Benefits and Taxes
All about Benefits and Taxes and Salaries in Zimbabwe, How to Calculate Your Benefits and Taxes, What are your Benefits and Taxes and more on Mywage Zimbabwe
Mywage Zimbabwe shows you how to calculate your salary in relation to benefits and taxes.
Why is it important?
It is important because you do not earn as much as you think when you take into account tax deductions such as Pay As You Earn (PAYE), HIV/AIDS levy, and social security taxes (NSSA). These taxes are withheld from your pay.
Benefits, on the other hand, are added to your pay. These benefits will have the effect of increasing your taxable income, as we illustrate below.
Is every employee taxed?
No. It depends on the size of your gross pay; that is your basic pay plus benefits (if any). Simple: If the amount is below the minimum tax threshold it will not be taxed and if above the minimum tax threshold it will be taxed.
Is every employee entitled to benefits?
No. In terms of payment of benefits it is not compulsory that every employee be paid benefits. Benefit structures vary from organisation to organisation and the basket of benefits varies according to grade and seniority.
What are tax rates and who fixes them?
Tax rates are fixed by the Minister of Finance in his annual fiscal policy statement and the detailed calculations are fixed by the Zimbabwe Revenue Authority (ZIMRA). With effect from 1st January 2011 the income bands have been revised as illustrated below.
|
Taxable Monthly
Income Band USD |
|
Rate of Tax |
|
|
1st January 2011 -31st December 2011 |
|||
|
- |
To |
225 |
0% |
|
226 |
To |
500 |
20% |
|
501 |
To |
1000 |
25% |
|
1,001 |
To |
1500 |
30% |
|
1,501 |
And above |
|
35% |
|
(Plus 3% Aids Levy) |
|
|
|
Allowable deductions (in brackets):
From USD 225.01 to USD 500.00 (USD 45.00)
From USD 500.01 to USD 1000.00 (USD 70.00)
From USD 1000.01 to USD 1,500.00 (USD 120.00)
From USD 1,500.01 and above (USD 195.00)
Illustration
According to the above rates, if an employee earns a basic pay of USD 225.00 then such employee will not have his pay taxed.
However, if the employee receives:
Basic pay USD 225.00.
15% Transport allowance USD 33.75
10% Accommodation allowance USD 22.50
12% Education allowance USD 27.00
Gross Pay USD 308.25
Immediately the employee’s gross earnings become taxable and here is how the earnings are taxed:
From USD 308.25 (gross pay)
Deduct Pension - USD 11.25 (being 5% of basic pay of USD 225.00)
Deduct NSSA - USD 6.00 (being 3% of basic pay of USD 225.00 or maximum contribution of USD 6.00, whichever is less)
Therefore taxable pay is USD 291.00
The next step is to check the tax rate to use on USD 291.00. It is 20% because USD 291.00 falls within the range of USD 226 TO USD 500. (see table above)
PAYE is USD 58.00 (20% of USD291.00) less USD 45.00 (allowable deduction) equals to USD 13.00
Therefore PAYE is: USD 13.00
Less AIDS Levy: USD 0.39 (3% of PAYE)
Net Pay: USD 277.61
The above illustration is for employees who are 54 years and below. If the employee is 55 years and above by the beginning of the current tax year he/she will qualify for an elderly person’s credit of USD 75.00. Using the above illustration there will be no tax deduction as the personal credit of USD 75.00 is more than PAYE of USD 13.00.
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Find out more about Decent Work and Labour Laws in Zimbabwe.
