Capital Gains Tax Act PDF

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CHAPTER 23:01

CAPITAL GAINS TAX ACT Acts 54/1981, 30/1982, 32/1983, 7/1984, 24/1984, 19/1985, 4/1988, 16/1988, 22/1989, 10/1990, 19/1990, 21/1991, 17/1992, 12/1993, 19/1994, 13/1996, 29/1998, 21/1999, 22/1999, 18/2000, 22/2001, 27/2001, 15/2002, 10/2003, 17/2004, 18/2004, 29/2004, 2/2005, 8/2005, 6/2006, 12/2006 16/2007, 3/2009;5/2009. 1/2014. SIs: 222E/1999.

ARRANGEMENT OF SECTIONS PART I PRELIMINARY

Section

1. Short title. 2. Interpretation.

PART II ADMINISTRATION

3. Delegation of functions by Commissioner. 4. [Repealed] 5. [Repealed]

PART III CAPITAL GAINS TAX

6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.

Charging of capital gains tax. Calculation of capital gains tax. Interpretation of terms relating to capital gains tax. When capital amount deemed to have accrued. Exemptions from capital gains tax. Deductions allowed in determination of capital gain. Circumstances in which no deductions may be made. Damage to or destruction of specified asset. Determination of fair market price of specified assets. Transfers of specified assets between companies under the same control. Transfers of specified assets between spouses. Transfer of business property by individual to company under his control. Provisions for sales of immovable property under suspensive conditions. Provisions relating to credit sales where ownership passes. Provisions for the reductions in costs of specified assets. Provision for sales of principal private residences. Substitution of business property.

PART IIIA CAPITAL GAINS WITHHOLDING TAX

22A. Interpretation in Part IIIA. 22B. Capital gains withholding tax. 22C. Depositaries to withhold tax. 22D. Agents to withhold tax not withheld by depositaries. 22E. Payee to pay tax not withheld by depositary or agent. 22F. Exemptions. 22FA. Registration of depositaries. 22G. Depositaries to furnish returns. 22H. Penalty for non-payment of tax. 22I. Refund of overpayments. 22J. Credit where tax has been withheld. 22K. Application of Part IIIA to sales concluded before 1.1.1999. 22L. Suspension of provisions of Part II A to marketable securities.

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PART IV RETURNS AND ASSESSMENTS

23. Application of provisions of Taxes Act relating to returns and assessments.

PART V REPRESENTATIVE TAXPAYERS

24. Application of provisions of Taxes Act relating to representative taxpayer.

PART VI OBJECTIONS AND APPEALS

25. Objections and appeals.

PART VII PAYMENT AND RECOVERY OF TAX

26. Day and place for payment of tax.

PART VIII GENERAL

27. 28. 29. 30. 30A. 31.

Application of provisions of Taxes Act relating to offences, evidence, forms and regulations. Application of provisions of Taxes Act relating to relief from double taxation. Application of provisions of Taxes Act relating to tax avoidance. Transitional provision re capital gains and losses of married women. Capital gains tax not withheld in terms of Part IIIA to be paid before transfer of specified asset. Returns by Registrar of Deeds , financial institutions and other persons.

AN ACT to provide for the raising of a tax on capital gains, and to make provision for matters ancillary or incidental thereto. [Date of commencement: 1st August, 1981.]

PART I PRELIMINARY

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Short title This Act may be cited as the Capital Gains Tax Act [Chapter 23:01]. Interpretation (1) In this Act— “approved employee housing trust fund” means an arrangement embodied in a notarised trust deed which satisfies the Commissioner-General that its dominant purpose or effect is to enable a company or group of companies to finance and construct housing for its employees on terms that will eventually allow the employees to acquire ownership of their homes from the trust; [Definition inserted by Act 6 of 2006]

“assessed capital loss” means the amount by which the sum of the deductions to be made under subsections (2) and (3) of section eleven from the capital amount (as defined in Part III) of any taxpayer exceeds such capital amount: Provided that where the total amount of the assessed capital loss of a person in respect of sales in any year of assessment is one hundred United States dollars or less the assessed capital loss arising from such sales shall be reduced by such amount; [Definition inserted by Act 5 of 2009]

