After the announcement by the president on Saturday 7 May 2022 with measures to restore confidence in the economy there was a lot to digest. While we waited patiently for clarity and enforcing instruments on some of the measures others did not wait so patiently and there was quite a bit of confusion and chatter in the nation. 7 days later we received Statutory Instrument 96 of 2022 which brought amendments to the laws governing the areas the president touched on. There was clarity on the IMTT and withdrawal levy, while ZSE investors will breathe a sigh of relief as they seem to have dodged a big bullet.
Automated financial transactions tax
Confirmation of the withdrawal levy being 5 cents for amounts below ZWL$1000 and US$1000, the 5 cents being in the currency of withdrawal. The SI also confirmed the 2% withdrawal levy on amounts over US$1000.
Intermediated Money Transfer Tax on US Dollar transactions doubled
IMTT on Zimbabwean dollar transactions remains at 2 cents per dollar (2%) while IMTT on US dollar transfers goes up to 4 cents on the dollar (4%) as was read out in the speech by the President. We also received an adjustment to the maximum IMTT payable on transactions. Beyond ZWL$66 million the IMTT payable is ZWL$1320000 while in US dollar terms any amount of US$500000 or above will pay a maximum of US$10150.
ZSE Capital Gains Tax doubled
One of the more confusing announcements was the increase of capital Gains tax on ZSE share disposals. As we surmised in the coverage of the announcement the reference to 20% capital gains tax was erroneous as Marketable Securities only attract 2% Capital Gains tax on the proceeds of disposal. Many were confused and made reference to Capital Gains Tax for companies which does not exist in our Capital Gains Tax Act or any amendments. We cautiously feared for the worst expecting an increase to 40%. Fortunately, SI 96 of 2022 makes it clear that the increase is from 2% to 4% of the total proceeds. Since 2009 only Capital Gains With holding Tax of 1% (which was adjusted to 2% and 1.5% in the 2022 national budget) are chargeable on the disposal of listed marketable securities. The market has suffered over the last 5 trading days and this will be a relief. Let us hope this is not an error too.
With a few u-turns on the ban on bank lending already namely for tobacco and agriculture, the accusations of policy inconsistently will surely hit the authorities again. Taking so long between the announcement and the SI does create room for panic and opportunities for some. The measures have already taken their toll on the stock exchange and many businesses are crying foul over the lack of access to credit. We are likely to have a few more announcements and adjustments in the next week or so.