Understanding Capital Gains Tax

What is Capital Gains Tax?
Capital Gains Tax (CGT) is tax that is levied on the capital gain arising from the disposal of a specified asset. Capital gains tax is administered through the Capital Gains Tax Act (Chapter 23:01).

What is a specified Asset?

• Specified asset means;
• immovable property; or
• any marketable security; or
• any right or title to property whether tangible or intangible that is registered or required to be registered in terms of the –
• Mines and Minerals Act (Chapter 21:05 ); or
• Patents Act [Chapter 26:03]; or
• Trade Marks Act (Chapter 26:04); or
• Industrial Designs Act (Chapter 26:02); or
• Copyright and Neighbouring Rights (Chapter 26:05 ); or
• Brands Act [Chapter 19:05]; or
• Geographical Indications Act(Chapter 26:06); or
• Integrated Circuit Layout-Designs Act (Chapter 26:07 ) Act (No. 18 of 2001).

Examples of Specified Assets

(a)  Immovable property : Land and buildings.

(b) Marketable Security :       Includes any bond capable of being sold in a share market or exchange market, debenture, share or stock.

(c) Right or title registered or required to be registered by certain Acts, which qualify to be recognised as specified assets:

• Mines and Minerals Act [Chapter 21:05] : the right to the mineral claims or entitlement on mining claims.
• Patents Act [Chapter 26:03]: the right or title that is conferred for a set period, especially the sole right to exclude others from making, using, or selling an invention.
• Trade Marks Act (Chapter 26:04 ): right to use of trade name or  registered trade mark trade mark that is entered in the Register in terms of that
• Industrial Designs Act (Chapter 26:02); An artistic work of any ; paintings, sculptures, drawings, engravings and photographs, works of architecture, being either buildings or models for buildings and works of artistic craftsmanship.
• Copyright and Neighbouring Rights (Chapter 26:05) copyright registered in terms of that Act of literary works, musical works, artistic works, audio-visual works,   sound recordings, broadcasts, programme-carrying signals and published editions.
• Brands Act (Chapter 19:05) : the right or title on any mark made or placed on any horse, cattle, sheep or goat for any purpose whatsoever and includes any representation of a mark intended so to be made or placed on any such animal as the circumstances may require.
• Geographical Indications Act (Chapter 26:06): the right or title on an indication, however expressed, which identifies a product as originating in a particular area, where some quality, reputation or other characteristic of the product is essentially attributable to its geographical origin.
• Integrated Circuit Layout-Designs Act (Chapter 26:07) Act (No. 18 of 2001): right or title to “integrated circuit” and “layout-design”.
• Integrated circuit means a product, in final or intermediate form, containing electrical, electromagnetic or optical elements and circuitry, which is capable of performing an electrical or an optical function and in which at least a part of the electrical, electromagnetic or optical elements and circuitry are integrally formed, in accordance with a predetermined topography, in or on a semiconductor or other material; and “layout-design” means a functional design which consists of the pattern, shape or configuration, however expressed, of the three-dimensional disposition of all or some of the electrical, electromagnetic or optical elements and circuitry of an integrated circuit, and includes such a design of an integrated circuit that is intended for manufacture.

Who is liable to pay Capital Gains Tax?

• The Seller of the specified asset, or
• The Agent of the seller of the specified asset, or
• The Depository (any person who holds the funds to the transaction involving the disposal of a specified asset).
• Rates of Capital Gains Tax
• Where the specified asset being disposed of/sold was acquired after the 1st of February 2009 the Capital Gains Tax is chargeable at the rate of 20% (twenty percent) of the capital gain.
• Where the specified asset being disposed of/sold was acquired before 1st February 2009, the Capital Gains Tax is chargeable at the rate of 5% (five percent) of the gross capital amount realised from the sale.
• Our valued clients are encouraged to contact their nearest Zimbabwe Revenue Authority for any clarification which may be required.
• Instances where Capital Gains is not payable (Exemptions from Capital Gains Tax).
• Transfers of specified assets between spouses.
• Transfers in a scheme of reconstruction/merger or the like that is approved by the Commissioner General of Zimbabwe Revenue Authority (ZIMRA).
• Transfer of business property used for the purposes of trade by an individual to a company under his control where such company will continue to use the property for the purposes of trade.

NB: It should be noted that exemption on the above CGT cases are not automatic but rather are only effected upon election by the transferor. However automatic exemptions can only be effected on the following cases.

• Amounts received by or accruing to a person on the sale of any marketable security which was subjected to Capital Gains Withholding Tax. This is with effect from 1 February 2009.
• Sale of a Principal Private Residence (PPR) by a person aged 55 years or above at the time of the sale.

Disclaimer  This article was compiled by the Zimbabwe Revenue Authority for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority. To contact ZIMRA: WhatsApp line  : +263 782 729 862  Visit our website  : www. zimra.co.zw Follow us on Twitter :  @Zimra_11 Like us on Facebook  :   www.facebook.com/ZIMRA.11 Send us an e-mail :  [email protected]/[email protected] Call us (Head Office) :   04 –758891/5; 790813; 790814; 781345; 751624; 752731  e-TIP : http://ecustoms.zimra.co.zw/etip/