“deed of sale” means an agreement in respect of a specified asset the effect of which is that ownership of the specified asset shall pass to a person upon or after payment by him of the whole or a certain portion of the amount payable under the agreement; “marketable security” means— (a) any bond capable of being sold in a share market or exchange; or (b) any— (i) debenture, share or stock; or (ii) right possessed by reason of a personƒs participation in any unit trust; whether or not capable of being sold in a share market or exchange;

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“share” includes a memberƒs interest in a private business corporation; “specified asset” means— (a) immovable property; or (b) any marketable security; “tax” means tax leviable in terms of this Act; “Taxes Act” means the Income Tax Act [Chapter 23:06]. (2) For the purposes of this Act— (a) an expression to which a meaning is assigned in subsection (1) of section 2 of the Taxes Act in relation to the gross income, income or taxable income of a person or the making of any assessment or the furnishing of any return shall, unless the expression is otherwise defined in this Act, have the same meaning in this Act in relation to the gross capital amount, capital amount or capital gain, respectively, of a person or to the making of any assessment or the furnishing of any return under this Act; (b) an expression to which a meaning is otherwise assigned in subsection (1) of section 2 of the Taxes Act shall, unless the expression is otherwise defined in this Act, have the same meaning in this Act. (3) For the purposes of this Act— (a) a company shall be deemed to be under the control of an individual if the majority of voting rights attaching to all classes of shares in the company is controlled, directly or indirectly, by the individual; (b) an individual and his nominee shall be deemed to be one individual. (4) Any expression defined for the purposes of Part IIIA shall bear the same meaning when used elsewhere in this Act. [Subsection inserted by Act 1 of 2014]

PART II ADMINISTRATION

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Delegation of functions by Commissioner Section 3 of the Taxes Act relating to the delegation of functions shall apply, mutatis mutandis, in relation to this Act for the purposes of providing for and giving effect to the matters concerned in relation to this Act. [Section substituted by Act 17 of 1999]

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5

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Section repealed by Act 17 of 1999] [Section repealed by Act 27 of 2001]

PART III CAPITAL GAINS TAX

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Charging of capital gains tax There shall be charged, levied and collected throughout Zimbabwe for the benefit of the Consolidated Revenue Fund a capital gains tax in respect of the capital gains, as defined in this Part, received by or accrued to or in favour of any person during any year of assessment, other than a capital gain so received or accrued prior to the 1st August, 1981. 7 Calculation of capital gains tax Subject to section twenty-one, the capital gains tax with which a person is chargeable shall be calculated in accordance with the Finance Act [Chapter 23:04] by reference to— (a) the capital gains of the person in the year of assessment; and (b) the rate of capital gains tax fixed from time to time in that Act. 8 Interpretation of terms relating to capital gains tax (1) For the purpose of this Part— (a) “gross capital amount” means the total amount received by or accrued to or in favour of a person or deemed to have been received by or to have accrued to or in favour of a person in any year of assessment from a source within Zimbabwe from the sale on or after the 1st August, 1981, of specified assets excluding any amount so received or accrued which is proved by the taxpayer to constitute “gross income” as defined in subsection (1) of section 8 of the Taxes Act and includes any amount allowed to be deducted in terms of subsection (2) of section eleven which has been recovered or recouped: Provided that in the case of bodies referred to in subparagraphs (a), (c) and (f) of paragraph 2 of the Third Schedule to the Taxes Act an amount so received or accrued shall, notwithstanding that it is so proved to constitute “gross income” as so defined, constitute a gross capital amount; (b) “capital amount” means the amount remaining of the gross capital amount of any person, after deducting therefrom any amounts exempt from capital gains tax under this Act;

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Provided that this paragraph does not apply to the donation by a company or group of companies of immovable property to an approved employee housing trust fund. [Proviso inserted by Act 6 of 2006]

