In Zimbabwe, certain types of income are subject to withholding tax – a tax withheld at source by the payer and remitted to the Zimbabwe Revenue Authority (ZIMRA). Withholding taxes apply mainly to passive incomes such as interest, dividends, fees for services, remittances of branch profits, and royalties. These taxes are generally final taxes on those incomes, meaning the withheld amount satisfies the income tax obligation on that income. We will examine each category of withholding tax in detail – covering the legal basis in the Income Tax Act (and Finance Act), current rates in United States dollars (USD) and Zimbabwean dollars (ZWL) as of 2025/26, illustrative examples for both individual and corporate payers/recipients, cross-border implications (such as double tax agreements and foreign tax credits), and whether each tax is final or non-final for tax purposes. A summary comparison table is provided at the end.

Legal Basis and Scope: Section 34 of the Income Tax Act [Chapter 23:06] establishes a Residents’ Tax on Interest (RTI). The detailed rules are in the Twenty-First Schedule of the Act. This tax applies to interest paid or credited by any financial institution (e.g. banks, building societies or unit trusts) to individuals or entities ordinarily resident in Zimbabwe. In other words, when a Zimbabwean resident earns interest from a local financial institution, the paying institution must withhold RTI and remit it to ZIMRA.

Current Rates (USD and ZWL): The standard withholding rate on interest paid to residents is 15% of the gross interest. This rate is the same whether the interest is paid in ZWL or USD; however, the tax must be remitted in the currency of receipt (ZWL for ZWL interest, USD for USD interest). There is an important concession for longer-term deposits: interest on fixed-term deposits with a tenure of at least 90 days is subject to a reduced 5% withholding rate. In practice, most ordinary savings or money-market interest earned by residents will attract 15% RTI, while qualifying fixed deposits enjoy the 5% rate. These rates are final – no further income tax is charged on the interest income once RTI is withheld.

Note: Interest from sources other than financial institutions (for example, interest on a private loan between individuals or on debentures) is not subject to RTI withholding. Instead, such interest is included in the recipient’s taxable income and taxed at the normal tax rates (e.g. 25% for companies or the progressive individual rates).

Examples – Individuals vs Companies:

• Individual example: Tendai, a Zimbabwe-resident individual, has a savings account that earned interest of USD $200 in a month. The bank will deduct 15% ($30) as residents’ tax on interest and pay Tendai the remaining $170. Tendai does not need to declare this interest on his tax return – the $30 withheld is a final tax and satisfies his tax liability on the interest. If Tendai placed funds in a 6-month fixed deposit that earned $200 interest, the bank would withhold only 5% ($10) under the special rate for long-term deposits, given the incentive for longer tenures. Again, that $10 is final, and Tendai’s interest income is otherwise tax-free.
• Company example: A local company (e.g. a manufacturer) keeps surplus cash in an interest-bearing account. In a quarter it earns ZWL 1,000,000 in interest. The bank withholds 15% (ZWL 150,000) as RTI. Final Tax Treatment: That interest is exempt from further corporate income tax because the 15% withholding is a final tax. The company will not include the ZWL 1,000,000 interest in its gross income for tax purposes (or if it does, it will claim an exemption or exclude it, since the interest was taxed at source). This is beneficial to the company, as the 15% RTI is lower than the standard 25% corporate tax rate – effectively an incentive for using formal financial instruments.

Cross-Border/International Implications: Notably, until recently Zimbabwe did not levy withholding tax on interest paid to non-residents, to encourage foreign investment in debt and banking instruments. Thus, if the recipient of Zimbabwe-source interest was a non-resident, no RTI was withheld (interest to foreigners was exempt). However, this is changing – effective 1 January 2026, Zimbabwe is reintroducing a Non-Residents’ Tax on Interest at 15% on interest paid to non-resident persons. For example, if a South African investor earns interest on a Zimbabwean bank deposit in 2026, the bank will withhold 15%. Double Taxation Agreements (DTAs) may limit the rate on interest – many of Zimbabwe’s treaties cap interest withholding to around 10% or less. A non-resident investor could claim a foreign tax credit in their home country for the Zimbabwean RTI withheld, if permitted by that country’s tax law. Note that certain interest payments are excluded from withholding even under domestic law (e.g. interest paid by the government or on certain government bonds may be exempt, and interest payable to International Financial Organisations might be excluded by statute).

Final or Non-Final?: Residents’ tax on interest is a final tax. Once the 5% or 15% is withheld at source, the interest income is not subject to any further income tax in Zimbabwe. The recipient (individual or company) does not pay additional tax on that interest, nor is it included in the taxable income calculation (aside from disclosure, if required). If for some reason RTI was not withheld when it should have been, the law requires the payee or payer to rectify this – but in normal operation, the withheld amount settles the tax due on that interest.

Legal Basis and Scope: Section 28 of the Income Tax Act introduces Resident Shareholders’ Tax (RST) on dividends. This is a withholding tax on dividends distributed by Zimbabwean companies to Zimbabwe-resident shareholders. Every company incorporated in Zimbabwe is required to deduct RST from any dividend it pays to a resident shareholder and pay it over to ZIMRA. The detailed rules are in the Fifteenth Schedule of the Act. In essence, whether a resident individual or a resident company receives a dividend from a local company, that dividend may be subject to RST at source.

