Zimbabwe introduces domestic minimum top-up tax

Harare (New Ziana) – The government on Thursday introduced a Domestic Minimum Top Up Tax (DMTT) for multinational corporations operating in the country whose tax liabilities here fall below internationally accepted thresholds.

Presenting a $60 trillion 2024 national budget in Parliament, Finance, Economic Development and Investment Promotion Minister, Prof Mthuli Ncube said the move was intended to ensure that the country did not lose tax revenues to home countries of the corporations where the businesses would be required to top up the tax difference.
He said DMTT was in line with global rules, and meant to foster fair and effective tax systems.

“Mr Speaker Sir, the Domestic Minimum Top up Tax is part of the Global Rules which aim to ensure that global profits of large multinational enterprises are taxed at a minimum Corporate Income Tax rate of 15 percent,” he said.

“Granting of generous tax incentives result in an effective tax rate of less than 15 percent for some multinationals. Under the Global Tax Rules, where a tax incentive results in an effective rate of less than 15 percent, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15 percent.

“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the Top-Up Tax rather than ceding taxing rights to the headquarter jurisdiction. The calculation of the DMTT will be based on the effective tax rate charged on the jurisdictional profits not the jurisdictions’ statutory corporate income tax.

“The DMTT only taxes the tax incentives to the same extent that the same income will be included in the headquarter country of the company,” Prof Ncube said.

He said the DMTT rules will guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments.

New Ziana