Introduction
Capital Gains Tax (CGT) in Zimbabwe is a crucial aspect of the country’s taxation system, especially for those involved in real estate, business transfers, and investment activities. Whether you’re a local property owner, a foreign investor, or a business planning a merger or acquisition, understanding CGT regulations is essential to avoid costly surprises.
This article provides a comprehensive guide to Capital Gains Tax in Zimbabwe, including who pays it, how it is calculated, current rates, exemptions, and recent developments in the CGT regime. By the end, you’ll have a clear understanding of how to remain compliant and possibly reduce your tax liability.
What is Capital Gains Tax?
Capital Gains Tax is a tax levied on the profit realized from the sale or disposal of a capital asset. This includes immovable property (such as land and buildings), marketable securities (like shares), and other chargeable business assets.
In Zimbabwe, CGT is governed by the Capital Gains Tax Act [Chapter 23:01] and administered by the Zimbabwe Revenue Authority (ZIMRA).
What Constitutes a Capital Gain?
A capital gain arises when the sale price of an asset exceeds its original cost (adjusted for inflation and allowable expenses). For example, if you bought a commercial building for USD 100,000 in 2015 and sold it for USD 200,000 in 2025, the capital gain would be USD 100,000.
Who Pays Capital Gains Tax in Zimbabwe?
CGT is payable by both individuals and companies who realize a gain from the disposal of a specified asset. This includes:
- Individuals selling residential or commercial property
- Companies disposing of real estate or shares
- Trusts and estates
- Non-residents owning assets in Zimbabwe
The obligation to pay CGT falls on the seller, and in most cases, proof of tax clearance is required before property transfers can be registered with the Deeds Office.
What Assets Attract Capital Gains Tax?
Under Zimbabwean law, the following assets are typically subject to CGT:
- Land and buildings (residential, commercial, or industrial)
- Shares and other marketable securities
- Mining claims and rights
- Business assets such as goodwill, trademarks, and franchises
- Leasehold rights
Current Capital Gains Tax Rates in Zimbabwe (2025)
Zimbabwe has different CGT rates depending on the nature of the transaction and the asset type. As of 2025, the applicable rates are:
Transaction Type
CGT Rate
Property acquired before Feb 2009
5% of gross proceeds
Property acquired after Feb 2009
20% on net gain
Marketable securities (listed)
1% of transaction value
Marketable securities (unlisted)
20% on net gain
Mining claims/disposals
20% on net gain
Assets by deceased estates
Exempt (under specific conditions)
Note: For assets acquired before February 1, 2009, when Zimbabwe transitioned to the multi-currency regime, CGT is charged on the gross selling price rather than on the gain, due to currency distortion.
How to Calculate Capital Gains Tax
The basic formula for calculating capital gain is:
Capital Gain = Selling Price – (Purchase Price + Allowable Costs)
Allowable Costs Include:
- Legal fees
- Transfer fees
- Advertising costs
- Improvement expenses
- Estate agent commissions
Example Calculation:
Suppose you sell a property for USD 300,000 in 2025.
- Purchase price: USD 150,000
- Legal and transfer costs: USD 10,000
- Renovation expenses: USD 20,000
Net gain = 300,000 – (150,000 + 10,000 + 20,000) = USD 120,000
CGT = 20% × 120,000 = USD 24,000
When and How is CGT Paid?
Capital Gains Tax in Zimbabwe must be paid before the transfer of the asset can be registered. The seller must:
- Submit CGT Return (CGT 1 Form) to ZIMRA.
- Attach supporting documents (sale agreement, proof of costs, title deeds, etc.).
- ZIMRA will assess the tax payable and issue a CGT Clearance Certificate (CGT5) upon payment.
No transfer of property will be accepted at the Deeds Office without the CGT5 certificate.
