Name: Baker Tilly
Price range: $

As Zimbabwe strives for economic recovery, a critical challenge remains; fostering a tax system that businesses can trust. While the government relies heavily on tax revenue, many businesses struggle with the complexities, burdens, and perceived inequities of the current system. This erodes trust, leading to non-compliance and hindering overall economic growth.

In a business environment already fraught with challenges, the core question is no longer simply "What taxes can we levy?" but rather "Do businesses trust the tax system?" This is where trust becomes the cornerstone of meaningful tax compliance and a stable economic future for Zimbabwe.

1. The Tax System: More Than Just Revenue Collection

Zimbabwe's tax system has been criticized by the business community, particularly regarding its administration. Organizations across Zimbabwe are struggling with the escalating tax burden, which causes financial distress and erodes competitiveness. Taxes such as excise duties, levies, the sugar tax, and the Intermediated Money Transfer Tax (IMTT) are among those most criticized by businesses. A digital dashboard or automated service might improve efficiency, but if users do not trust its accuracy or security, adoption will be low. Likewise, taxpayers may hesitate to use online services if they are unsure how their personal data is being used or protected. True transformation is cultural. It requires aligning people, processes, and technology to build confidence, transparency, and sustainability.

2. Complexity and Instability: Barriers to Compliance

The complexity of Zimbabwe's tax policies, coupled with an ever-changing monetary landscape, makes it difficult for companies to plan for the future. This unpredictability is particularly concerning for foreign investors who are already wary of Zimbabwe's economic instability. The government's frequent changes to currencies also pose challenges for businesses' accounting systems.

3. The Burden on Formal Businesses

The current tax regime in Zimbabwe places a significant burden on large corporations, which are largely compliant relative to small and medium enterprises. High tax heads coupled with high regulatory complexity create operational challenges for businesses, which are already grappling high inflation.

4. FMDS and TaRMS Integration: A Step Towards Enhanced Fiscal Management in Zimbabwe

The Zimbabwe Revenue Authority (ZIMRA) has been actively working on integrating its core systems to improve efficiency and compliance. A key aspect of this modernization is the integration of the Fiscalisation Data Management System (FDMS) with the Tax and Revenue Management System (TaRMS).

What are FMDS and TaRMS?

FDMS (Fiscalisation Data Management System): This system captures transactional data from businesses in real-time through fiscal devices, ensuring that all sales are accurately recorded for VAT purposes. It includes features like QR codes on invoices for verification.
TaRMS (Tax and Revenue Management System): This is ZIMRA's new digital platform designed to manage all tax-related activities and integrate various tax functions such as registration, filing, payments, and assessments into a single, centralized system. TaRMS replaced the older SAP TRM system.

Why Integrate?

The integration of FDMS and TaRMS offers several key benefits:

Automated Data Exchange: TaRMS can automatically draw data from FDMS, eliminating manual data entry for VAT returns.
Improved VAT Administration: The integration enables pre-filled input-tax schedules, credit/debit note, and line-level apportionment, streamlining the VAT return process.
Enhanced Compliance: By routing buyer-specific information directly from the fiscal device to FDMS and onward into TaRMS, ZIMRA is building an audit trail that leaves little room for manual error or intentional understatement.
Increased Efficiency: The integrated system reduces processing times for tax returns, assessments, and payments.
Better Service Delivery: Taxpayers can access the system from anywhere, at any time, allowing for greater flexibility.

Key Requirements for Businesses:

As of 31 May 2025, VAT-registered operators were required to:

Ensure fiscal devices transmit the full buyer profile to the FDMS.
Capture the buyer's name, address, Taxpayer Identification Number (TIN), contact information, and VAT number (where applicable) on each business-to-business transaction.
Ensure each fiscal tax invoice bears a QR code that returns “VALID” on the FDMS portal.

The integration of FDMS and TaRMS represents a significant step forward in modernizing Zimbabwe's tax administration. While there have been challenges and deadlines extended, the move towards a more integrated and automated system promises to improve efficiency, enhance compliance, and foster a more transparent tax environment for businesses and the government.

5. How Baker Tilly Can Assist Businesses in Zimbabwe

Ensuring Tax Compliance:
- Navigating the complexities of Zimbabwean tax laws and regulations.
- Preparing and submitting accurate tax returns (Income Tax, VAT, PAYE, CGT, etc.) on time.
- Keeping up-to-date with changes in tax legislation and advising on their implications.
- Ensuring compliance with specific requirements like Fiscalisation Data Management System (FDMS).
Tax Planning and Optimization:
- Identifying legal and ethical strategies to minimize tax liabilities.
- Advising on tax-efficient business structures and transactions.
- Helping businesses take advantage of available tax incentives, deductions, and exemptions.
- Developing tax strategies aligned with the business's overall financial goals.
Tax Risk Management:
- Conducting tax compliance audits (Tax Health Checks) to identify potential weaknesses and areas of non-compliance.
- Assessing the tax implications of business decisions and transactions.
- Developing and implementing internal controls to ensure ongoing tax compliance.
Dealing with ZIMRA (Zimbabwe Revenue Authority):
- Assisting with tax registrations and obtaining necessary tax clearances.
- Representing businesses during ZIMRA audits and investigations.
- Negotiating with ZIMRA on tax settlements, payment plans, and waivers.
Specific Tax Areas:
- Value Added Tax (VAT): Providing guidance on VAT registration, calculations, and compliance.
- Pay As You Earn (PAYE): Assisting with payroll tax calculations, deductions, and submission of returns.
- Capital Gains Tax (CGT): Advising on the tax implications of selling assets.
- Income Tax: Helping businesses understand their income tax obligations and minimize their tax burden.
- International Tax: Advising on cross-border transactions and international tax planning.
- Transfer Pricing: Ensuring that all related party transactions are analysed and adhere to the arm’s length principle, to avoid transfer pricing adjustments by ZIMRA and penalties in cases of audits.
Tax Training and Support:
- Providing tax training to business owners and employees to improve their understanding of tax obligations.
- Offering ongoing support and guidance on tax-related matters.

By leveraging the expertise of Baker Tilly, businesses in Zimbabwe can navigate the complexities of the tax system, minimize their tax liabilities, and ensure compliance with all applicable laws and regulations. This allows them to focus on their core business activities and achieve their financial goals.

References;

Written by Nyasha Chitindo - Senior Tax Consultant

Rebuilding Tax Compliance in Zimbabwe

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