A Guide to Capital Gains Tax on Property in Zimbabwe

Part 1: What is Capital Gains Tax (CGT)?

Capital Gains Tax, or CGT, is a tax that you pay on the profit you make when you dispose of an asset. In Zimbabwe, the two most common assets this applies to are immovable property (like a house or a stand) and marketable securities (like shares on the stock exchange). This guide will focus specifically on property.

It's important to remember that you are not taxed on the total selling price, but only on the **gain**—the difference between what you originally paid for the property and what you sold it for, after accounting for certain allowable costs.

Part 2: How is the Capital Gain Calculated?

ZIMRA uses a specific formula to determine the taxable gain. In simple terms, the formula is:

(Selling Price) - (Allowable Costs) = Capital Gain

What are "Allowable Costs"?

To reduce your taxable gain, you can deduct certain expenses that you incurred in acquiring and improving the property. These include:

• The original purchase price of the property.
• The cost of additions or alterations to the property (e.g., building a cottage, adding a durawall, drilling a borehole). You must have receipts to prove these costs.
• Inflation Allowance: ZIMRA provides an inflation allowance to account for the loss of value of money over time, which reduces your taxable gain.
• Agent's Commission and Legal Fees associated with the sale.

Part 3: Key Exemptions and Rollovers

There are several important situations where you might not have to pay Capital Gains Tax. The most common is the sale of your main home.

The Principal Private Residence (PPR) Exemption

You may be exempt from paying CGT if you are selling your main home. To qualify for this exemption:

• You must be an individual (not a company).
• The property you are selling must be your main residence.
• You must have lived in the property for the majority of the time you have owned it.

If you are over the age of 55, this exemption may also be more broadly applied. It's crucial to discuss your specific situation with a tax advisor.

Rollover Relief

If you sell your main home and use the full proceeds to buy another main home within a certain period, you may be able to "roll over" the tax liability. This means you defer paying the tax until you sell the new property.

Part 4: The Capital Gains Tax Clearance Certificate

This is the most critical part of the process for any property sale. The Deeds Office will not transfer the property's Title Deeds to the new owner until the seller provides a **Capital Gains Tax Clearance Certificate** from ZIMRA. This certificate is proof that you have either paid the tax due or have been correctly exempted.

How to Get the Certificate:

1. Gather Your Documents: You will need to submit a full set of documents to ZIMRA, including the Agreement of Sale, a copy of the Title Deed, proof of all your allowable costs, and completed tax forms.
2. Submit to ZIMRA: Your application is submitted to the relevant ZIMRA office. A conveyancer or tax consultant usually handles this on your behalf.
3. Assessment: ZIMRA will assess your application, calculate the tax payable (if any), and issue an assessment.
4. Payment & Clearance: Once you have paid the assessed amount, ZIMRA will issue the clearance certificate.