Current Rates (USD and ZWL): The standard withholding tax on dividends paid to residents is 15% of the gross dividend. However, if the dividend is from a company listed on the Zimbabwe Stock Exchange (ZSE), a lower rate of 10% applies as an incentive for listed securities. (These percentages apply regardless of currency – the tax on a USD dividend is calculated in USD and remitted in USD, same for ZWL.) Additionally, Zimbabwe in recent years introduced the Victoria Falls Stock Exchange (VFEX), which deals in foreign-currency investments. Dividends from companies listed on the VFEX carry an even lower withholding rate of 5%. (The 5% rate is particularly aimed at attracting investment in VFEX-listed companies, and in practice most VFEX investors are non-residents. For consistency, however, a VFEX-listed company dividend to a resident would also be withheld at 5% at source.)

Some domestic dividends are explicitly exempt from withholding tax. For example, amounts distributed by certain building societies on special share classes are excluded from the definition of “dividend” for purposes of these taxes. Similarly, distributions deemed to be a return of capital (as determined by the Commissioner) are not treated as dividends. Also exempt are dividends paid to approved pension, benefit, or charitable funds (which typically have tax-exempt status), and dividends paid by licensed investors in special economic zones out of their export-related profits. Aside from such exceptions, most ordinary dividends to residents attract a 10% or 15% withholding.

Administration: For resident shareholders’ tax, the paying company must remit the withheld tax within 10 days of the dividend payment date (this remittance deadline is shorter than for some other withholdings). The shareholder should be provided a tax certificate showing the gross dividend and tax withheld.

Examples – Individuals vs Companies:

• Individual example: Mary, a Zimbabwean resident individual, owns shares in a local private company (unlisted) that declares a dividend of ZWL 100,000 to her. The company will withhold 15% (ZWL 15,000) as resident shareholders’ tax and pay Mary ZWL 85,000 net. Mary’s tax obligation on this dividend is fully satisfied by the ZWL 15,000 withheld – she does not include the dividend in her gross income on her tax return. The 15% RST is a final tax on that dividend income. If Mary instead held shares in a company listed on the ZSE that paid the same dividend, the withholding would be 10% (ZWL 10,000) due to the lower rate for listed companies. If it were a VFEX-listed stock, only ZWL 5,000 (5%) would be withheld.
• Company example: XYZ Pvt Ltd, a Zimbabwean-resident holding company, owns 50% of another local company that declared a USD $20,000 dividend. XYZ will receive $20,000 minus withholding. Because the shareholder (XYZ) is resident, the paying company applies RST. If the subsidiary is not listed, 15% ($3,000) is withheld; if it were listed on ZSE, 10% ($2,000) is withheld; if listed on VFEX, 5% ($1,000) is withheld. The net dividend is paid to XYZ. For XYZ Pvt Ltd, that dividend income is excluded from taxable income – inter-company dividends within Zimbabwe are effectively tax-free beyond the withholding. The $3,000 (or $2,000/$1,000) withheld is final tax, and XYZ does not pay additional corporate income tax on the dividend receipt. This prevents double taxation of the same profits at the corporate-shareholder level. (Foreign dividends are treated differently – see below.)

Cross-Border Considerations: Resident Shareholders’ Tax specifically concerns resident recipients. If the shareholder is not a Zimbabwe resident, the tax falls under Non-resident Shareholders’ Tax (discussed next). One area worth noting is the treatment of foreign dividends for Zimbabwe residents. Dividends from a company incorporated outside Zimbabwe are not eligible for the low withholding rates; instead, foreign dividends are taxed as normal income for residents, at a special rate of 20%. For example, if a Zimbabwean individual receives a dividend from a South African company, no local withholding occurs, but that income should be declared and taxed at 20% in Zimbabwe (with credit for any foreign withholding under a DTA). This is outside the RST regime but is relevant for comparison. DTAs generally do not affect RST because RST applies to domestic shareholders; however, DTAs do influence how Zimbabwe taxes outbound dividends to foreign shareholders (covered under NRST below).

It’s also noteworthy that deemed dividends can trigger RST. If a local company tries to make payments to a resident investor that are effectively disguised profit distributions, the law can treat those payments as dividends for RST purposes. For instance, if Company A (resident) pays excessive management fees to its resident parent Company B beyond the limit allowed by law (Section 16(1)(q) of the Act caps deductible management fees within groups), the excess is deemed a dividend to Company B. Section 28(2) of the Act (as amended by Finance Act) provides that any amount paid inside Zimbabwe by a local company in excess of the allowable deductions for management fees or interest (thin capitalization) “shall be deemed to be the payment of a dividend” on which resident shareholders’ tax is chargeable. This prevents companies from avoiding dividend tax by re-characterizing distributions as fees or interest.

Final or Non-Final?: Resident Shareholders’ Tax is a final withholding tax. The shareholder does not pay any further income tax on the dividend. As noted, individuals do not include the dividend in taxable income, and companies receiving the dividend typically treat it as tax-exempt income (since the company paying it would have paid corporate tax on profits already). The withheld RST cannot be claimed as a credit against other taxes – it is the final liability on that income. The only time the underlying dividend might enter a tax computation is if a required withholding was not made – in which case ZIMRA can recover it from the company or even the shareholder, but once properly withheld, that income is tax-settled.

