The Reserve Bank of Zimbabwe says there is no legal gap regarding the status of the Zimbabwe Gold (ZiG), which was established in terms of the Presidential Powers (Temporary Measures) Act in April this year, stressing that currency reforms remain an ongoing process.
Zimbabwe has since February 2019 been working to re-establish its domestic currency, which had been scrapped in 2009 due to hyperinflation.
The Government believes the country's economy cannot prosper without a viable domestic currency, given the litany of constraints tied to a limited foreign currency, especially the United States dollar.
This comes after Treasury last week promulgated legal provisions, through the Finance Act, 2024, for the payment of at least 50 percent of taxes in the domestic currency, as part of measures the Government believes will drive demand for and anchor the stability of the ZiG.
The central bank's response follows unofficial claims on various media platforms purporting that the ZiG had expired following the lapse of Statutory Instrument 60 of 2024, which introduced the domestic unit.
"Currency reforms by their nature do not lapse simply because the instrument that introduced them has lapsed. The lapse of the Presidential Powers that introduced the currency does not, therefore, create a gap in the law.
"Legally, currency reform measures are only revoked by another legal instrument. Meanwhile, it should be noted that the Finance Act 2024, which has been gazetted into law, simply declares the provisions of SI 60 of 2024 and does not seek to validate them.
"Thus, ZiG remains the country's legal tender and the Reserve Bank will continue to promote its use and stability," the central bank said in a statement issued by its corporate affairs department yesterday.
ZiG was introduced in April this year as part of several measures to stabilise the exchange rate, tame inflation and drive economic growth.
In June this year, the Government allowed companies to account for income tax in both local and foreign currencies on a 50:50 basis, with the option to settle such obligations in line with the proportions in which income is earned.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube proposed, in his 2024 mid-term budget review, to amend legislation and compel any corporates whose revenue exceeds 50 percent in foreign currency to account for Corporate Income Tax on a 50:50 basis.
Furthermore, where a company's revenue exceeds 50 percent in local currency, he proposed that tax shall be payable proportionately in the currency of trade thereof.
The latest provisions on payment of taxes were introduced through the amendment of Section 4A (Payment of certain taxes in foreign currency) (1) of Finance Act (Chapter 23:04).
They form part of several interventions by monetary and fiscal authorities to promote wider use and stability of the ZiG, which replaced the inflation-battered Zimbabwe dollar.
In terms of the new provisions, which give legal effect to mid-term budget proposals by Prof Ncube, a person other than a company, trust or pension fund, whose income from trade or investment is received in whole or partly in forex, shall pay at least half of the tax in ZiG if the income exceeds 50 percent in hard currency.
"With effect from 1st July, where such a person received or accrued more than 50 percentum of total income in foreign currency, such a person shall account for tax as if half of the income is earned in foreign currency.
"For the purpose of converting any such foreign currency...tax shall be paid in local currency at the official rate of exchange on the day of payment," reads an excerpt from Finance Act, 2024.
Similarly, the requirement applies to companies, trusts, pension funds and any other juristic person.
Likewise, a person liable to presumptive tax in terms of Section 36C of the Taxes Act, as read with Section 22C of the Finance Act, shall pay their tax obligations in local currency, at the official exchange rate, notwithstanding the currency of trade.
According to Finance Act, 2024, provisions, for the period April 1, 2023 to June 30, 2024, being the second quarterly installment of provisional tax payable for the 2023 year of assessment, taxpayers are required to remit half the tax payable in local currency.
And for the period April 1, 2024 to June 30, 2024, the second quarterly income tax payment period for 2024, taxpayers are required to settle "as if half of the income was earned in foreign currency at the official exchange rate on the day of payment".
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Reinforcement measures to promote wider use, demand and stability of ZiG include the requirement for presumptive tax to be paid in local currency.
This will bring into the tax bracket sections of informal businesses notorious for dodging taxes and resisting the use of domestic currency in their transactions.
The informal sector constitutes an estimated 60-70 percent of Zimbabwe's economy, making interventions to bring them into the tax loop critical for economic growth and development.
These informal traders are now required to pay the equivalent of 10 percent of their monthly rentals as presumptive tax.
Others include operators of taxicab businesses, omnibuses, goods vehicles, driving schools, hairdressing salons, restaurants, bottle stores, cottage industry, commercial water-borne vessels, beauty and massage parlours, gymnasia and fitness centres, cross-border traders, architects, engineers, legal practitioners, health practitioners and real estate agents.
