or their dependants for injury, disease, disablement or death suffered in employment. This is a broad exemption covering workers’ compensation payments. For instance, if a miner is injured at work and gets a lump-sum disability compensation from the NSSA Workers’ Compensation Fund or under the law, that amount is tax-free. Similarly, if an employee’s death leads to compensation to the family, that isn’t taxed. It aligns with the principle that compensation for the loss of bodily capacity or life is not income or gain – it’s restitution – and thus shouldn’t be taxed. So a coal miner who develops pneumoconiosis and receives a compensation payout can use it entirely for treatment and livelihood without the taxman taking a share.

War victims and disaster compensation: Paragraph 6(f) exempts any compensation (pension, benefit, etc.) paid under the War Victims Compensation Act. This Act provides compensation for civilians who were injured in the Liberation War. Those payments, often lump sums or pensions to disabled war victims, are not taxed. Likewise, paragraph 6(g) exempts any payment from the Wankie Disaster Relief Fund, a fund that was established after the Kamandama Mine disaster in Hwange (Wankie) in 1972 to support survivors and victims’ families. If that fund disburses money to a victim, it’s tax-free. These specific exemptions are somewhat historical but still in the law, ensuring those affected by those traumatic events aren’t taxed on the relief given.

Pensions on account of old age: A very significant exemption is in Paragraph 6(h): any pension paid from a pension fund or from the Consolidated Revenue Fund to a taxpayer who is 55 years of age or older at the start of the tax year is entirely exempt. In practical terms, if you have retired and you are at least 55, your monthly private pension from, say, Old Mutual or NSSA, or any government pension, is not taxable. This is a major tax concession for the elderly. For example, if a 60-year-old retiree gets a pension of ZWL equivalent US$200 per month, none of that is included in income – it’s all tax-free. The rationale is to assist older citizens on fixed incomes, recognizing that pensions are effectively deferred wages they saved. Zimbabwe’s system thereby spares senior citizens the burden of income tax on their retirement pay (a policy sometimes called “tax-free pensions for those over 55”). This exemption was introduced by Act 8 of 2005 and remains a cornerstone of elderly tax relief. It’s worth noting that if someone took their pension as a lump sum, other rules may apply (lump sums often had partial exemptions elsewhere), but regular pension pay to over-55s is fully exempt.

Retrenchment pension/annuity commutations: Covered by Paragraph 6(h1), this is a companion to the retrenchment gratuity exemption discussed earlier, but specifically for pension/annuity payments linked to retrenchment. It addresses the case where an employee is retrenched and opts to commute part of their future pension or receives an annuity as part of the package (for example, some companies convert severance into an annuity or pay from a pension fund). For those under age 55, such payments would normally be taxable (since they are like early pension benefits), but Paragraph 6(h1) gives a relief: it exempts the greater of US$1,500 or one-third of the commuted pension/annuity, up to a package of US$10,000, with an annual cap of US$1,500 per year. In simpler terms, if a retrenched employee under 55 gets a lump-sum pension payout or an annuity due to retrenchment, they can exclude at least $1,500 (or one-third of it, if that’s more) from tax, limited to cases where the total amount is $10,000 or less – and even then, only $1,500 exemption per tax year if it’s paid over time. This is quite specific. For instance, a 50-year-old retrenchee is given an option to withdraw $9,000 from the company pension fund as part of retrenchment: one-third is $3,000, which exceeds $1,500, so $3,000 is exempt. However, the law says this exemption is applied on packages up to $10k, and only $1,500 per year. So if in one year he actually receives all $9k, I interpret that the first $1,500 of that year’s payment is exempt (the wording is a bit complex – effectively it ensures at least $1,500 of any pension commutation due to retrenchment is tax-free, more if one-third is bigger, but spread out if needed). This provision was updated by Finance Act 8 of 2022 and 13 of 2023 to raise the amounts (previously it was lower, e.g. $1,000). It complements Paragraph 4(p) by addressing not cash severance but pension withdrawals due to retrenchment, so younger workers don’t lose a chunk of what is effectively their retirement money.