Legal Basis and Scope: Section 26 of the Income Tax Act imposes Non-Resident Shareholders’ Tax (NRST) on dividends. The Ninth Schedule to the Act contains the mechanics. NRST applies when a Zimbabwean company pays a dividend to a shareholder who is not ordinarily resident in Zimbabwe (this includes foreign individuals, foreign companies, and non-resident partnerships). In practice, this is a withholding tax on dividends remitted abroad or to non-resident investors. The paying company must withhold NRST and remit it to ZIMRA. (If a resident company receives a dividend on behalf of a non-resident – e.g. as an paying agent or nominee – it must also ensure NRST is withheld and paid.)

Current Rates: The NRST rates mirror the resident dividend WHT in many ways, with some incentives for listings: for unlisted companies, the NRST is 15% of the gross dividend; for companies listed on the Zimbabwe Stock Exchange, the rate is 10%; and for Victoria Falls Stock Exchange (VFEX) listed companies, the rate is 5%. These rates apply to all non-resident shareholders unless reduced by a tax treaty. The withholding is usually done in the currency of the dividend (USD or ZWL as applicable). The tax must be remitted to ZIMRA within 30 days of the dividend declaration/payment (longer than the 10-day window for RST, recognizing cross-border payment logistics). The non-resident shareholder should be provided a certificate showing the dividend and tax withheld.

Certain dividends are excluded from NRST by statute. Many of the exclusions are the same as for RST (e.g. building society special shares, return of capital, etc. – these amounts are not considered “dividends” for tax purposes). Additionally, dividends paid to international institutions like the International Finance Corporation (IFC) or dividends from licensed investors in export processing zones are exempt. Such exclusions encourage investment by development institutions and export-oriented capital. For the vast majority of standard company dividends paid to foreign investors, however, NRST will apply at 5%, 10%, or 15% as noted.

Examples:

• A UK-based investor owns shares in a private Zimbabwean company (not listed) and is paid a dividend of USD $10,000. The company must withhold 15% NRST ($1,500) and will remit that to ZIMRA within 30 days, paying the investor $8,500 net. The investor receives a withholding tax certificate. From Zimbabwe’s perspective, the $1,500 is final tax on that dividend. The UK investor may then claim a foreign tax credit of $1,500 in the UK, if the UK taxes that dividend and the UK-Zimbabwe DTA (Double Tax Agreement) allows credit. In many treaties, the NRST is creditable against home country tax on dividends. If the Zimbabwean company was listed on the ZSE, the withholding would be 10% ($1,000) rather than 15%. If it were listed on VFEX, only 5% ($500) would be withheld, making Zimbabwe an attractive destination for portfolio investors.
• A South African parent company owns 100% of a Zimbabwean subsidiary. The subsidiary declares a dividend of ZWL 50 million to its parent. Under domestic law, 15% (ZWL 7.5 million) NRST would apply. However, Zimbabwe and South Africa have a tax treaty: typically, such treaties reduce dividend withholding tax when the recipient is a substantial shareholder. For example, the treaty might cap the rate at 10% or even 5% if the parent owns a significant percentage (often at least 25%) of the company. Assuming the treaty cap is 10%, the Zimbabwean company would withhold ZWL 5 million (10%) instead of 7.5 million. The South African parent could then credit that against its South African tax (or if dividends are exempt in SA, it simply incurs the 10% cost). This example shows how DTAs can override domestic NRST rates to the investor’s benefit. Zimbabwe’s DTAs with countries like South Africa, the UK, China, etc., generally limit dividend withholding to 10% or lower – and in some cases 5% for large shareholdings. The paying company needs to obtain proof of the investor’s tax residence/treaty entitlement to apply the reduced rate; otherwise, it withholds at the full domestic rate.

One special scenario involves branch profits or excess payments: If a local branch of a foreign company or a subsidiary of a foreign company makes payments to its foreign head office or parent that exceed what’s allowable as a deduction (for example, paying more management fees, interest, or head-office charges than the tax law permits), the excess amount is deemed a dividend and becomes subject to NRST. The Finance Act 2024 reinforced this: any amount paid outside Zimbabwe by a local branch or subsidiary of a foreign company in excess of the deductible limit (per Section 16(1)(q), (r), (t)) “shall be deemed to be the payment of a dividend” on which NRST is charged. Essentially, this prevents profit extraction via inflated expenses – such amounts will be treated like dividends to the foreign company and taxed at 15% (or treaty rate) NRST.

Final or Non-Final?: Non-Resident Shareholders’ Tax is a final tax in Zimbabwe on the dividend income of the non-resident. The foreign shareholder has no further tax liability in Zimbabwe once NRST is paid. They are not required to file a return for that income. However, the non-resident may have to declare the dividend in their home country and can typically claim the NRST as a foreign tax credit or have the dividend exempted under participation exemption rules, depending on that country’s laws. In Zimbabwe, the profits out of which the dividend was paid have already likely been taxed at the corporate level (e.g. 25% corporate tax on company profits), and NRST is a secondary tax on distribution. From the Zimbabwean tax perspective, the chain of taxation for that income stops at NRST. If NRST was not properly withheld, ZIMRA can pursue the paying company or appointed agents for the tax (with penalties up to 100% of the tax for failure to withhold). But if properly withheld, it’s the final settlement.

