DOING BUSINESS IN ZIMBABWE STARTING A BUSINESS STANDARDIZED COMPANY Legal Form: Private Limited Liability Company Minimum Capital

Requirement: 2,877,298 City: Harare Registration Requirements: Procedure 1. Register the company name with the Chief Registrar of Companies Time to complete: 9 days Cost to complete: USD 0.6 Comment: The reservation is valid for 30 days and can be extended for another 30 days by paying an additional fee. Procedure 2. File Memorandum and Articles with the Registrar of Companies Time to complete: 21 days Cost to complete: USD 60 Comment: The law provides ready-made articles. Within one month from the date of incorporation, a Particulars (a) of Register of Directors and Secretaries and of any changes therein or A list (a) of Directors and Principal Officer (Form C.R. 14) must be lodged to notify the Registrar of the appointments of the Company's Directors and Secretaries. These documents must be accompanied by a duplicate original or a printed notarial copy. In reality, companies usually start up with a low amount of capital to avoid the exorbitant stamp duty. Furthermore, a company may issue shares at a premium in order to get around the problem. Procedure 3. Register with the tax authorities for income tax, VAT and taxes for Pay As You Earn purposes Time to complete: 21 days Cost to complete: no charge Comment: On formation, a company is required to register at the regional Zimbabwe Revenue Authority Office. A copy of the Certificate of Incorporation of the Company is required for the Collector's records. The Company will be issued with a registration number,

as well as the current tax tables, receipt books for PAYE, P8 and P6 forms. Remittance is done monthly, once the relevant calculations have been made. PAYE is payable by the 15th of the following month. Year end reconciliation is made at the end of the tax year (31st December). Tax and earnings are detailed on P6 forms and reconciled on P8 forms which must be submitted annually with an ITF 16 form and copies of all P6's. These annual reconciliation are meant to be completed within one month of the end of the tax year. From January 1 2004 Zimbabwe switches from Sale Tax to VAT. Firms with turnover of more than Z$250 million are required to register for VAT with the Zimbabwe Revenue Authority (Zimra>. An application must be made on an Application for Certificate of Registration (Form VAT 1). There are also forms VAT 2 and VAT 3 which will be found on Zimra website www.zimra.co.zw . Firms with a turnover of less than Z$250 million may apply for voluntary registration for VAT. Procedure 4. Register with the National Social Security Authority for pension and Accident Prevention and Compensation Scheme Time to complete: 14 days Cost to complete: no charge Comment: The employer and the employee are required to contribute Z$22,500.00 per month to the fund Procedure 5. Register with the Manpower Development Fund Time to complete: 1 day Cost to complete: no charge Comment: Employers need to contribute 1% of their wage bill to the state-run fund, which supports vocational training for workers. The cost of training employees may be recovered from the fund upon completion of the training. Procedure 6*. Pick up the form of license application notice from the City Health Department Time to complete: 2 days (simultaneous with procedure 4) Cost to complete: no charge Procedure 7*. Advertise on a local newspaper the application for a Trade and Business License Time to complete: 4-6 weeks (simultaneous with procedure 4)

Cost to complete: USD 48 Comment: An intended applicant for a Trade and Business License is required to advertise twice in a local newspaper, advising the public of the proposed application. A Form of Notice of Intention to Apply for the Issue of a New License is available from the City Health Department. The first notice must be no more than 6 weeks but at least 4 weeks before the application will be heard by the licensing Authority. The second notice must appear 7 days after the first notice. Anyone wishing to object to the application must make a written submission to the Licensing Authority within 7 days of the second notice. Procedure 8*. Submit an Application form for Issue of New License to the Licensing Office in Harare Municipality Time to complete: 30 days (simultaneous with procedure 4) Cost to complete: USD 12.5 Comment: Two copies of the application forms are submitted with a fee of Z$1250000 and proof of publication in a newspaper of a notice of intention to operate a business. On receipt of the application, the Licensing Office requests a report on the applicant from the Police, as well as a report on the person who will be in actual and effective control of the premises to which the application relates, if the latter is not also the applicant. The Office also seeks a report from the Harare Town Planner to ensure that the application is consistent with the zoned use of the premises. Application of license can start once the Registrar of Companies grants its approval of the company name. It is also possible to apply for a temporary license pending the grant of full license which can take up to a month or longer. Procedure 9*. Licensing Officers visit the company site Time to complete: 1 day Cost to complete: no charge Comment: Officers inspect the site to check if the intended premises are suitable for the intended use. The criteria used by the officers are specified in the relevant by-laws. Procedure 10*. Obtain the Trading License Time to complete: 1 day Cost to complete: no charge Comment: The Licensing Office submits the application and supporting documents to the Harare Licensing Committee (comprised of City Councilors) who hear any objections that