(c) “capital gain” means the amount remaining, after deducting from the capital amount of any person all the amounts allowed to be deducted from a capital amount under this Act. (2) For the purposes of the definition of “gross capital amount” in subsection (1)— (a) when owing to a variation in the rate of exchange of currency between Zimbabwe and any other country, the amount received, expressed in Zimbabwean currency, differs from the amount that had accrued prior to the variation in the rate of exchange— (i) the amount to be included in the gross capital amount shall be the said amount received, expressed in Zimbabwean currency; and (ii) if the receipt and the accrual occur in different years of assessment, effect shall be given to the increase or reduction in the gross capital amount in the year of assessment in which the amount accrued; (b) where a person disposes of a specified asset otherwise than by way of sale such disposal shall be deemed to be a sale and an amount which, in the opinion of the Commissioner, is equal to the fair market price of such asset at the time of disposal shall be deemed to have accrued to such person at such time; (c) where a specified asset is expropriated such specified asset shall be deemed to have been sold for an amount equal to the amount paid by way of compensation for the expropriation of such specified asset; (d) where a specified asset is sold in execution of the order of a court, the amount for which it was sold shall be deemed to have accrued to the person on whose behalf it was sold; (e) where an amount accrues to a person by reason of the maturity or redemption of a specified asset, or in circumstances which in the opinion of the Commissioner are of a similar nature, such asset shall at the date of such accrual be deemed to have been sold by such person for such amount; (f) where a person transfers to another person his rights under a deed of sale in respect of the passing of ownership of the specified asset which is the subject of the deed of sale, he shall be deemed to have sold the specified asset to that other person for an amount equal to the whole amount received by or accruing to him as a result of the transfer. (g) where a person transfers to another person his or her rights in a residential, commercial or industrial stand, whether or not the stand is serviced and whether or not his or her title to the stand is registered under the Deeds Registries Act [Chapter 20:05], he or she shall be deemed to have sold a specified asset to that other person for an amount equal to the whole amount received by or accruing to him or her as a result of the transfer; [Paragraph inserted by Act 1 of 2014]

(h) where a person relinquishes a membership interest in a condominium in favour of another person, he or she shall be deemed to have sold a specified asset to that other person for an amount equal to the whole amount received by or accruing to him or her as a result of the relinquishment. [Paragraph inserted by Act 1 of 2014]

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When capital amount deemed to have accrued A capital amount shall be deemed to have accrued to a person in the circumstances set out in subsections (1) and (2) of section 10 of the Taxes Act, the provisions of which shall, for the purposes concerned, apply mutatis mutandis in relation to this Act. 10 Exemptions from capital gains tax There shall be exempt from capital gains tax— (a) the receipts and accruals of bodies referred to in paragraphs 1, 2 and 3 of the Third Schedule to the Taxes Act, other than those referred to in subparagraphs (a), (c) and (f) of paragraph 2; (b) amounts received or accrued on the realization or distribution by the executor of a deceased estate of a specified asset forming part of such estate; (c) amounts received or accrued on the sale of any marketable security being any bond or stock in respect of any loan to— (i) the State or any company all the shares of which are owned by the State; (ii) a local authority; (iii) a statutory corporation; (d) amounts received or accrued on the sale, by a person carrying on life insurance business as defined in subparagraph (1) of paragraph 1 of the Eighth Schedule to the Taxes Act, of specified assets which are investments in Zimbabwe for the purposes of factor F or G in the formula in paragraph 6 of that Schedule;

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(e) amounts received or accrued on the sale of any shares in the Zimbabwe Development Bank established by section 3 of the Zimbabwe Development Bank Act [Chapter 24:14].where such sale is by an institutional shareholder as defined in that Act who is not ordinarily resident in Zimbabwe; (f) amounts received or accrued on the sale by a petroleum operator, approved by the Minister by notice in the Gazette, of immovable property used for the purposes of petroleum operations, to another petroleum operator, if the Commissioner is satisfied that the property is to be used for such purposes by the purchaser; (g) the receipts and accruals of a licensed investor from the sale of a specified asset forming the whole or part of the investment to which his investment licence relates. (h) the receipts and accruals of an industrial park developer from the sale of a specified asset that forms part of or is connected with his industrial park. [Subparagraph inserted by section 18 of Act 22 of 1999]

(i) amounts received or accrued on the sale or disposal of any shares withheld by an insurance company in the circumstances described in subparagraph (2) of paragraph 6 of the Twenty-Seventh Schedule to the Income Tax Act [Chapter 23:06]. [Subparagraph inserted by Act 18 of 2000]