Legal Basis and Scope: Section 30 of the Income Tax Act establishes Non-Residents’ Tax on Fees (usually abbreviated as “NRTF”). This withholding tax applies to certain fees paid by Zimbabwean residents to non-residents for services. The Seventeenth Schedule of the Act defines the scope of “fees” for this purpose. In general, it covers payments to non-resident persons (individuals or companies) for technical, managerial, administrative or consulting services performed in or for Zimbabwe. For example, if a Zimbabwean company hires a foreign consulting firm or pays a foreign expert for services used in Zimbabwe, NRTF may be applicable. The tax is triggered when the payer is resident in Zimbabwe (or a Zimbabwean permanent establishment) and the payee is a non-resident who earned fees from that Zimbabwean source.

There are a few notable scope details: The law often excludes payments for services that are of a trivial nature or those specifically classified as employment income (which would instead fall under PAYE). Also, fees related to certain export promotion activities may be excluded or exempt. The Schedule defines “export market services” – services rendered to seek or boost export opportunities – and allows an exemption for fees paid to foreign agents for export market development (capped at 5% of FOB value). In practice, this means if a Zimbabwean business pays a foreign agent to secure export orders, that fee might not attract withholding (to encourage exports). Other exemptions include fees paid by licensed investors in special economic zones for services, and payments to foreign governments or institutions under specific agreements. But generally, payments for professional or technical services rendered by non-residents to Zimbabwe will attract this tax.

Current Rate: 15% is the withholding rate on gross fees paid to non-residents. This rate is the same irrespective of currency (if a fee is invoiced in USD, 15% of the USD amount is withheld and remitted in USD; if in ZWL, 15% in ZWL). There is no separate tiered rate structure – a flat 15% applies to all taxable fees to non-residents, unless a DTA provides relief. The payer must withhold the 15% at the time of payment or credit and remit it to ZIMRA (typically within 10 days of payment, as provided in the Schedule for agents receiving money on behalf of a non-resident). If the non-resident receives the fee gross without withholding (perhaps by oversight or if paid abroad), the law actually requires the non-resident to pay the 15% themselves to ZIMRA within 30 days – though in practice ZIMRA usually enforces it on the payer.

Examples:

• A Zimbabwean manufacturing company engages an IT consultancy firm based in India to provide software development services remotely, for a fee of USD $50,000. Under NRTF rules, the Zimbabwean company, being the payer, must deduct 15% ($7,500) as non-residents’ tax on fees when paying the invoice. It will then remit $7,500 to ZIMRA and pay the Indian firm the net $42,500. The Indian firm receives a certificate for the $7,500 tax withheld. From Zimbabwe’s perspective, that tax covers the income tax on the Indian firm’s fee income in Zimbabwe. The Indian firm would look to the India-Zimbabwe tax treaty: if the treaty has a technical fees article or treats such services as business profits, it might limit Zimbabwe’s taxing right. For instance, if the treaty said “no tax on services in Zimbabwe absent a permanent establishment (PE)”, then the Indian firm could claim a refund or exemption (with proper clearance) so that the 15% would not apply. However, without prior clearance, the Zimbabwean payer will still withhold first and the firm would then have to seek a refund by proving treaty protection. In the absence of treaty relief, the firm can often credit the $7,500 against its Indian taxes on that income.
• A local Zimbabwean bank pays annual license fees of EUR 100,000 to a software company in Germany for a banking system (a technical service/software maintenance performed partly from abroad). This payment would be considered a fee for services (royalty vs fee can be a fine line, but assume this is treated as a services fee rather than royalty for software use). The bank must withhold 15% (EUR 15,000) NRTF and remit it. If Zimbabwe has a DTA with Germany, and that DTA limits fees/royalty withholding to, say, 7.5%, the German company could invoke the treaty. Ideally, the German company would provide a certificate of tax residence and request the reduced rate upfront, so that only 7.5% is withheld. Otherwise, it might have to reclaim the excess from ZIMRA later. The German company could credit the Zimbabwean withholding when paying its taxes in Germany on that fee income.

Cross-Border and Treaty Aspects: Non-residents’ tax on fees is a classic instance of source-vs-residence taxation. Zimbabwe, as the source country, withholds 15%. Many Double Taxation Agreements can reduce or eliminate this tax. Some of Zimbabwe’s older treaties do not have a specific article for technical or management fees – in those cases, such income might fall under the “Business Profits” article, meaning Zimbabwe cannot tax it if the foreign company has no permanent establishment in Zimbabwe. For example, the UK-Zimbabwe treaty and the South Africa-Zimbabwe treaty would typically prevent Zimbabwe from taxing business profits of a foreign company absent a PE. In such situations, a foreign service provider can claim an exemption from NRTF (no 15%) if it operates purely from abroad and has no PE in Zimbabwe. Other treaties (like with China or Mauritius) sometimes include a clause allowing a reduced rate (e.g. 10% on technical fees). According to Zimbabwean authorities, almost all of Zimbabwe’s DTAs cap withholding taxes on dividends, interest, royalties and fees to 10% or less. Thus, treaty residents often benefit from a lower effective rate on service fees – but the treaty relief is not automatic; the non-resident must usually apply to ZIMRA for treaty relief or claim a refund later.