Other war-related payments: Paragraph 6(i) and (j) at the end reiterate the war veterans pension and gratuity exemptions (they appear redundant due to earlier subparagraphs, likely due to renumbering errors in the Act). In essence, any veteran’s pension or veteran’s gratuity remains exempt, as already noted. These were inserted in late 1990s and even though the War Veterans Act has changed, the exemption endures (the Veterans of the Liberation Struggle Act of 2020 continues to provide those benefits, so the exemption effectively carries over).

The philosophy here is clear: do not tax compensation for loss or service. If someone is receiving money because they were injured, or because their spouse died in war, or because they are a war hero, or simply because they’ve grown old and are on a pension – those monies are either morally earned or serve to alleviate hardship, and the tax system leaves them alone. This is quite generous especially with the over-55 pension rule – many countries tax pensions (maybe with some credit or reduced rate), but Zimbabwe chose a full exemption, effectively subsidizing retirees.

From a case law perspective, these exemptions are usually straightforward (less litigation-prone since they are clear-cut). One can note that Matewu v Minister of Finance & Others (2024) challenged some aspects of the 2023 Finance Act’s changes on constitutional grounds, but not specifically these exemptions (Matewu case was about process of passing the Act). The exemptions stand as of 2025, benefitting thousands of pensioners and compensation recipients.

Recognizing that some employer-provided benefits are for the welfare of employees and their families, Paragraph 8 of the Third Schedule exempts certain employment benefits in kind or by reimbursement. Specifically:

Medical treatment and transport provided by an employer for an employee or their dependent is not taxed. This includes the situation where an employer pays the hospital or doctor directly, or reimburses the employee, or even provides transportation (like an ambulance or bus fare) for the employee or a family member to get medical care. For example, if a company pays for surgery for a worker’s child, or offers an in-house clinic free of charge, the value of that is not treated as taxable fringe benefit to the employee. Normally, non-cash benefits are taxable (like a company car), but the Act carves out medical support as an exception – presumably to encourage employers to assist with health without the employee worrying about tax on that help. One limitation: this applies to employees, not to board directors who are not also employees (the Act notes a director who isn’t an employee doesn’t get this exemption, likely to prevent high-paid non-exec directors from getting free medical perks tax-free, whereas regular employees can).

Medical Aid contributions: Paragraph 8(2) exempts any contributions an employer makes to a medical aid society on behalf of employees. So if your employer pays, say, $50 per month to CIMAS (a medical aid) for your coverage, you are not taxed on that $50 as a benefit. This encourages employers to provide medical insurance as part of remuneration packages – a critical thing in Zimbabwe’s context. It reduces the cost to the employee of having medical aid, effectively giving them a tax-free compensation element.

School fees/educational assistance: Paragraph 8(3) provides a half exemption for a specific schooling benefit. The Income Tax Act defines in Section 8 certain “benefits” including where an employer pays school fees for employees’ children. Here, para 8(3) says ½ of the value of any school benefit (as defined in sec 8’s “advantage or benefit” definition, specifically paragraph (f)1(a)(vi) of that definition) is exempt, up to a limit of 3 children. In plainer language: if an employer pays school tuition for an employee’s children, only half of that amount is considered taxable income to the employee, and if the employee has more than three children, only three kids’ benefits get the half-exemption – presumably the rest would be fully taxed. This provision was inserted in 2012. It reflects a compromise – education assistance is partially for the employee’s private benefit (so not fully exempt), but it’s also socially beneficial (educated children), so the law gives a 50% break on it. For example, if a mining company pays US$2,000 per term for an engineer’s two children to attend school, ordinarily the $2,000 each would be a taxable fringe benefit (like additional salary). Under this rule, the engineer would only be taxed on $1,000 per child (half), and nothing on the other half. If they had four children, the first three could use the half exemption; the fourth child’s fees might be fully taxed. This incentive likely helps families and encourages employers to invest in employee retention via schooling perks. It’s capped at three children to prevent abuse (someone schooling a whole extended family at employer expense), and the assumption is that very large schooling benefits still face partial taxation.

All these exemptions in Paragraph 8 make up a “social package” of sorts. They encourage employers to cover critical social needs – health and education – by reducing the tax cost. Without these, an employee might decline a medical aid or school fees perk because the tax on it would be high; with these, it’s attractive. It’s also arguably easier on public services if employers voluntarily support their staff in these areas. Many companies in Zimbabwe do pay medical aids and sometimes schooling; the tax law thus complements that practice.

