The new Finance Act, 2023 (No. 13 of 2023), which came into operation on the 1st of January 2024 introduces a new tax, a wealth tax. This article seeks to provide an understanding into the new wealth tax.
The Zimbabwe business environment is facing significant changes due to the various macro-economic policies currently being undertaken. For individuals it is important to take special consideration of any new taxes that are introduced. It becomes essential for one to develop efficient tax strategies to enable investment and growth. The newFinance Act, 2023 (No. 13 of 2023), which came into operation on the 1st of January 2024 introduced a new tax, a wealth tax.This article seeks to provide an understanding into the new wealth tax.
What is the Wealth Tax
A wealth tax is a tax based on the value of an asset owned by a taxpayer.The Finance Act, 2023 amends the Income Tax Act [Chapter 23:06] to insert a new section 36O which provides for the Wealth Tax chargeable on a taxable dwelling whose value exceeds two hundred and fifty United States Dollars (US$250 000.);
‘The Wealth Tax chargeable in terms of section 36O of the Taxes
Act shall be calculated at the rate of one per centum of the value of a
dwelling other than a principal private residence, if such value exceeds
two hundred and fifty thousand United States dollars:’
The wealth tax is a tax on an owner of a dwelling as defined in the Income tax Act.
Properties on which the tax is chargeable.
Subsection (1) of section[1] 36O defines a “dwelling” as a building or any part of a building, which is wholly or mainly used for the purpose of residential accommodation. What this means is that in this section, every time the word “dwelling” is used it excludes a building used for commercial, industrial or agricultural purposes. A taxable dwelling means any dwelling the rateable value of which exceeds two hundred and fifty thousand United States dollars in the year of assessment concerned. The valuation of the property is to be done by the local authority in which the property is located and is conducted in the manner prescribed in Part XVIII of Urban Councils Act [Chapter 29:15].
Properties on which the tax is not chargeable.
Subsection (2)[2] of section 36O also provides that the tax is not chargeable on a “principal private dwelling”, that is a building owned by an individual and used by that individual for his sole or main residence and is on a piece of land registered as a separate entity in a Deeds Registry. The dwelling must have a Title Deed. What this means is that a dwelling which is used by an individual for his sole or main residence but does not have a title deed will be liable to pay Wealth Tax because it does not fall in the ambit of the definition of “principal private dwelling” as defined by the Act.
Exemptions from the Wealth Tax
- Dwellings in which the owner primarily resides (principal private dwelling)
- Dwellings whose value is below US$250 000.
- Dwelling owned by individuals over the age of seventy years.
What must be appreciated is that the wealth tax is a tax on the owner of a dwelling. This means that a company or a trust that own a residential property will be liable to pay this tax, if a dwelling exceeds US$250 000. Further a foreign national owning a dwelling exceeding US$250 000 would also be liable to pay this tax.
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Read the original publication at Muvingi Mugadza