(j) …… [Subparagraph repealed by Act 2 of 2005]

(k) amounts received by or accruing to an employee from the sale or disposal of his shares or interest in an approved employee share ownership trust where such sale or disposal is to the trust. [Subparagraph inserted by Act 15 of 2002]

(l) amounts received by a person on the sale of his or her principal private residence as defined in subsection (1) of section twenty-two if such person was, on the date of the sale, of or over the age of fifty-nine years; [Subparagraph inserted by Act 29 of 2004]

(m) amounts received by or accruing to a person who is of or over the age of fifty-five years on the sale of any marketable security, other than a marketable security referred to in paragraph (j), in respect of the first twenty-four million dollars received by or accruing to him or her in the year of assessment concerned. [Subparagraph inserted by Act 5 of 2009]

(n) amounts received by or accruing to a person on the sale of any marketable security which was subjected to withholding tax in terms of section 39(b) of the Charging Act. [Subparagraph inserted by Act 5 of 2009]

(o) the amount by which the fair market price of shares sold to an indigenisation partner or community share ownership trust or scheme exceeds the actual price at which those shares were sold. For the purposes of this paragraph— “community share ownership trust or scheme” means such a scheme approved in terms of the Indigenisation and Economic Empowerment (General) Regulations, 2010, published in Statutory Instrument 21 of 2010; “indigenisation partner” means an indigenous person who benefits (whether as an employee or in any other capacity) under an indigenisation implementation plan approved in terms of the Indigenisation an Economic Empowerment (General) Regulations, 2010, published in Statutory Instrument 21 of 2010. [Paragraph inserted by Act 1 of 2014 with effect from 1 January 2013]

11 Deductions allowed in determination of capital gain (1) For the purposes of determining the capital gain of any person there shall be deducted from the capital amount of such person the amounts allowed to be deducted in terms of this section: Provided that when, owing to a variation in the rate of exchange of currency between Zimbabwe and any other country, the amount actually paid in Zimbabwean currency differs from the amount of the liability that had been incurred prior to the variation in the rate of exchange— (a) the amount to be deducted shall be the amount actually paid in Zimbabwean currency; (b) if the incurring of the liability and the payment therefor occur in different years of assessment, effect shall be given to the increase or reduction in the amount in the year of assessment in which the liability was incurred. (2) The deductions which shall be allowed for the purposes of subsection (1) shall be— (a) expenditure to the extent to which it is incurred on the acquisition or construction of such specified assets as are sold during the year of assessment other than expenditure in respect of which a deduction is allowable in the determination of the sellerƒs taxable income as defined in subsection (1) of section 8 of the Taxes Act. For the purposes of this paragraph where a person has acquired a specified asset—

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(i) by way of inheritance, he shall be deemed to have incurred expenditure on such acquisition to an amount which is equal to the amount at which the specified asset was valued in the deceased estate concerned; (ii) otherwise than by way of purchase or inheritance— A. prior to the 1st August, 1981, he shall be deemed to have incurred expenditure on such acquisition to an amount which is equal to an amount proved to the satisfaction of the Commissioner to be the fair market value of the specified asset at the time it was so acquired; B. on or after the 1st August, 1981, he shall be deemed to have incurred expenditure on such acquisition to an amount equal to the amount, if any, included in respect of the specified asset— I. for the purposes of this Act, in the gross capital amount of the person disposing of the specified asset; or II. for the purposes of the Taxes Act, in the gross income, as defined in subsection (1) of section 8 of that Act, of the person disposing of the specified asset; (b) expenditure to the extent to which it is incurred on additions, alterations or improvements to specified assets referred to in paragraph (a) other than expenditure in respect of which a deduction is allowable in the determination of the sellerƒs taxable income as defined in subsection (1) of section 8 of the Taxes Act. For the purposes of this paragraph, in the case of a capital amount arising from the sale of shares in a company which owns immovable property, any expenditure incurred by the seller on additions or alterations to the property shall be deemed to be expenditure incurred on additions to the shares; (c) in respect of the year of assessment beginning on the 1st January, 2007, and any subsequent year of assessment, an amount determined in accordance with the following formula:

A—B B where— A represents the figure for the All Items Consumer Price Index issu...