Zimbabwe effectively operates a classical tax system with a relief for local dividends: companies pay corporate tax on profits, and dividends paid out of those taxed profits are then exempt in the hands of shareholders. This is codified in Paragraph 9 of the Third Schedule, which states that any amount received as a dividend from a company incorporated in Zimbabwe, which is chargeable to income tax, is exempt. In short, domestic dividends are not taxed again.

For example, if John owns shares in Delta Corporation (a local company) and Delta pays him a dividend of ZWL 100,000 (out of its after-tax profits), John does not include that dividend in his gross income – it’s completely exempt. The company Delta already paid corporate tax (currently 24% plus AIDS levy) on the profit that sourced that dividend, so this prevents double taxation of the same income. This rule has been in place for decades, although in the past there was a resident shareholders’ tax (RST) which was a form of withholding on dividends. RST was repealed in 2009, moving Zimbabwe fully to the exemption system for local dividends. As a result, since 2009, if you are a Zimbabwe resident shareholder, no further tax is levied on your Zimbabwe-sourced dividends (foreign dividends are another matter – they would be taxable unless a treaty or other exemption applies). Even non-resident shareholders pay only a withholding tax on dividends (15%), but no normal tax beyond that; effectively the withholding is the final tax for non-residents.

It is important to note an anti-avoidance caveat in Paragraph 9: deemed dividends under certain circumstances are not exempt. The Act specifies that amounts deemed to be dividends in terms of section 26(2) or 28(2) are excluded from the exemption. These sections typically refer to situations like undistributed branch profits or loans to shareholders treated as dividends. So, if a closely-held company tries to disguise a distribution (for example, by giving a shareholder an interest-free loan or assets), the Commissioner can deem it a dividend – and in that case it won’t get the tax exemption. This prevents abuse of the dividend exemption by mischaracterizing payments.

Otherwise, the dividend exemption is straightforward. Real-life example: Alice owns shares in a listed company, which declares a $200 dividend to her in 2025. The company will not withhold any tax if Alice is a resident, and Alice will simply not count that $200 in her tax return – it’s fully exempt. If Bob, a foreign investor, gets the same $200, the company withholds, say, $30 (15%) as non-residents’ tax on dividends, and Bob has no further liability – still aligning with the idea that the dividend isn’t subject to normal tax computations beyond withholding.

This exemption makes equity investment more attractive, since individuals don’t suffer incremental tax on dividend income (which might otherwise be taxed at up to 40% if treated as normal income). It also simplifies tax administration (few individuals would have to declare dividend income at all). The cost is revenue loss on passive income, but Zimbabwe has favored capital formation by taxing it lightly. One can compare that interest income, as we’ll see next, is not fully exempt – only certain interest is – indicating a deliberate bias towards equity investment.

Interest earned can be taxable, but Paragraph 10 of the Third Schedule provides a long list of interest-bearing instruments and situations where interest is exempt. The objective is typically to encourage savings in certain vehicles or to lower government’s borrowing costs by making interest tax-free to investors. Key interest exemptions include:

Interest on government securities and similar savings instruments:

Savings certificates issued by law – e.g. old government savings bonds or certificates – interest on these is exempt (para 10(1)(a)).

Post Office Savings Bank deposits – interest on money in the Post Office Savings Bank is exempt (para 10(1)(b)). The POSB traditionally offered savings accounts especially to small depositors, so exempting its interest was a pro-poor encouragement to save.

Tax Reserve Certificates (para 10(1)(c)) – these were instruments taxpayers could buy to set aside money for future tax payments, earning interest. Their interest is exempt to promote their use (though they are less common now).

Any State loan where the interest is stipulated to be tax-free (para 10(1)(d)). Often when government floats bonds, it may declare the interest exempt to attract investors – this clause gives legal effect to such terms. Similarly, para 10(1)(e) lets the Minister declare by statutory instrument that interest on a particular government loan is exempt. For example, the Interest on 4% Government Bonds (Non-Residents) Notice, 1984 declared those bond interest payments to non-residents exempt. This helped the government borrow internationally at lower rates.

Certain development bank loans: interest on loans made by the European Investment Bank (EIB) is exempt (para 10(1)(f)), reflecting an agreement with the EIB. Likewise, interest on loans to the Infrastructure Development Bank of Zimbabwe (IDBZ) by foreign institutional shareholders is exempt (para 10(1)(g)). This was inserted in the 2000s to encourage foreign investment into IDBZ’s infrastructure projects.

