African Payroll: Zimbabwe New Tax Tables

Relief at last for employees

Public Notice No. 51/2023, issued on 10 August 2023 by the Zimbabwe Revenue Authority (ZIMRA) significantly changed the local currency employment tax bands and tax rates with effect from 01 August 2023, in a bid to provide relief to taxpayers.

Importantly, where clients pay employees in US$’s, these bands and tax rates remain unchanged.

The new tax tables are enumerated below:

Why this seemingly generous concession by ZIMRA?

Persistently high inflation, elevated interest rates, and a depreciating and volatile Zimbabwe dollar have combined to fuel a cost of living crisis for households which has seen employees (being paid in local currency) disposable income being severely reduced.

The high inflation rate in Zimbabwe is clearly demonstrated by the graph below:

The new blended inflation calculations use 77% US$ and 33% RTGS inflation to calculate the blend.

Given the high inflation rate, employees have been receiving significant salary increases and/or hardship allowances to keep up with the ever-increasing cost of living, only for employees to pay higher taxes because the salary increases push them to a higher tax bracket.

The Permanent Secretary for Finance and Economic Development stated, ”Due to recent macroeconomic changes that necessitated salary reviews, a significant number of employees are caught up in bracket creep, consequently, some salaries and wages are subject to higher rates of tax. In order to provide relief to taxpayers…Treasury has approved a review of the local currency tax tables with effect from 1 August 2023.”

The increase in the tax brackets will provide welcome relief to local currency-paid employees, who have seen their purchasing power continually (and dramatically) decrease over the last three years.

Employers (HR and Payroll) can expect a flood of questions from employees when the August payslips are published.

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African Payroll: Mauritius, Tanzania, Madagascar Tax Updates

Payroll

African Payroll: Mauritius, Tanzania, Madagascar Tax Updates

MAURITIUS

Our earlier article in June 2023, detailed the employee and employer tax changes resultant from the 2023 Budget.

There has been a subsequent tax change increasing the contribution levels to the National Savings Fund.

The National Savings Fund (NSF) provides a lump sum at retirement age and is a defined contribution scheme funded by contributions from employees and employers. The lump sum provided on retirement is determined by past contributions and by the performance of investments of the fund. The fund is compulsory in respect of all citizen employees of the public and private sectors.

The rate of contribution from citizen employees is 1.0% of the basic salary and employers are required to contribute 2.5% of the basic salary of each employee. Basic salary is defined as the yearly salary compensation but excludes any bonuses and any allowance paid in cash or given to the employee in kind.

Effective from 1 July 2023, the minimum and maximum basic salary on which contributions are payable have increased as follows:

The NSF contribution increase will therefore increase employers’ cost of employment and will also decrease employees’ net take-home pay.

TANZANIA

There has been a change to the Skills Development Levy.

Each month an employer (employing more than 10 employees) is required to pay 4.0% of the employee’s gross emoluments to the Commissioner. Gross emoluments are defined as the amount from salaries, wages, payments in lieu of leave, fees, commissions, bonuses, gratuity, any subsistence traveling, entertainment, or other allowance received by an employee in respect of employment or service rendered.

Effective from 1 July 2023, the SDL Levy has been reduced from 4.0% to 3.5%.

This will have no impact on employees’ take-home pay but will reduce, albeit slightly, the employer’s cost of employment.

MADAGASCAR

On 14 June 2023, the Ministry of Labour, Employment, Public Service and Social Laws published Decree No. 2023-563. The Decree increased the minimum wage from MGA 217,000 to MGA 238,800 effective from 1 January 2023: a 9.7% increase.

Depending on the payroll methodology employed, the statutory deductions based on the revised minimum wage may have to be manually backdated to 1 January 2023.

The increase in the minimum wage is important given that many social security deductions reference the same in the contribution formula.

Social Security (CNaPS)

Employers contribute 13% of cash remuneration, up to a monthly maximum amount of 13% of eight times the legal minimum salary, per employee. In other words, the employer contribution will now be capped at MGA 1,910,400.

Employees contribute 1%, subject to a monthly maximum amount of 1% of eight times the legal minimum salary.

The CNaPS contribution increase will therefore increase employers’ cost of employment and will also decrease employees’ net take-home pay.

Health Insurance (ESIA, FUNHECE, OSTIE and SALFA)

There are four different health schemes. If an employer offers all four, the employee can elect a scheme of their choice. If, however, the employer only offers one scheme, the employee is obliged to become a member of that scheme.

Employers are required to contribute 5% of employee remuneration to a statutory health organisation, up to a monthly maximum of 5% of eight times the legal minimum salary. Employees are also required to contribute 1% of monthly remuneration up to a monthly maximum of 1% of eight times the legal minimum salary.

The health insurance contribution increase will therefore increase employers’ cost of employment and will also decrease employees’ net take-home pay.

Training Fund (FMPF)

Since 1 January 2019, employers are required to contribute to the Fonds National sur la Formation Professionnelle (FNFP). The aim of the organisation is to assist Malagasy companies cope with economic, technological, and organizational changes by strengthening the skills and qualifications of their employees. No contribution is required from employees.

The contribution rate is 1% of employee taxable remuneration. The contribution is capped to an amount calculated at eight times the legal minimum salary.

No contribution is required from employees.

The FMPF contribution increase will increase the employer’s cost of employment but will have no impact on the employee’s take-home pay.