Budget proposals on regulation of informal sector in Zimbabwe

FUNGAI CHIMWAMUROMBE AND BHEKIMPILO MANGENA

The 2025 National Budget, unveiled on the 28th of November 2024 has proposals that seek to formalise the informal sector under Revenue Measures.

Titled ‘’Taxation of the Emerging Sector’’ sections 572 through to 581 provides for the formalisation of the informal sector by removing Presumptive Tax and introducing Personal and Corporate Income Tax.

The Minister of Finance and Economic Development , Professor Mthuli Ncube, has authority prescribed in existing legislation to designate a category of persons earning income from trade to be registered for Income Tax.

According to the Minister, survey results have shown that the informal sector carries out significant economic activities. Sectors to be formalised Section 576 of the 2025 national budget statement specifically identifies the following for mandatory registration for Corporate and Personal Income Tax:Fabric Merchandisers; Clothing Merchandisers/Boutiques; Spare Parts Dealers; Car Dealers; Grocery and Kitchenware Merchandisers; Hardware Operators; and Lodges. The rationale given is that such businesses have capacity to maintain books of accounts but deliberately conceal such records, a move akin to tax avoidance and/or evasion.

In addition to tax registration with the Zimbabwe Revenue Authority (ZIMRA), the given operators should transact through Point of Sale (POS) machines and maintain records of all transactions from the 1st of January 2025. Requirements for Tax RegistrationTax registration may be done for individuals involved in trade without need to register a company first. The registration process identifies the nature of business and will result in the need to do monthly PAYE and quarterly income tax returns. Informal businesses also have the opportunity to register as a Private Business Corporation (PBC) if there is a single member (shareholder) and/or private limited company if it has more than one member. Operationalisation of a bank account is a pre-requisite for tax registration purposes for both individuals and corporates.

Penalties for non-complianceHefty penalties were proposed for non-compliance with proposed measures and these differ per category as follows:Spare parts dealers, Grocery and Kitchenware merchandisers – US$9 000.00Card dealers and Hardware Operators – US$15 000.00Fabric and clothing merchandisers (boutiques) – US$12 000.00Lodges – US$5 000.00Additionally, the Minister proposed that ZIMRA be empowered to temporarily close businesses which fail to adhere to tax registration and fiscalisation proposals. Closed operations will be allowed to re-open upon tax registration and payment of applicable taxes.ConclusionThe proposed formalisation of the informal sector will go a long way in redefining Zimbabwe’s economic landscape as focus moves towards achieving targets for National Development Strategy I which comes to an end in December 2025. The proposed measures shall also have a positive contribution to Zimbabwe’s National Financial Inclusion Strategy II (2022-2026) given need to open bank accounts.

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted through email fungai@zenaslegalpractice.com.

Bhekimpilo Mangena is a registered Legal Practitioner, Public Accountant and a Business Consultant at Zenas Consulting (Pvt) Limited and can contacted through bheki@zenasconsulting.co.zw.