have been received and adjudicate on the application. The Committee may grant the application conditionally or unconditionally, or refuse the application. Under the law, decisions are required to be made within 45 days and in practice, the minimum time is 10 days. The Committee meets monthly. Licenses are renewable annually, subject to an inspection to ensure compliance with the conditions of the license and the payment of the annual fee. Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*). FORMS OF BUSINESS ORGANISATION The usual choice is a limited liability company or a branch, although the former is more common. The formation of a subsidiary company is usually entrusted to professional advisers. The company must be registered with the Companies Registry, a Government department. It is normally easier to set up a subsidiary company than to establish a branch, however, both must be approved by the inward investment authorities. It is possible for a branch to be reorganised as a subsidiary company, and is usually encouraged. Treatment of a representative or non-trading office will depend on the facts of each case, but in general a representative office is not a place of business and does not generate income. As such, it is not subject to either company or tax law requirements, but funding for its operations will have to come from outside the country. Foreigners may own 100% of a Zimbabwe enterprise, provided that necessary approvals are obtained. However, joint ventures with local equity participation by the Government or private investors are encouraged. TAXATION Corporate tax Main rate: 30% Resident and non-resident companies are taxed on income received in Zimbabwe or accruing from sources in Zimbabwe. The rate of tax is 30% (15% for mining companies), and there is an AIDS levy of 3% of income tax payable. Lower rates of tax may apply in growth point areas and export processing zones. Dividends paid between resident companies are exempt. Foreign dividends received are taxed at a flat rate of 20%. Partnerships are not taxed as entities but the income is attributed to the individual partners.

Individual tax Progressive rates to 40% for employment; flat rate of 30% for trade Resident individuals are taxed on Zimbabwean-source income and on specific foreign income that is deemed to be from a source in Zimbabwe. Income of a non-resident is generally calculated in the same way as for residents, but an exemption is granted for certain local source interest. Dividends received from Zimbabwean companies are subject to a withholding tax of 20% (15% for dividends from listed companies). Capital gains are subject to a separate capital gains tax. There is also, as for companies, an AIDS levy of 3%. Capital gains Capital gains tax rate: 20% Capital gains tax is imposed on immovable property and marketable securities. The general rate is 20% but a lower rate of 10% applies to the sale of listed securities. A gain on the sale of an individuals residence is not charged to tax provided that the proceeds are reinvested in another residence or where the sale is by a person over 59 years of age. Indirect tax VAT standard rate: 17.5% Value-added tax (VAT) applies to most transactions at the standard rate of 17.5% from September 1st 2005 (previously 15%). Registration is compulsory for businesses with an annual taxable turnover above ZWD 250m. Zero-rated supplies include exports, basic foodstuffs, agricultural inputs, international transport and supplies of services outside of Zimbabwe. Exemptions include financial services, rental of residential accommodation, the supply of leasehold land, educational and medical services, and domestic electricity. Tax administration and compliance Tax year: Companies: Accounting period (subject to restrictions) or calendar year; Individuals: Calendar year (accounting period for businesses) Corporate and individual taxpayers must file an annual tax return within 30 days of the notification that a return is to be made. Tax is payable in fixed instalments in advance. Employment income of individuals is taxed at source. Individuals with other types of income must submit a tax return. Additional tax information Withholding taxes: Dividends 15% (listed securities) 20% (unlisted securities); Interest (non-residents) 10%; Royalties 20%. Rates may be lower under tax treaties.

Tax treaties: Zimbabwe has concluded more than ten tax treaties. Dividends: Dividends paid to resident and non-resident individuals taxed by withholding; dividends paid between Zimbabwean companies exempt. Revenue protection: There is no anti-haven (CFC) legislation. Groups: There is no provision for group taxation. Incentives: Growth point areas; industrial parks; export processing zones; development projects. Other taxes: Automated financial transactions tax, Carbon tax, Intermediated money transfer tax, Customs and excise duties, Registration fees, Stamp duties, Tobacco levy.