Building society Class “C” shares: these are a form of savings share in building societies; interest (dividends) on Class C shares is exempt to the extent provided in their governing regulations (para 10(1)(h)). This historically helped building societies (like CABS, etc.) mobilize funds by offering tax-free returns on certain shares.

Special financial instruments introduced at various times:

(h1), (i), (j) were repealed entries (they used to cover certain old bonds that no longer exist).

Agricultural bonds: para 10(1)(k) and (m) exempt interest on certain agricultural bonds issued by consortia of banks to finance agriculture. These were specific arrangements around late 1990s/early 2000s to fund resettlement and farming (e.g. a Syfrets-led consortium bond for land reform in 2000). The exemption was to entice banks to participate by making the interest they receive tax-free, improving their net return.

National Fuel Facility bonds: para 10(1)(l) exempts interest on bonds issued by RBZ on behalf of the National Fuel Investments Company. This was related to financing fuel imports; again, tax-free interest was a sweetener to investors in those bonds (inserted in 2000).

Diaspora bonds: para 10(1)(p) exempts interest on any “Diaspora Bond” issued by CBZ Bank. This was introduced by Act 5 of 2010. Diaspora bonds were aimed at Zimbabweans abroad to invest in national projects; making the interest tax-free was a way to encourage uptake.

AMA bills: para 10(1)(q) exempts interest on Agricultural Marketing Authority bills issued after 8 Nov 2011. AMA periodically raises money via bills for financing crop purchases (e.g. for Grain Marketing Board). The exemption helps them offer lower yields since investors don’t have to pay tax on the interest (this was added in late 2011).

Small-scale gold miner loans: para 10(1)(r) (mis-lettered due to prior q) exempts interest on loans made to small-scale gold miners for mining or exploration. This was introduced in 2014 to boost gold production by making it attractive for banks to lend to artisanal miners – the interest they earn is tax-free. Conditions include the miner qualifying as a “micro-enterprise” under SME Act schedules. Essentially, a bank could give a loan to a registered small miner to buy equipment and not pay tax on the interest income, hopefully leading to more lending in the sector.

Long-term deposits: para 10(1)(s) and (t) address interest on long-term deposits. Specifically, interest on deposits with a tenure over 12 months is exempt. This policy was introduced in 2014–2015 (and renumbered a couple of times) to encourage savings of over a year by not taxing the interest earned on such fixed deposits. Given Zimbabwe’s historically short-term savings culture, this incentive was to promote longer-term funding in banks. For example, if an individual places money in a 18-month fixed deposit, the interest they earn will be exempt from tax (whereas a 3-month deposit’s interest would be taxable via withholding). It’s a significant incentive for those willing to lock away funds.

Loans to statutory corporations: para 10(1)(u) exempts interest on any loan to a statutory corporation, if that loan is approved by the Minister by notice. This broad power was (after some confusion in numbering) effectively backdated to apply from 2009, aimed at making it easier for parastatals to borrow money. For instance, if the Zimbabwe Power Company (a statutory corp) floats a bond and the Minister approves it for exemption, investors won’t pay tax on the interest, making the bond more attractive (hence lower interest cost to the company). This has been used in practice for infrastructure bonds.

As one can see, Paragraph 10 is lengthy – it essentially lists out all the scenarios over time where government said, “We want to make this borrowing/savings instrument attractive; let’s not tax its interest.” Some of these items are dated (like specific 2004 land reform bonds), but many are ongoing (like long-term deposits, diaspora bonds, AMA bills which are still issued, etc.).

For ordinary savers, the most relevant are the long-term deposit exemption and an important one in subparagraph (n) and (o) introduced in 2019/2020: the interest for senior citizens. These were highlighted in the training notes:

Interest for taxpayers aged 55 or above: Paragraph 10(1)(n) exempts the first US$3,000 of interest per year from any deposit with a financial institution, for individuals aged 55 or older. Paragraph 10(1)(o) does the same for interest from banker’s acceptances or similar discounted instruments for those seniors. Essentially, if you are 55+, up to $3,000 of your interest income in a year is tax-free (covering bank deposits, money market instruments, etc.). If you earn $4,000 interest, $3k is exempt, $1k is taxable. If you earn exactly $3k or less, you pay no tax on interest. This exemption was put to give a break to retirees and seniors who often rely on interest from savings as income. As of the end of 2023, the age threshold was lowered to 55 (it used to be 59) and the exempt amount standardized to US$3,000 (which has changed over the years – the notes show a history of adjustments from ZW$ millions pre-dollarization to US$ after 2009). This means a 56-year-old with fixed deposits and treasury bills, etc., doesn’t pay tax on the first $3k interest earned. It encourages savings for retirement and acknowledges that interest rates might be low, so a basic amount should be untaxed.