From the Zimbabwean side, if a payer fails to withhold when required, ZIMRA will hold the payer personally liable for the tax, plus penalties of 100% of the tax in some cases. So local companies are careful to assess if a payment to a foreign entity might attract NRTF or not. Some payments might be structured as payments for goods or software licenses (royalties) rather than fees for services, in order to fall under a different category of withholding (royalties have the same 15% rate though).

Final vs Non-Final: For the non-resident recipient, the 15% NRTF is generally a final tax in Zimbabwe – it discharges their Zimbabwe tax liability on that fee income. The foreign service provider normally does not file a tax return in Zimbabwe (unless they choose to, perhaps if they believe their net profit is much lower and want to be taxed on net income by registering a branch – but this is uncommon). The Income Tax Act even provides a mechanism (Section 95) that if a non-resident proves that NRTF was withheld from their fees and they were subject to income tax assessment in Zimbabwe on those same fees, the withheld amount is credited against the income tax. In practice, this means if somehow the non-resident had a permanent establishment and the fee was part of its taxable business profits in Zimbabwe, the 15% withheld would be credited against the tax on those profits. However, in the normal case of no PE, the non-resident is not additionally assessed – the withholding is the final tax. For the Zimbabwean payer, the withheld tax is not an expense of the payer (it’s the recipient’s tax withheld), and the fee paid (net of tax) is usually deductible in full as a business expense provided it is arm’s length and not in excess of the 0.75% restriction on head-office/administration fees (for related party payments) under Section 16(1)(q). If the fee is in excess of that cap for related parties, the excess is disallowed as a deduction (and if paid abroad to a related foreign parent, could be deemed a dividend for NRST as discussed). But that is a limit on deduction, not on the withholding – the full gross fee still would suffer 15% withholding when paid out.

In summary, NRTF is a final withholding tax in Zimbabwe. The foreign payee’s Zimbabwe tax obligation is fully met by the 15% withheld (or lower treaty rate). The foreign payee then only deals with taxation in their home country (utilizing credits if available).

Legal Basis and Scope: Section 31 of the Income Tax Act creates Non-Residents’ Tax on Remittances (NRTR), detailed in the Eighteenth Schedule. This tax is commonly understood as a branch profits tax or remittance of profits tax. It applies to Zimbabwe-source income earned by a branch or permanent establishment of a non-resident, when that income is remitted or deemed remitted to the head office abroad. In simpler terms, if a foreign company operates in Zimbabwe without a subsidiary (i.e. through a branch), after paying normal corporate tax on its profits, any repatriation of those after-tax profits to the home country attracts a further withholding tax. The tax can also apply to other types of remittances from Zimbabwe to a non-resident that are not covered under other categories. Historically, this provision was used to tax things like head office charges, management fees, or other amounts extracted by a branch of a foreign firm, to ensure some tax symmetry between branches and subsidiaries (since a subsidiary would pay dividend withholding tax on profits distributed).

The Eighteenth Schedule defines what amounts are considered “remittances” for tax purposes. Essentially, any amount paid by a Zimbabwean branch to its foreign head office, or any amount “dealt with” in a way that it leaves Zimbabwe for the benefit of the non-resident parent, can be deemed a remittance. For example, if a branch earns profit and simply transfers the funds to the overseas head office, that transfer is a remittance. Also, excessive charges paid by a branch to the head office can be deemed a remittance of profit (though as of 2025, such excesses are more directly treated as dividends under section 26(2) for NRST if it’s a subsidiary, or similarly caught for branches).

Current Rate: The withholding tax on remittances is 15% of the amount remitted. This rate is flat (no reduced rate for any special scenario in domestic law, and it applies regardless of currency). The branch is responsible for withholding/remitting this tax at the time of the remittance. For instance, if a branch intends to send $100, it should withhold $15 for tax and remit $15 to ZIMRA, only $85 leaves the country. By law, the tax should be paid to ZIMRA within 10 days of the remittance or such time as the Commissioner may allow (similar administrative timeline as other withholdings).

Example: A foreign company (let’s say based in Mauritius) operates in Zimbabwe as a branch (not a separate subsidiary). In 2025, the branch’s taxable profits in Zimbabwe are $1,000,000. It pays corporate income tax on those profits at 25% (i.e. $250,000) to ZIMRA through its annual tax return. This leaves $750,000 of after-tax profit. If the branch then remits this $750,000 to its head office (transfers the funds out of Zimbabwe as a dividend to itself, effectively), it must pay 15% of $750,000, which is $112,500, as non-residents’ tax on remittances. The head office will thus net $637,500. The $112,500 is turned over to ZIMRA. The overall effective tax on the branch’s profits ends up being 25% + (15% of the remaining 75%) which is about 36.25%. This is analogous to the scenario if the foreign company had instead incorporated a local subsidiary: the subsidiary would pay 25% corporate tax on profits, then a 15% dividend withholding on the after-tax dividend – resulting in the same combined tax burden. NRTR essentially puts branches on a similar footing as subsidiaries distributing dividends.

