SETTING UP & OPERATING BUSINESS IN ZIMBABWE

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TYPE OF BUSINESS The usual choice is a limited liability company or a branch, although the former is more common. The formation of a subsidiary company is usually entrusted to professional advisers. The company must be registered with the Companies Registry, a Government department. It is normally easier to set up a subsidiary company than to establish a branch, however, both must be approved by the inward investment authorities. It is possible for a branch to be reorganised as a subsidiary company, and is usually encouraged. Treatment of a representative or non-trading office will depend on the facts of each case, but in general a representative office is not a place of business and does not generate income. As such, it is not subject to either company or tax law requirements, but funding for its operations will have to come from outside the country. Foreigners may own 100% of a Zimbabwe enterprise, provided that necessary approvals are obtained. However, joint ventures with local equity participation by the Government or private investors are encouraged. TAXATION Zimbabwe promotes international tax equity to encourage foreign investment by concluding treaties to avoid double taxation. Such treaties exist with the UK, Sweden, Romania, The Netherlands, Bulgaria, Norway, Germany, France, Poland, Mauritius, South Africa. Corporate Tax Corporate tax is currently at 39.375%. The effective rate of taxation can be reduced through statutory allowances on various assets. With effect from 1 January 1999 the rate becomes 36,75% Yield Income Income from Treasury Bills is liable to a 15% withholding tax and is exempt from income tax. Other 'yield income' e.g. on bankers acceptances is subject to normal corporate or individual rates of tax. Interest from Banks and Building Societies is taxed at 30% at source. Capital Gains A capital gains tax of 30% is imposed on assessed capital gains from a Zimbabwean source on the sale or other disposal of immovable property and marketable securities, except quoted securities on the Stock Exchange where tax is charged at 10% of the capital gain. An annual inflation allowance of 10% of cost per annum is allowed as a deduction and capital gains amounting to less than Z$1 000 in any tax year is disregarded. Individuals Employers must register with the tax authorities for the payment of PAYE tax that they are required to deduct from the salaries of their employees. Companies should submit particulars about themselves and employees to the tax office for incorporation. Any businesses with an expected turnover for the sale of goods exceeding Z$250 000 or $60 000 for services per year should also register for sales tax purposes and charge 17% sales tax. INCENTIVES Some State financial assistance and tax incentives are available for new investment projects. Additional tax incentives are available for establishments at designated growth points. All business activities qualify for such incentives. More particularly, productive enterprises in the manufacturing, mining and agro-industrial sectors. All investment proposals by foreigners must be submitted to the Zimbabwe Investment Centre for approval. Tax incentives are claimed when normal annual tax returns are filed. Foreign owned companies have access to the same sources and types of finance as domestically owned enterprises but borrowings by foreign owned companies may require Exchange Control approval beyond certain limits. The country provides various tax incentives for investment as follows: · Depreciation allowances for buildings, implements, machinery and utensils in respect of industrial, agricultural, hotel and mining activities · Wear and tear allowances as an alternative to the Special Initial Allowance · Mining allowances · Training allowances EXCHANGE CONTROL The Government is focusing on an export lend economy and an important component of this has been the deregulation of investment procedures, prices and wages, foreign exchange and labour regimes to move towards a free market to facilitate growth and employment Exchange Control permission for a direct investment must be obtained from the Zimbabwe Investment Centre. The percentage of foreign ownership is dependent on the line of business but joint interests with local investors are encouraged. Dividends up to 100% of after tax profits may be remitted in the case of new investments. Interest, royalties, fees and the like are remittable subject to the foreign exchanged being purchased form the market. The approval for the remittance is obtained from the Commercial Bank if the amounts are within the guidelines and the Reserve Bank if the limits are exceeded. Foreign borrowings greater the US$5 million by corporations will have to be approved by the Reserve Bank. Borrowings below this limit but subject to their use can b approved by the Commercial Bank. VISA REQUIREMENTS Visitors to Zimbabwe must have acceptable travel documents, possess sufficient funds or means to support themselves for the period they are in Zimbabwe, and have the funds or means for returning to their home country or their next destination (usually a return air ticket or own road transport). For visitors staying in Zimbabwe for less than six months, minimal formalities are required. Visas must be applied for and obtained in advance of arrival of persons travelling on the national passports of the countries listed below. Visa application forms are obtainable direct from the Department of Immigration Control in Harare, or from Zimbabwean High Commissions, Trade Missions or Embassies. Afghanistan, Albania, Algeria, Angola, Bhutan, Bulgaria, Cape Verde Islands, China, Cuba, Czechoslovakia, Ethiopia, Guinea-Bissau, Hungary, India, Iran, Iraq, Israel, Kampuchea, Laos, Lebanon, Libya, Mali, Mongolia, Mozambique, Myanmar, Nigeria, North Korea, North Yemen, Philippines, Poland, Portugal, Romania, Senegal, Somalia, South Korea, South Yemen, Sudan, Syria, Vietnam, Zaire Nationals and passport holders of most other countries will be granted visas at ports of entry, subject to normal compliance in other respects. If in doubt, advice should be sought before travelling. Visas are also required for those holding such travel documents as Titre de voyages and Laissez Passers irrespective of the country or authority of issue.