FUNGAI CHIMWAMUROMBE AND SIMBARASHE MUKWEKWEZEKE
The elderly persons of Zimbabwe are rewarded sometimes by little-known concessions and tax breaks as recognition for all their years of contribution to the Zimbabwean fiscus.
Enabled through Income Tax act (Chapter 23:06), Capital Tax Act (Chapter 23:01) and the current Finance Act (Chapter 23:04) which is amended from time to time, are various tax mechanisms aimed as cushioning our elderly from the harsh effects of retirement and allow them to enjoy retirement with the extra income.
Before going into the individual tax concessions, it’s important to first note that the minimum age to enjoy tax benefits is fifty-five (55) years of age.
Undoubtedly, the most attractive concession is that of the exemption of capital gain tax for the disposal of the elderly’s private primary residence. Basically, what it means in these times where the elderly downsizes what would have become the empty nest, they can be rest assured that any benefits they receive due to property value increase is free from capital gains tax.
The important point to note on this point is that there is no financial limit placed on the exempt disposal proceeds. This is provided by section 10(l) of the Capital Gains Act.
The definition of a principal private residence plays a central role as it is not merely a residence owned by the elderly person, but that defined by section 21(1) (a). As per the aforementioned provision, the definition is as follows:-
dwelling” means a building, or any part of a building, which is used wholly or mainly for the purpose of residential accommodation;
“principal private residence”, in relation to an individual, means—
(a) a dwelling which is proved to the satisfaction of the Commissioner—
(i) to have been that individual’s sole or main residence throughout the period that he owned it; or
(ii) to have been that individual’s sole or main residence for a period of four years or more
immediately before the date of its sale, or for such shorter period immediately before the date of its sale as the Commissioner considers reasonable in all the circumstances; or
(iii) to have been regarded by that individual as his sole or main residence, even though he was prevented from residing in it as provided in subparagraph (i) or (ii) in consequence of his employment or for such other cause as the Commissioner considers reasonable in all the circumstance;
(b) subject to subsection (5), any land, whether or not it is a piece of land registered as a separate entity in a Deeds Registry, which—
(i) is owned by the individual concerned; and
(ii) surrounds or is adjacent to the dwelling referred to in paragraph (a); and
(iii) is used by the individual concerned primarily for private or domestic purposes in association with the dwelling referred to in paragraph (a);
The definition clearly shows that it should be the main residence for which a person resides, and any other residences and holiday homes would be liable for capital gains tax.
Capital gains tax for proceeds from marketable securities such as shares is also exempt although the tax-free credit is capped at an upper limit of $140 000.00 per annum for each taxpayer of fifty-five years and above. The exemption is made in terms of section 10(m) of the Capital Gains Tax Act (Chapter 23:01).
Most of our elderly heroes are reliant on rental income and it is for this reason they are granted a tax credit of ZWL 3000 or USD 300 per annum currently which may be amended from time to time.
Another area of income tax concession afforded to the elderly is the tax-free status of income received from registered financial institutions as interest on fixed deposits and deposits which is capped at the first USD3000.00 and ZWL30 000.00 per annum with anything over these amounts attracting tax at rate of 24% since it is income flowing from trade and investment.
For the elderly still employed or engaged in any other income generating projects they are allowed a tax credit of USD 900.00 or ZWL9000.00 per annum which basically reduces their tax liability by the provided tax credit.
As is the nature of termination of employment where a person is often granted sale or ownership of their motor vehicle which used, our elderly are entitled to receive this benefit tax free upon their retirement or termination of their employment. Still on the issue of after retirement, our elderly have a tax-free pension to look forward to as long as it’s received from a pension fund or the consolidated Revenue fund.
It is however important to note the latter is only exempt income tax and the recipient would still be liable to pay other taxes such as value added tax and the Intermediated money transfer tax, popularly known as the 2% tax.
While, the suitability those on retirement of the amounts provided for may be debated, one must acknowledge they go a long way in assisting the elderly and they must be encouraged to make use of them. Our elders are encouraged to make use of tax concessions and increase their tax compliance.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at firstname.lastname@example.org and WhatsApp 0772 997 889. Simbarashe Mukwekwezeke is a Senior Associate at Chimwamurombe Legal Practice and can be contacted at email@example.com