For resident individuals in general (not seniors), note that Zimbabwe imposes Residents’ Tax on Interest (RTI), a withholding tax of 15% on bank deposit interest. However, Paragraph 10A then exempts any interest from which RTI is required to be withheld. In other words, if an interest income is subject to the 15% withholding at source, the law treats that interest as final-taxed and does not tax it again in the recipient’s hands. So, for example, if a 40-year-old earns $500 interest from a one-year bank deposit, the bank withholds 15% ($75) and the $500 interest is exempt from further income tax by virtue of para 10A – the 15% was the final tax. This prevents double taxation and simplifies things (the person doesn’t declare the interest or pay extra tax beyond the withheld amount). Essentially, RTI interest is exempt from normal tax because the withholding is the final liability.

So practically: an ordinary individual under 55 with a regular savings account – the bank will deduct RTI on any interest and that’s the end of it; that interest is not included in their taxable income calculation. If the individual is 55+, the first $3k of interest should actually be free of even withholding – banks usually have to apply the exemption and not withhold on that portion (the mechanics require perhaps filing a form). But even if withheld, the senior can get a refund or not be charged further.

All told, Zimbabwe’s interest exemptions target government debt, development finance, and senior citizen savings. Interest that doesn’t fall under an exemption – e.g. corporate bonds held by a 40-year-old – would either be subject to RTI (if through a financial institution) or normal tax if not captured by withholding. Non-residents’ interest is generally subject to a 5% or 10% withholding tax (if not exempt by a treaty or by these rules, like EIB loans which are exempt, etc.).

Paragraph 11 of the Third Schedule provides a targeted exemption to encourage certain foreign loans. It says that, subject to some conditions, interest accruing to a person who is not ordinarily resident in Zimbabwe and who isn’t carrying on business in Zimbabwe is exempt if the interest is on:

a loan to a statutory corporation,

and formerly a loan to a building society made before a certain date (that part (e) was repealed in 2010 as it was outdated).

In simpler terms, if a foreign investor or bank lends money for mining in Zimbabwe, or lends to the government or municipalities or parastatals, the interest they earn is not taxed in Zimbabwe (no withholding, nothing). This is a big incentive: it effectively means these types of loans yield gross interest to the lender. For example, a UK bank lends $10 million to Harare City Council for water infrastructure at 6% interest – the $600,000 interest annually is exempt from Zimbabwean tax, so the UK bank gets full 6%. If this exemption didn’t exist, Zimbabwe might impose, say, 15% withholding leaving the lender only 5.1% effective, possibly deterring the loan or causing demand for higher interest. Similarly, if a Canadian mining finance company provides exploration funding to a Zimbabwean miner with interest, it can receive that interest free of local tax, presumably making it easier for the miner to attract the loan.

However, there are anti-avoidance clauses in Paragraph 11(3) to prevent misuse by residents routing loans through offshore or by foreign parents. The exemption does not apply if:

(a) The interest would be taxable in the lender’s home country solely because it’s exempt in Zimbabwe. This is a bit complex, but it addresses tax haven scenarios. It implies that if the only reason the foreigner isn’t taxed at home is because Zimbabwe didn’t tax it, then Zimbabwe will also not exempt it (i.e. to avoid a double non-taxation). It seems aimed at situations where a treaty might allow the home country to tax interest only if Zimbabwe didn’t – though in practice not many cases like that.

(b) If the foreign lender is actually a company controlled by Zimbabwe residents or doing business here, then no exemption (so locals can’t just set up an offshore shell to give themselves a tax-free loan).