Another example: consider a scenario where instead of formally remitting declared profits, a branch might make a large payment to its head office labeled as “head office expenses” beyond what’s reasonable. Zimbabwean law (Section 16(1)(q) & (r)) limits the deduction for head office administrative expenses to 0.75% of turnover. If a branch pays more than this to head office, that excess could be deemed a remittance of profits (since it’s effectively taking profits out under the guise of an expense). ZIMRA would then subject that excess to the 15% remittance tax. However, as mentioned earlier, recent amendments target such excess payments to treat them as deemed dividends for NRST or as nondeductible remittances. In any event, the tax outcome is that 15% applies to profit outflows.

Treaty Implications: Many double tax treaties do not explicitly cover branch profit taxes. Some treaties include a provision limiting tax on permanent establishments’ repatriated profits (for example, the US model treaty allows a contracting state to levy a branch profits tax up to a certain rate, often equivalent to the dividend rate). Zimbabwe’s treaties with countries like the UK, Netherlands, etc., do not specifically mention branch remittance tax, meaning Zimbabwe likely retains the right to impose it. However, a few treaties (if any) might implicitly restrict it through nondiscrimination clauses (which say a PE should not be treated less favorably than a local company). Arguably, branch profits tax could be seen as treating a PE of a foreign company differently than a locally incorporated company – but since a locally incorporated subsidiary also suffers a secondary tax (dividend WHT), one can argue nondiscrimination isn’t violated. Thus, in practice, Zimbabwe’s 15% NRTR generally applies unless a treaty explicitly limits it. Some investors structure through countries with treaties that reduce dividend WHT to 5% (like Mauritius or Netherlands); however, if they operate as a branch, that treaty benefit might not directly apply, because the branch tax isn’t labeled a “dividend”. Most often, serious investors incorporate a subsidiary to access treaty dividend rates rather than operate as a branch.

From the foreign company’s perspective, the branch profit after Zimbabwe taxes might either be taxable or exempt at home. If taxable, some countries might give credit for the Zimbabwe corporate tax and possibly also for the branch remittance tax, treating it akin to a dividend withholding. For example, if the foreign is in a country that allows underlying tax credits, they might credit both layers. Others might not give credit for branch profit taxes specifically. This is a complex area of international tax; suffice to say that the 15% NRTR can sometimes be an additional cost if not creditable. It incentivizes foreign investors to consider local subsidiaries (taking advantage of treaty WHT reductions) rather than branches, if treaties are favorable.

Final or Non-Final: Non-residents’ tax on remittances is a final tax on the repatriation of profits. The branch (or person making the remittance) pays it, and the foreign recipient (head office) has no further tax obligation in Zimbabwe on those remitted profits. The branch itself, being part of the same legal entity as the foreign company, doesn’t get a “refund” or credit of that tax against its corporate tax – it is a post-profit distribution tax. In Zimbabwe’s tax computation for the branch, profits are taxed and that’s it; the remittance tax is not part of the income tax computation but rather a withholding on distribution. Therefore, once the 15% is paid, the matter is closed on Zimbabwe’s side. If a branch chose to reinvest profits in Zimbabwe and not remit them, then no remittance tax would apply (just as retained earnings in a subsidiary don’t trigger dividend tax until distributed). Should the branch later close operations, there could be a final remittance tax on the repatriation of any remaining funds.

If for some reason NRTR was not withheld when it should have been (say a branch quietly transferred funds out without paying), ZIMRA can enforce payment from any assets of the branch or through the local banking system. The law makes the payer (the branch or its bankers) liable for the tax if not paid. But generally, a branch can’t expatriate money through formal channels without clearing the tax, since exchange control and tax clearance procedures in Zimbabwe will flag large outflows.

In summary, NRTR is a final withholding tax on branch profit remittances, ensuring Zimbabwe collects a share of repatriated profits akin to dividend WHT. Once paid, the foreign company’s Zimbabwe tax obligations on those profits are fully settled.

Legal Basis and Scope: Section 32 of the Income Tax Act provides for Non-Residents’ Tax on Royalties, with rules in the Nineteenth Schedule. A “royalty” for tax purposes is defined broadly to include any amount paid for the use of or right to use intellectual property rights (patents, trademarks, copyrights, designs, models, plans, formulas, processes) or for the use of industrial/commercial/scientific equipment, as well as payments for knowledge or information (know-how). It essentially covers licensing fees, franchise fees, and similar payments for intangible assets. If the payment is from a Zimbabwean source to a non-resident, then withholding tax on royalties applies.

To clarify “source”: a royalty is deemed Zimbabwe-source and subject to this tax if either (a) the payer is ordinarily resident in Zimbabwe, or (b) the royalty is for the use of or right to use intellectual property or rights in Zimbabwe. This means even if a foreign company pays another foreign company for IP used in Zimbabwe, it could be considered Zimbabwean source (though practically, most royalties will involve a local payer). For example, a local mining company paying a foreign owner for the right to use a patented extraction process in Zimbabwe must withhold this tax.

