Zimbabwe's new rental tax raises compliance questions for landlords

Zimbabwe's introduction of a presumptive rental income tax on commercial property rentals has created new compliance obligations for landlords, estate agents and tenants, while also raising questions about the interpretation of the law and its interaction with existing income tax provisions.

The tax was introduced through the Finance Act, 2025 (Act No. 7 of 2025) and took effect on January 1, 2026. It is provided for under Section 36R and the Thirty-Ninth Schedule of the Income Tax Act, with further administrative guidance issued by the Zimbabwe Revenue Authority (ZIMRA) through Public Notice 08 of 2026.

Under the new regime, a 15 percent tax is levied on gross rental income derived from premises used for trade, business or occupational purposes. The tax is treated as a final tax, meaning landlords cannot claim deductions for expenses such as maintenance, repairs, insurance, management fees or financing costs. The amount paid also cannot be credited against any other income tax liability.

The tax is generally payable by the registrable proprietor, including landlords, property owners, lessees and sub-lessees who receive rental income directly or indirectly from tenants conducting business activities on the premises. Purely residential rentals remain outside the scope of the tax, although mixed-use properties are taxable on the portion attributable to business activities.

The introduction of the tax has created an important distinction between landlords who were already registered with ZIMRA and those entering the tax system after the measure came into effect. According to ZIMRA's administrative position, taxpayers who were already registered and declaring rental income under the normal income tax system before December 31, 2025, may continue accounting for rental income under the ordinary income tax framework. This potentially creates different tax outcomes for landlords depending on their registration status before the commencement date.

For landlords who were not previously registered, the public notice requires registration under the presumptive rental income tax regime. However, some tax practitioners have argued that the wording of the legislation itself does not clearly exclude the possibility of registration under the ordinary income tax system, creating uncertainty that may require further clarification.

The compliance requirements are extensive. Registrable proprietors are expected to register with ZIMRA within 30 days of becoming liable and must submit detailed information relating to properties and tenants. Monthly returns must be filed by the fifth day of the following month, while tax payments must be made by the tenth day of that month.

The law also places significant responsibilities on estate agents and other intermediaries who collect rental income on behalf of landlords. Such parties may be deemed statutory agents and can be required to remit the tax where the proprietor has failed to do so. They may also be required to issue withholding certificates and maintain relevant records.

Tenants are not entirely removed from the compliance framework. If a landlord or agent fails to remit the tax, ZIMRA has the authority to require the tenant to pay the tax directly. In such circumstances, the law provides certain protections to tenants, including protection against eviction or rent increases for a period of three months solely because they complied with the tax directive.

The presumptive rental income tax operates independently of other taxes. Commercial rentals that are subject to VAT will continue to attract VAT, while landlords must also continue complying with other tax obligations, including the collection of informal trader's tax where applicable.

Failure to comply carries severe consequences. Taxpayers may face recovery of outstanding amounts together with penalties equal to 100 percent of the unpaid tax, in addition to any other enforcement measures available to the revenue authority.

Tax experts have cautioned that while the objectives of broadening the tax base and improving revenue collection are understandable, there remain concerns about whether the administrative guidance issued by ZIMRA fully aligns with the provisions of Section 36R and the Thirty-Ninth Schedule of the Income Tax Act. They argue that commercial landlords, real estate investment trusts, large-scale property developers and other affected parties should seek professional advice to determine the most appropriate compliance approach.

As Zimbabwe expands the reach of presumptive taxation beyond traditional sectors, the new commercial rental tax is expected to have far-reaching implications for the property market, particularly for landlords managing large portfolios and those with significant operating costs that can no longer be deducted under the presumptive regime.