Exemptions from Capital Gains Tax
Certain capital asset disposals are exempt from CGT. These include:
1. Primary Residence
If you sell your main residential home, the capital gain may be exempt provided:
- The property was your primary place of residence for at least 5 consecutive years.
- The proceeds are used to acquire another residence within 12 months.
2. Assets Acquired Through Inheritance
Assets acquired by inheritance or donation may be exempt, particularly if the asset is not later sold for profit.
3. Government and Approved Entities
Transactions involving the State, local authorities, or approved pension funds are often CGT-exempt.
4. Company Restructuring
Intra-group transfers or mergers under approved restructuring schemes may qualify for CGT deferment or exemption.
How to Minimize Capital Gains Tax in Zimbabwe
While tax avoidance is illegal, legitimate tax planning can help reduce CGT liability:
- Improve Record-Keeping: Document all acquisition and improvement costs.
- Consider the Acquisition Date: Assets acquired before February 2009 enjoy a lower 5% gross rate.
- Use Rollover Reliefs: Reinvesting proceeds in another qualifying asset may defer CGT.
- Hold Through Tax-Exempt Entities: Some trust structures and pension schemes have CGT exemptions.
CGT and Foreign Investors
Foreign investors are subject to CGT on Zimbabwean assets. However, Double Taxation Agreements (DTAs) between Zimbabwe and countries like South Africa, the UK, China, and Germany may provide relief or lower rates. It is advisable for foreign investors to engage tax consultants to navigate CGT and withholding tax obligations.
Penalties for Non-Compliance
ZIMRA imposes strict penalties for non-compliance with CGT obligations:
- Late Payment Penalty: 10% of the unpaid tax
- Interest Charges: 5% above commercial bank lending rate
- Delays in Transfer: Without CGT clearance, property transfers are blocked
- Prosecution: In severe cases of tax evasion or misrepresentation
Capital Gains Tax vs. Other Zimbabwean Taxes
It’s important to distinguish CGT from other transaction-based taxes:
Tax Type
Applies To
Rate
Capital Gains Tax
Sale of assets like property/shares
5% or 20%
Transfer Duty
Immovable property transfer
4% (standard)
VAT
Goods and services (some property sales)
15%
Withholding Tax
Dividends, royalties, rent, services
10–15%
Note: In some real estate transactions, both VAT and CGT may apply, depending on whether the seller is VAT-registered.
Recent Reforms and Trends in Zimbabwe’s CGT Policy
As part of broader tax reforms, Zimbabwe has taken several steps to update and streamline CGT regulations:
- Digital Tax Filing: ZIMRA now accepts online submissions via the ZIMRA e-services portal.
- Taxpayer Education Campaigns: The government is raising awareness of CGT compliance, especially among informal property sellers.
- Focus on Real Estate Market: With booming property prices in Harare and Victoria Falls, CGT enforcement has increased.
- Increased Scrutiny of Related Party Transactions: To prevent under-declaration of sale values and profit shifting.
Frequently Asked Questions (FAQs)
1. Can I pay CGT in local currency?
Yes, CGT can be paid in Zimbabwean dollars (ZWL) at the prevailing exchange rate. However, for USD-denominated transactions, payment is expected in hard currency.
2. Is CGT applicable on agricultural land?
Yes, unless the land is communally owned or held by the State. Farmland owned privately is subject to CGT upon sale.
3. Do property developers pay CGT?
No, developers pay Income Tax on profits as part of their business, not CGT. CGT applies only to capital (non-trading) disposals.
Conclusion
Capital Gains Tax in Zimbabwe is an important consideration for anyone dealing in assets such as real estate, shares, or business interests. While the system is relatively straightforward, it requires careful documentation, timely filing, and awareness of exemptions to minimize tax exposure.
Whether you’re an individual selling your home or a business restructuring your assets, complying with Zimbabwe’s CGT laws will save you time, money, and legal trouble.
For more information or to download CGT forms, visit the Zimbabwe Revenue Authority (ZIMRA) website.