Current Rate: The withholding rate on royalties paid to non-residents is 15% of the gross royalty. This is a final tax on the gross amount; no deduction for expenses by the licensor is allowed at the withholding stage. As with other withholdings, the tax is to be remitted in the currency of payment (15% of a USD royalty in USD, etc.). The payer must withhold and pay the tax to ZIMRA within 10 days of the royalty payment date. (The law specifies 10 days from payment for royalties, reflecting the expectation of prompt remittance.) A withholding certificate must be provided to the payee (showing the gross royalty and tax withheld). If an agent in Zimbabwe receives a royalty on behalf of a non-resident and the tax wasn’t withheld by the original payer, that agent is required to withhold and pay 15% upon delivering the funds to the non-resident – ensuring the tax can be collected even if payment routes are indirect.

Examples:

• A Zimbabwean music recording company pays USD $20,000 to a UK-based music label for the rights to distribute an international artist’s songs in Zimbabwe. This payment is a royalty (payment for copyright use). The Zimbabwean company must deduct 15% ($3,000) as non-residents’ tax on royalties and remit that to ZIMRA within 10 days of payment. The UK label receives $17,000 net and a tax certificate for $3,000. Under the UK-Zimbabwe DTA, suppose the royalty article limits withholding to 10%. The UK label could have provided a residency certificate and asked for the reduced 10% upfront, in which case only $2,000 (10%) would be withheld. If 15% was withheld without treaty relief at payment, the label can file for a refund of the 5% excess from ZIMRA or simply claim the $3,000 as a credit in the UK (the UK would credit up to the treaty rate of 10%, the extra 5% might not be creditable if it violates the treaty limit).
• A local gold mining company pays an annual fee of ZWL 50 million to an Australian company for the use of patented mining technology and support. This fee constitutes a royalty. The mining company withholds 15% (ZWL 7.5 million) and remits it to ZIMRA. After withholding, the net amount is sent overseas. The Australian company will examine the Zimbabwe-Australia tax treaty: if it caps royalties at say 10%, the Australian company can claim a refund for the 5% difference or ensure future payments are withheld at 10%. The Australian company will likely get a credit for the Zimbabwean tax against its Australian tax (Australia would tax the royalty as income, but since it’s business income, there might be other nuances, possibly treated under the treaty’s royalties article if defined as such).

Cross-Border Considerations: As with other passive income, Zimbabwe’s network of DTAs often limits the royalty withholding tax. A typical treaty might cap it at 10% or even lower (some treaties with Western countries have 10%, with some exceptions – e.g., the Sweden-Zimbabwe treaty might have a lower rate for certain royalties). If a treaty is in force, the non-resident can avail themselves of the lower rate by providing proof of residence and that they are the beneficial owner of the royalty. According to Zimbabwean sources, almost all signed DTAs limit royalty withholding to 10% or less. For example, treaties with the UK, South Africa, China, etc., generally set the max royalty tax at 10%. A notable point: Zimbabwe does not differentiate for tax purposes whether the intellectual property owner is in a tax haven or not – the same 15% applies by law. (This is in contrast to some countries that impose higher rates for payments to tax havens.) However, if no treaty exists, 15% is the flat rate.

From the foreign recipient’s perspective, the Zimbabwean withholding is usually creditable against their home income tax on the royalty income. If the foreign jurisdiction has an exemption for foreign royalties or some special regime, the credit might not be needed. But typically, e.g., a UK company would include the royalty in taxable income and credit the 15% Zimbabwe tax (up to the treaty rate). Some countries consider royalties as active business income if connected to a PE, but then a PE in Zimbabwe would mean the income was taxed on net basis – in that case, Zimbabwe wouldn’t have imposed WHT, it would tax through the PE’s profits. Section 96 of the Act provides that if a non-resident who had royalties taxed by withholding can show that those royalties were also subject to normal income tax in Zimbabwe, the withheld amount is credited. This again is mainly to cover scenarios like the non-resident having a local branch.

Administration and Compliance: If a payer fails to withhold the 15% royalty tax, the law makes the payer personally liable for the tax, plus a penalty equal to 100% of the tax. ZIMRA is very strict on this – any company paying royalties abroad must obtain a tax clearance or will have the bank insist on seeing proof of withholding. Royalty payments often also require Exchange Control approval in Zimbabwe, and one condition for approval is usually that tax obligations are met. So compliance is tightly enforced.

Final or Non-Final: Non-residents’ tax on royalties is a final tax from Zimbabwe’s perspective. The foreign licensor does not file a tax return in Zimbabwe for that royalty income; the 15% (or treaty-reduced rate) satisfies Zimbabwean tax on that income. The income is not subject to further Zimbabwean income tax. As mentioned, if somehow the licensor had a taxable presence (PE) in Zimbabwe and the royalties were effectively connected with that PE, they’d then be taxed on net income at normal rates, and the WHT could be credited or waived to avoid double tax. But that is rare – typically, IP owners don’t have local PEs. Thus, the withholding is the first and last instance of taxation in Zimbabwe on the royalty. The tax is “final” in that the rate is fixed on gross and does not get recalculated on assessment. The foreign recipient’s home country will then determine the final tax treatment of that royalty (with credit for Zimbabwe’s cut).

