Everything Home-Buyers, Renters and Landlords Need to Know About Zimbabwe's 2025 National Budget

Professor Mthuli Ncube, the Minister of Finance, Economic Development and Investment Promotion, unveiled Zimbabwe's 2025 National Budget on November 28, 2024. With its theme of "Building Resilience for Sustained Economic Transformation," the budget contains key measure that affect Zimbabwe's real estate landscape.

It introduces Rental Income Tax among many other measures that are of interest to anyone looking to find a property for sale, buy a home or rent a home. 

It is crucial for home-owners, landlords and tenants to understand these new budget proposals. 

As Zimbabwe’s largest real estate platform with over 8,000 listed properties and connections to a network of over 2,000 agents, we at Propertybook have leveraged our vast pool of resources and expertise to help. This comprehensive guide will walk you through the key points you need to know about the Zimbabwe's real estate landscape in 2025 in the context of the new National budget. 

Conversion of Residential Properties to Business Premises

Rental income has always been taxed in Zimbabwe. However, it can be concluded from this new budget that these taxes have not been collected as strictly as they should.

That's why, according to Priscilla Nyatsanga, a partner at Titan Law, the key measures of the budget include, "The introduction of stricter monitoring and enforcement measures for accounting in under-taxed areas such as rental income to broaden the tax base." 

But more specifically, in the new budget, "all properties that have been converted from residential to business properties be subject to Rental Income Tax at a rate of 25% and accounted separately by the Zimbabwe Revenue Authority,” Prof. Ncube said in his budget proposal speech. 

The budget statement will require all landlords who own properties that have been converted from residential to business premises to a rental income tax of 25%. This tax will be accounted for and collected separately by the Zimbabwe Revenue Authority (ZIMRA).

Properties in suburbs such as Eastlea, Belvedere or Mbare which are near the CBD have proven highly lucrative for conversion to commercial use, at great profit to owners. Now, for anyone looking to do the same, it is important to remain tax compliant in this regard, and complete the relevant payments and paperwork to ZIMRA.

The government will be deploying in-depth resources and measures to uncover undeclared rental income. Tax compliance mechanisms are going to be much tighter going forward.  

Disclosure of Rental Expense Information

Additionally, the budget proposes that companies and organizations renting premises be compelled to disclose the rental expense, location, and the owner of the property to the Commissioner of ZIMRA for rental income tax purposes.

This measure is designed to enhance transparency. It will enable ZIMRA to cross-check information, ensuring that rental income is accurately reported and taxed. It will also assist in identifying property owners who may be evading or underpaying their rental income tax obligations. Therefore, transparency will be crucial for property owners. 

Consulting with experts, lawyers or consultants before converting a residential property could save thousands of dollars in penalties as well as stress from being in contravention of ZIMRA policies. Home-owners and renters alike should anticipate increases in prices and costs as a result of the budget changes.  

Penalty for Non-Disclosure

"Deliberately failing to declare rental income tax is considered a serious offense, punishable with financial penalties, criminal prosecution and imprisonment, seizure of property to recover unpaid taxes and penalties," Nyatsanga writes. 

In addition, such violators will be precluded from claiming the rental expense against their taxable income.

This provision serves as a deterrent against non-disclosure and incentivizes businesses, landlords and investors, and even Air BnB hosts to ensure that complete and accurate information regarding their rental arrangements is being tracked and recorded. It underscores the government's commitment to fostering a culture of tax compliance and transparency. 

Tips for Landlords, Investors and Air-BnB Hosts

Effective property tax management in Zimbabwe requires knowledge of deductions and careful documentation. By deducting allowable expenses like levies, property taxes, upkeep, security, and utilities, property owners can drastically lower their taxable income.

Since costs that exceed rental income for people renting out properties might be deducted from other sources of income, it is essential to speak with tax professionals for precise planning.

Keeping thorough financial records is also crucial. Lease agreements, rental payment records, and invoices for deductible costs such as electricity, maintenance, and advertising are all necessary paperwork. Such records support tax claims during audits and guarantee conformity with the Zimbabwe Revenue Authority (ZIMRA).

Occasionally reviewing tax obligations is another useful strategy for property owners to adjust to Zimbabwe's shifting economic landscape. Because demand and inflation frequently affect the real estate market, property owners should prepare for any tax obligations related to changes in property values and seek professional guidance to maximize financial results.

For more advice, Propertybook offers property management materials, such as information on how to choose the best investment plan when building or purchasing a home and how to deal with Zimbabwe's particular tax environment.

Frequently Asked Questions

What is the proposed rental income tax rate for converted residential properties?

The budget proposes subjecting converted residential properties used for business purposes to rental income tax at 25%. 

Why is the government introducing these changes?

The primary objectives are to enhance compliance, broaden the tax base, and ensure that rental income is accurately reported and taxed, thereby boosting revenue collection.

How will the disclosure of rental expense information benefit tax administration?

By compelling businesses to disclose rental expense details, ZIMRA will be able to cross-check information and identify property owners who may be evading or underpaying their rental income tax obligations.

What is the penalty for non-disclosure of rental property ownership?

Companies or organizations that fail to declare the owner of the rented property will be precluded from claiming the rental expense against their taxable income.

When will these changes come into effect?

The budget did not specify an exact implementation date, but it is expected that the changes will be introduced during the 2025 fiscal year, pending any necessary legislative amendments. These tend to happen when parliament meets in January or early February.

How can property owners and businesses prepare for these changes?

Property owners and businesses should familiarize themselves with the new requirements, ensure accurate record-keeping, and seek professional advice if necessary to ensure compliance with the revised rental income tax regulations.