(c) If the loan interest is paid from a Zimbabwe subsidiary to its foreign parent company, the exemption won’t apply if certain conditions aren’t met. Essentially, for a foreign parent to get interest from Zim tax-free, that interest must be taxable in the parent’s country and the Zimbabwean tax that would have been paid (but for the exemption) would have been creditable in that country. This prevents a scenario where a multinational might capitalize a Zim subsidiary with loans to extract profits as untaxed interest rather than dividends – unless they’d have paid tax anyway back home. If the parent is in a high-tax jurisdiction where the interest will be taxed and Zimbabwe’s foregone tax would just be a credit, then it’s okay to exempt it here. But if the parent is in a tax haven (no tax on interest), then Zimbabwe doesn’t exempt – it would want to tax it since no one else will. In practice, this is a safeguard to ensure the exemption is used genuinely to attract third-party loans and not intra-group profit shifting to zero-tax jurisdictions.

With those safeguards, Paragraph 11’s exemption is a powerful tool to attract foreign capital for key areas: mining and public sector financing. Mining is capital-intensive and often funded by foreign venture capital or loans; offering interest exemption can tilt decisions in Zimbabwe’s favor compared to other countries. Similarly, government and municipalities often borrow from development banks – those banks usually demand tax-free interest via host country guarantees; this provision gives legal basis for that.

For example, if the City of Bulawayo issues a bond and a South African fund buys it, interest could be exempt under the local authority clause. Or if ZESA (a parastatal) takes a loan from a Chinese bank for power equipment, interest is exempt as it’s a statutory corporation loan. These make borrowing cheaper for the borrower because the lender didn’t ask for a higher rate to cover taxes.

The interplay of these interest exemptions (Paragraphs 10, 10A, 11) shows a pattern: Zimbabwe doesn’t uniformly exempt all interest (that would open a tax loophole too wide). Instead, it selectively exempts interest that either furthers development goals (government bonds, infrastructure, agriculture, small businesses) or eases access to financing (foreign loans, long-term deposits), while generally taxing other interest (via withholding) to raise revenue from investment income.

Finally, the Third Schedule contains several specific exemptions that don’t fall neatly into earlier categories, but are important to note:

Alimony (Maintenance): Paragraph 12 (implied) – the Third Schedule lists an item (un-numbered in our text but effectively Paragraph 12) that “An amount received by way of alimony, howsoever paid” is exempt. This means any spousal maintenance payments after divorce or separation are not considered taxable income to the recipient. For example, if a court orders a husband to pay his ex-wife ZWL 200,000 per month for maintenance, the ex-wife does not pay tax on that money. It is treated as a private support payment, not income earned. (Correspondingly, the payer cannot deduct it for tax either – maintenance isn’t deductible). This exemption ensures that someone (usually a divorced spouse) receiving funds for their upkeep – which is more in the nature of personal support – isn’t treated like they earned income. It aligns with many tax systems that exclude personal maintenance and child support from taxation.

Traditional Beer Sales for Community Benefit: Paragraph 13 exempts income from the sale of traditional beer under the Traditional Beer Act [Chapter 14:24], to the extent the proceeds are devoted to the purposes required by that Act. Under that Act, certain authorized brewers (often rural district councils or chiefs’ councils) brew and sell traditional beer and must use the proceeds for community development (like building wells or roads in the communal area). This exemption means if, say, a rural township sells $5,000 worth of traditional beer and, as legally mandated, spends it on local infrastructure or development, the $5,000 isn’t taxed. It would be counter-productive to tax money that by law must go to community projects. Essentially it facilitates grassroots fundraising for local improvements without the tax collector taking a share.

Government Export Incentives (Export Bonus): Paragraph 14 exempts any amount paid by the State to an exporter of goods under an export development scheme (excluding any refund of import duty). This covers various export incentive programs the government might run. For instance, in the past the government had export incentives where exporters got a bonus or a premium for bringing in foreign currency. A recent example was the Export Credit Incentive (ECI) or Export Bonus Scheme around 2016–2017, where RBZ paid exporters a bonus in Bond Notes or credited accounts with a percentage of export proceeds (5% or so). Paragraph 14 ensures such bonuses are not taxed. If an exporter earns $100,000 from exports and government gives a 5% bonus ($5,000) in local currency, that $5,000 is exempt. The rationale is obvious: it’s a government grant to encourage exports, so taxing it would defeat its purpose. The training notes mention it’s a percentage of exports and specifically not a duty refund, meaning it’s truly an incentive, not a rebate (duty drawbacks are anyway not income but reimbursements). Thus any exporter’s rebate or bonus funded by the State – as long as it’s under an official scheme – comes tax-free to the exporter, maximizing the benefit to them.