In summary, the 15% royalty WHT is a final withholding tax in Zimbabwe. It secures revenue for Zimbabwe from the exploitation of intellectual property and know-how in Zimbabwe, without burdening the foreign licensor with Zimbabwe’s full tax filing process. Once withheld and paid, the foreign licensor’s obligation is complete here.

Throughout the above discussion, a recurring concept is whether the withheld tax is final (i.e. no further tax computation is required on that income) or non-final (i.e. the withholding is merely an advance payment to be credited against a normal tax liability). In Zimbabwe’s tax system, the withholding taxes on investment income (interest, dividends, royalties) are explicitly designed to be final taxes. This finality has important implications for both residents and non-residents:

Final Taxes (No further inclusion in taxable income): When a tax is final, the income on which it is levied is generally exempt from further taxation and often does not even need to be reported in the normal tax return (or is reported as a separate exempt item). For example, residents’ interest and dividend incomes that suffered RTI or RST are not included in the computation of the resident’s taxable income. The rationale is to simplify tax administration and avoid double taxation. The withholding at source is considered to have discharged the tax liability on that income. Similarly, for non-residents, the various withholding taxes (NRST, NRTF, NRTR, royalties) are final – the non-resident has no additional liability beyond the withheld amount, and they typically do not file a return in Zimbabwe. Final withholding taxes mean no refunds or assessments are involved (except in cases of error or treaty override).

Non-Final (Withholding as Credit): An example of a non-final withholding in Zimbabwe would be the 10% withholding on payments to local contractors without a tax clearance. That withholding is not the final tax; it is credited against the payee’s eventual income tax (and any excess can be refunded). However, none of the categories in our list are of this type – they are all final by design. Another example is PAYE on employment income – it’s a withholding, but since individuals still file annual returns in some cases, PAYE is a prepayment, not a final tax. In contrast, withholding on interest, dividends, fees, etc., are final so long as the underlying income isn’t required to be assessed under normal tax (which it isn’t, unless something unusual occurs).

Treatment in Taxable Income Calculation: If an income is subject to a final withholding tax, it is typically excluded from the recipient’s gross income for purposes of the ordinary tax calculation, or if included (for disclosure), it is deducted out via an exemption. For instance, the Income Tax Act provides that interest from financial institutions, though technically income, is exempt from further income tax because it’s subject to RTI. Dividends from local companies are similarly not taxed again in the hands of the shareholder (which also aligns with the policy of avoiding economic double taxation of corporate profits). On the other hand, if an income is not subject to final WHT (say a Zimbabwean earned foreign dividends), then it is taxed under normal rules.

Credits for Non-Residents with PE: The Act’s Sections 95 and 96 (for fees and royalties, respectively) we cited illustrate a scenario where withholding tax could be converted from final to a credit. They say, in effect, if a non-resident proves the withheld tax was on income that was actually assessed to normal income tax, then the WHT is credited. In simpler terms, if the non-resident ends up in the normal tax net (likely through having a permanent establishment or some taxable presence), then the withholding was not final – it was a prepayment and the final tax is the assessed income tax on net income. However, absent such a situation, the withholding stands alone as final.

Final Tax Advantages: Final withholding taxes greatly simplify compliance for taxpayers. A resident individual who only earns bank interest and dividends, for example, may have no need to file a tax return – since those incomes were fully taxed at source. It also provides certainty; the tax is a fixed percentage of gross, and whatever one receives net is post-tax. This is especially convenient for foreign investors who can then focus on tax in their home jurisdiction. For the tax authority, final WHT ensures collection at source (often easier to administer than chasing taxpayers later) and reduces administrative burden.

Final Tax Disadvantages: One downside is that final gross-based taxes can either under-tax or over-tax specific taxpayers relative to net income. For instance, a foreign consultant whose profit margin is very low still pays 15% on gross fees, which could be higher than 25% on their net profit if their costs were high. But Zimbabwe chooses simplicity and source-tax assurance over fine-tuned net taxation in these cases. Likewise, an individual in a very low income bracket might have had bank interest taxed at 15% final, even though their marginal rate on that interest if added to other income might have been 0% (below the threshold) – so final WHT can be a bit harsh on low-income earners. To mitigate that, Zimbabwe often sets tax-free thresholds or exemptions (e.g. the first ZWL interest from savings might be exempt – in the 2020s budgets, there were discussions of exempting small amounts of interest or pension interest). As of 2025, most interest is taxed from dollar one, but the rates are relatively low.

Conversion of Currency: A practical note when dealing with final taxes in a multi-currency system is that taxes are paid in the currency of the transaction. So if a dividend was declared in USD, the 10% or 15% WHT is paid in USD to ZIMRA. If interest is earned in ZWL, the 15% RTI is paid in ZWL. This ensures neither party gains or loses on exchange. ZIMRA maintains separate foreign currency accounts for collecting these taxes.

In summary, all the withholding taxes we have discussed (with the exception of special cases like contractor’s withholding or PAYE) are final taxes. The payer withholds, remits to the Revenue Authority, and the payee’s tax obligation on that income is fulfilled. These taxes simplify tax enforcement on passive and cross-border incomes and are a common feature in Zimbabwe’s source-based tax system.

Below is a summary table comparing the key features of the various withholding taxes in Zimbabwe: