LECTURE 3:

EXEMPTIONS
 LECTURE 3: EXEMPTIONS
To be deducted from gross income, are amounts that otherwise meet the
definition of gross income but which are specifically stated in the revenue
statutes to be exempt from tax.
Section 14 of the ITA as read with the Third Schedule, stipulates such amounts.
The FA specifies some absolute amounts which are exempt as pronounced by
Honorable Finance Minister in the annual national budget.
Some income enjoy full exemption some only partial, e.g. bonuses.
Exempt income can be categorized in two ways:
(a) By the identity of the recipient, or

(b) By nature of income.

 LECTURE 3: EXEMPTIONS
3.1 Exemptions on individuals
Generally amounts accruing to or received by an individual, which does not meet the definition of gross
income is exempt.
For instance income received from a source outside Zimbabwe.
Salary or allowances paid to the President of Zimbabwe and to domestic workers of the president to the extent
that the salary is paid by him from his salary.
Allowances paid to a member of parliament and the minister.
Allowances paid to civil servants. Only allowances, salary is taxable.
Allowances paid to the chief or village headman.
Receipt of a scholarship or bursary.
Alimony or maintenance received by a person.
Allowance paid to the councillor.
Bonus or any performance related award, in respect of the first ZWL$5,000, effective 1 Nov 2019.
 LECTURE 3: EXEMPTIONS
Retrenchment package, in respect of a third of such package to a minimum of ZWL$10 000 and a
maximum of ZWL$20 000. (i.e. the ceiling of retrenchment package is ZWL$60 000)
A scholarship paid to a student, as long as it is not payment for services rendered.
The value of medical treatment or of travelling to obtain such treatment which is provided by an
employer for an employee or the dependant of an employee, whether provided in kind, by direct
payment, by refund or in any other manner whatsoever.
Refunds from medical aid society or benefit funds. The amounts are exempt, they are used then to reduce
the respective medical expenses suffered in that year when calculating medical expenses credits.
The amount of any contributions paid to a medical aid society by an employer on behalf of his employee.
Such contributions do not stand as credits to the taxpayer because he did not suffer the expense himself.
Contributions to pension fund paid on behalf an employee by his employer.
Compensation for injury at work paid by an employer.
An amount accruing by way of a benefit in respect of the injury, sickness or death of a person which is
paid to the person or his dependants or deceased estate; or from a benefit fund; or in terms of a policy of
insurance covering accident, sickness or death; or by a medical aid society.
 LECTURE 3: EXEMPTIONS
Any amount received by way of an entertainment allowance to the extent that it is expended on the
business of the employer.
A pension received by an elderly person from the Consolidated Revenue Fund or any approved
pension fund.

3.2 Exemptions on elderly persons

Exemption from Income Tax of the first ZWL$3 000.00 per annum on rental income.
Exemption from Income Tax of the first ZWL$3 000.00 per annum on income earned from bankers
acceptances.
Exemption from Income Tax of the first ZWL$3 000.00 per annum on income earned from interest on
deposits with financial institutions.
Pension received from a pension fund or the Consolidated Revenue Fund is exempt from Income Tax.
Where an employer disposes of a motor vehicle to an employee whether on termination of
employment or otherwise, the benefit is exempt from tax.
 LECTURE 3: EXEMPTIONS
3.3 Exemptions on Trade and Investment Income
Interest from a POSB (Zimbabwe) account or Zimbabwe Revenue Authority tax reserve certificates.
Interest on class C permanent shares issued by building societies.
Dividend received from a Zimbabwean company which is chargeable to tax on its profits. To clarify on
this, dividend is exempt only in the hands of a statutory corporation, a company limited by shares,
a private business corporation, a pension fund, a benefit fund or a medical aid society which is
resident in Zimbabwe at the time of receipt .
Interest received by a non-resident not carrying business in Zimbabwe on a loan granted to a building
society or to a person carrying out mining operations, to the state or local authority and statutory
corporation.
Interest accruing to a resident company which has been subjected or which is subject to withholding
taxes (Resident Tax on Interest) is also exempt. Thus interest from financial institutions (Banks,
Building society, POSB, RBZ etc.) is exempt. Unless the question specifies that the interest was , then
received gross you have to tax it.
Interest on loan raised by state, a taxpayer who loans the state or statutory corporation is exempted on
tax on interest accruing to him. Examples of such interests in Treasury Bills.
 LECTURE 3: EXEMPTIONS
Amounts paid by the state to an exporter of goods in a scheme of export
development. Example is export incentive grants
Interest earned on approved loans to Statutory Corporations is exempt from income
tax retrospectively, from 1 February 2009.
Interest earned on loans to small scale miners – with effect from 1 January 2015,
interest accruing from loans to small scale gold miners is exempt from tax.
With effect from 1 November 2014, the 15th Schedule to the Income Tax Act is
amended to exempt from Shareholders’ Tax, deemed dividends arising as a result of
exceeding the debt to equity ratio of 3:1.
Income from sale of traditional beer.
The receipts and accruals of an industrial park developer, to the extent that they
accrue directly from the operation of his industrial park for the first five years of his
operation
 LECTURE 3: EXEMPTIONS
3.4 Organisation whose receipts and accruals are exempt from tax
Receipts accruing to the following categories of organisations are exempt from tax.
Parastatals and government owned entities, e.g. ZESA, NRZ, and RBZ etc.
Non profit making or non-profit sharing organisation which are of public characters:
Ecclesiastical or charitable institutions e.g. trust organisations, church organisation
Clubs, societies, institutes and associations organized and operated solely for social welfare,
civic improvement e.g. institutes like CIS, IBAS, ACCA, ICAZ
Employees saving schemes
Pension fund
Trusts of a public character
International government organizations, e.g. African Development Bank, FAO, WHO, IMF
etc.
 LECTURE 3: EXEMPTIONS
Example
Mr Jones is 56 years old and is a Director in the Ministry of Finance in Zimbabwe. He obtained the following income during the 2019 year
of assessment. Calculate his Income, clearly showing the exemptions.
$
Salary 20 000
Housing Allowance 5 000
Transport Allowance 3 000
Cash in Lieu of leave 1 000
Bonus 1 500
Retrenchment package 24 000
Pension from government 5 000
Rental income 6 000
Bankers’ acceptances interest 1 000
Interest from POSB Zimbabwe 500
Interest from deposits with CBZ 1 000
Income from Poultry Project5 000
Dividends from Econet Zimbabwe 2 000