Business expense allowances: Paragraph 15 exempts any amount of an allowance referred to in section 16(1)(m) of the Act, to the extent that it is expended on the business of the employer. In practice, section 16(1)(m) refers to certain entertainment or similar allowances given to employees. What this means is: if an employer gives an employee an allowance to cover business-related expenses (like a client entertainment allowance, travel per diem, etc.), and the employee actually uses it for the employer’s business, then that portion used is not taxable income for the employee. Only any unexpended portion (effectively, any personal benefit) would be taxable. For example, an executive is given a ZWL 100,000 monthly entertainment allowance to wine and dine clients. If in a month she spends ZWL 80,000 on actual client dinners and has ZWL 20,000 left over (or spends on herself), the ZWL 80,000 is exempt and only ZWL 20,000 would be treated as her income. The law essentially prevents employees from being taxed on money that merely passes through them for business expenses. It is similar to the principle that genuine reimbursements are not taxable. This is particularly relevant in cases like sales staff who get lump-sum allowances for fuel or entertainment – they won’t be penalized tax-wise for the portion they truly spend for work. The training material explicitly calls this “that portion of an entertainment allowance… expended on the employer’s business” is exempt. It’s a fair rule to avoid discouraging employers from giving such allowances or employees from using them properly.

RBZ Export Incentive (EFI): Paragraph 16 (as substituted by 2018) exempts the export incentive premium paid by the Reserve Bank of Zimbabwe on export proceeds and certain foreign remittances. This refers to the scheme from around 2016 where RBZ paid exporters a bonus in bond currency (initially 5%, later varied) for earnings and also an incentive for diaspora remittances. The law was amended to exempt these receipts retrospectively from 1 June 2016. It was effectively a central bank policy tool to increase liquidity and encourage export and remittance inflows, packaged as a “Remittance Incentive”. By exempting it, the policy’s effect was preserved. (Note: The paragraph also notes it was repealed in 2005, then reintroduced in 2017 and changed in 2018 to cover this scenario. By 2020, with the bond note scheme ending, this incentive largely phased out; but for the period it applied, it was tax-free. If an exporter got a 5% bonus in 2017, none of that bonus was taxed.)

Industrial Park Developer: Paragraph 17 exempts the receipts and accruals of an industrial park developer from their industrial park, for the first five years of operation. This incentive was introduced to spur development of industrial parks/zones. If a company establishes an approved industrial park (a cluster of factories or multi-industry zone), it gets a tax holiday for 5 years on the income directly from operating that park (like rental income from leasing factory shells, etc.). For instance, if in 2025 XYZ Properties sets up an industrial park and is approved by the Minister as such, then from 2025 through 2029, XYZ’s rental and service income from tenants in the park is exempt. This significantly improves the project’s viability and payback. This was part of a 2017/2018 drive to attract investment into manufacturing infrastructure, and effectively lowered the cost for developers to recoup their costs. After 5 years, the income becomes taxable normally.

Duty Exemption Certificate Trading: Paragraph 18 exempts any amount received from the sale, disposal or transfer of a duty exemption certificate issued by the RBZ to an exporter qualifying for a duty rebate. This is a niche provision: at one time, exporters under certain incentive schemes were given certificates that allowed them to import inputs duty-free or at a rebate. Some exporters might not need to use the full certificate and could legally sell it to another importer. This paragraph makes sure if they sell that certificate (which is essentially selling the right to a duty rebate), the money they get is not taxed. It’s a somewhat peculiar scenario, but consider: an exporter gets a duty-free certificate for $100,000 worth of imports. If the exporter’s own imports are only $60,000, they might transfer $40,000 of the certificate to another company for a fee. That fee is exempt from income tax (it’s sort of an arbitrage of a government benefit). This was inserted around 2001 when such certificates were more common. It prevents underutilization of incentives (exporters wouldn’t lose out by selling excess certificates), and acknowledges that the value comes from a government privilege, not normal trading income.

