Zimbabwe Revises Tax-Free Threshold and Introduces Energy Incentives in 2025 Budget

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HARARE – The Zimbabwean government has announced a revised tax-free salary threshold of ZWL$2,800 per month, effective January 2025, as part of efforts to boost workers’ disposable income. Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, presented the ZWL$276 billion 2025 national budget on Thursday, outlining measures to provide economic relief and support key sectors.

Tax Revisions

The updated tax-free threshold aligns with the exemption of the first US$100 of employee earnings under current legislation. Higher income brackets will continue to be taxed at rates between 20% and 40%.

“The equivalent exempt portion in local currency and the tax bands thereof have been affected by recent macroeconomic developments, hence the need to provide relief to taxpayers,” said Prof. Ncube.

The minister also proposed a 1% Capital Gains Withholding Tax on marketable securities starting January 2025, which will be treated as a final tax.

Energy Sector Incentives

Recognising the energy sector as critical to economic growth, the government has extended VAT deferments on capital equipment imports to energy operators. This policy, previously benefiting sectors like agriculture, health, and mining, is intended to bolster investment in energy infrastructure, including power generation and transmission.

To support renewable energy initiatives, electric motor vehicles will attract a 40% customs duty, while electric tractors will be exempt. Additionally, equipment for solar-powered electric vehicle charging stations will qualify for a duty rebate beginning January 2025.

LPG Exemption from VAT

The government aims to mitigate the impact of regional electricity shortages, which have caused prolonged load-shedding. Liquefied Petroleum Gas (LPG), widely used as an alternative energy source, will be exempt from Value Added Tax starting next year.

“LPG has become a viable substitute for traditional fuels such as firewood, which are linked to environmental degradation and indoor air pollution,” said Prof. Ncube. “This exemption will reduce the cost of LPG and encourage its use.”

Supporting Economic Growth

The budget underscores the government’s commitment to fostering economic growth under its National Development Strategy 1 (NDS1). Key measures include supporting independent power producers to integrate into the national grid and promoting investment in renewable energy solutions.

By introducing these fiscal and energy sector incentives, the government seeks to address immediate economic challenges while laying the groundwork for sustainable growth.