Employee Share Ownership Trusts: Paragraph 19 exempts any amount accruing to an employee from the sale to (or redemption by) an approved employee share ownership trust of the employee’s stake in that trust. In other words, if employees participate in a properly approved employee share ownership scheme (ESOP) – often these are trusts holding shares on behalf of employees – and later the employee cashes out their shares/units, the money they get is exempt. For example, a mining company sets up an ESOP trust that holds 10% of the company’s shares for employees. When an employee leaves or after a lock-in period, the trust might buy back the shares from the employee or redeem units for cash. This payout is not taxed as income for the employee. The logic: it’s meant to encourage broad-based empowerment and ownership by employees. If those pay-outs were taxed, it could discourage participation or reduce the benefit’s impact. The exemption only applies if the trust is an “approved” one – approval under indigenisation or empowerment laws or Commissioner’s approval likely. The case Old Mutual Zimbabwe Ltd v ZIMRA (2016) dealt with such an ESOP issue, confirming that amounts employees got from an employee share trust were not ordinary taxable income. Essentially, it treats those distributions as capital (like sale of shares, which typically could be subject only to capital gains tax if at all, but here even CGT might be waived by this specific exemption). This encourages companies to set up employee ownership plans during indigenisation programs by ensuring employees truly benefit tax-free when value is realized.

(Paragraph 20 was an exemption for certain power generation projects’ income, introduced in 2018, but it was repealed in 2020** before it took effect). Thus, currently there is no Paragraph 20 exemption applicable – any such projects now presumably negotiate tax incentives individually or fall under other provisions.

With that, we have covered all the categories listed in Section 14 and the Third Schedule. One can see that outdated items (like the repealed para 20, or the Deposit Protection Fund item replaced by a new Act, etc.) have either been removed or are noted as inactive. In compiling this 2025 lecture note, we have excluded thresholds or provisions that no longer apply – for instance, any references to ZW$ amounts from pre-2009 have been updated to the USD-based thresholds now in force, and the COVID-19 frontline risk allowance exemption (Paragraph 4(y)) which was time-bound for 12 months from April 2020 has run its course (we mention it here for completeness: it exempted the extra “risk allowances” paid to nurses, doctors and other health workers during the first year of the pandemic, reflecting national gratitude – it expired after that year). We have also integrated Finance Act 2023/24 updates: for example, the bonus USD 700 threshold (Act No. 2 of 2024), the new retrenchment limits (Act 13 of 2023), the lowered senior interest age (Act 13 of 2023), and others, all of which are effective in 2025.

In conclusion, Zimbabwe’s income tax exemptions are a patchwork reflecting historical, economic, and social policy goals. For a student or new tax practitioner, the key is to recognize the rationale behind each: public bodies (no point taxing government itself), charities and clubs (supporting public benefit and mutual activities), incentives for savings and investment (making certain bonds or deposits more attractive), relief for individuals (older persons, severance, etc.), and compliance with international norms (diplomatic immunities, foreign aid). Case law has occasionally clarified these – e.g. FC Platinum case on club status, Endeavour on public trusts, Old Mutual on employee schemes – underscoring that one must meet the exact requirements to enjoy the exemption. If an entity or person falls outside the narrow wording, normal tax applies. Thus, careful analysis is needed: for instance, if a company limited by guarantee doesn’t strictly meet Paragraph 2(d) club criteria, it might be taxable despite non-profit intentions.

By keeping these exemptions in mind, one can legitimately minimize tax liabilities (tax planning often involves channeling activities into exempt forms where possible) but must also heed that the tax authorities and courts strictly interpret them (since exemptions are exceptions to the rule that income is taxable). Importantly, any Finance Act changes usually update threshold amounts rather than remove exemptions – so the framework we’ve described is likely to persist, with figures like the bonus or retrenchment caps changing over time in response to inflation and currency changes.

This completes the comprehensive overview of income tax exemptions under Zimbabwean law as of February 2025. The Third Schedule serves as a checklist – if an item of income fits one of its paragraphs (and none of the exclusionary conditions of Section 14(2) or (3) apply), then that income is simply not taxed. All other income will be part of gross income and potentially taxable. A solid grasp of these exemptions allows one to properly compute taxable income and also to understand the policy direction of Zimbabwe’s tax system – which oftentimes leverages exemptions as incentives or reliefs to achieve broader economic objectives.