Zimbabwe Revenue Authority Harmonises Customs and Excise Duty Regime

The year 2022 witnessed significant legislative and policy adjustments to Zimbabwe's customs and excise duty regime, primarily driven by the Finance Act No. 8 of 2022 and various Statutory Instruments. Key changes included the alignment of the Harmonized System (HS) classification with international standards, impacting the duty treatment of emerging products. Notably, the option for VAT-registered operators to pay duties in foreign currency was introduced, alongside targeted duty suspensions and rebates aimed at stimulating specific economic sectors like agriculture, mining, manufacturing, health, and tourism. Excise duties on certain goods, such as energy drinks and cigarettes, were revised, and specific conditions for duty suspensions on motor vehicles for physically challenged persons and safari operators were updated. These reforms underscore the government's dual objectives of revenue generation and fostering local industry growth and economic stability.

The landscape of customs and excise duties in Zimbabwe underwent notable transformations during 2022, reflecting the government's ongoing efforts to balance revenue collection with economic development and industrial protection. These changes, primarily spearheaded by the promulgation of the Finance Act No. 8 of 2022 and a series of Statutory Instruments, introduced critical amendments to the Customs and Excise Act [Chapter 23:02] and related regulations. For legal practitioners and businesses engaged in cross-border trade or the manufacture of excisable goods, understanding these shifts is paramount for ensuring compliance, mitigating risks, and optimising operational costs.

This article delves into the core legal developments concerning customs and excise duties in Zimbabwe during 2022. It examines the legislative instruments that brought about these changes, analyses their practical implications for various sectors, and highlights key areas of focus for legal professionals. The reforms touched upon diverse aspects, from the harmonisation of product classifications to the introduction of foreign currency payment options for duties and the strategic use of suspensions and rebates to support local industries and vulnerable groups.

Customs and excise duties in Zimbabwe are primarily governed by the Customs and Excise Act [Chapter 23:02], which provides the framework for the imposition, collection, and management of these taxes. Customs duty is levied on imported goods, while excise duty applies to certain locally manufactured goods and specific imported items falling under the Excise Tariff. The applicable rates and classifications are detailed in the Customs Tariff Handbook, which is periodically updated through statutory instruments. Beyond revenue generation, these duties serve as critical tools for protecting local industries, regulating trade, and implementing broader economic policies.

Historically, Zimbabwe's customs and excise regime has been subject to frequent adjustments in response to economic conditions, budgetary requirements, and international trade agreements. The year 2022 continued this trend, with the Ministry of Finance and Economic Development, in conjunction with the Zimbabwe Revenue Authority (ZIMRA), introducing measures aimed at enhancing revenue collection, streamlining administrative processes, and providing targeted relief or incentives. These measures often stem from the annual National Budget Statement, which outlines proposed fiscal policies, subsequently formalised through Finance Acts and various Statutory Instruments.

A significant development in 2022 was the publication of Statutory Instrument 203 of 2022 on November 28, 2022, which superseded Statutory Instrument 53 of 2017. This instrument brought Zimbabwe's Harmonized System (HS) classification in line with the World Customs Organization (WCO) 2022 amendments. The updated HS Nomenclature introduced 351 sets of amendments, encompassing new and emerging products such as edible insects, drones, smartphones, and various tobacco products, thereby clarifying their classification for duty purposes. This alignment is crucial for international trade and ensures consistency with global customs standards.

The Finance Act No. 8 of 2022, gazetted on October 24, 2022, introduced several pivotal changes. Notably, Section 115 of the Customs and Excise Act [Chapter 23:02] was amended to provide VAT-registered operators with the option to pay duty in foreign currency for non-designated goods, effective September 1, 2022. This measure aimed to address challenges related to VAT refunds and foreign currency liquidity. Furthermore, the Act suspended the collection of VAT on the exportation of unbeneficiated platinum for 12 months, commencing January 1, 2022, with specific exemptions for certain suppliers.

Targeted duty suspensions and rebates were also a prominent feature of the 2022 regime. The 2022 National Budget Statement proposed expanding the list of capital equipment zero-rated for customs duty on importation across key sectors including agriculture, mining, energy, manufacturing, and health. Conversely, the suspension of duty on basic commodities was not extended, expiring on November 16, 2022. To support local production, proposals were made to gradually reduce ring-fenced milk powder and raw cheese imports under suspension of duty, a policy further detailed and extended by Statutory Instrument 222 of 2022, which set specific import allocations for dairy companies until December 31, 2025.

Excise duties also saw adjustments. The flat rate of excise duty on energy drinks was reviewed from US$0.05 to US$0.10 per litre, effective January 1, 2023, as outlined in the Finance Act No. 8 of 2022. Additionally, the excise duty rates on diesel and petrol were adjusted to US$0.30 per litre to prevent misclassification and align with petrol rates, a measure aimed at increasing government revenue and reducing the foreign currency burden. Statutory Instrument 10 of 2022 introduced specific conditions for the suspension of duty on motor vehicles for physically handicapped persons, setting a maximum import value of US$40,000 and requiring notification of address changes. It also extended the duty suspension for specified motor vehicles imported by safari operators until December 31, 2023.

Further administrative changes included the reduction of the exporting period for goods under bond from 10 to 5 days, effective January 1, 2023, as per Statutory Instrument 223 of 2022. This instrument also replaced the rebate of duty on capital equipment in the tourism sector with a suspension of duty for specified equipment with a minimum value of US$25,000, subject to the operator being registered with the Zimbabwe Tourism Authority and the Zimbabwe Council of Tourism for at least two years. These granular adjustments reflect a dynamic regulatory environment responsive to both fiscal needs and sectoral development priorities.

The year 2022 proved to be a period of significant recalibration for Zimbabwe's customs and excise duty framework. The legislative amendments, particularly through the Finance Act No. 8 of 2022 and various Statutory Instruments, demonstrate a concerted effort to modernise the tax system, align with international standards, and strategically deploy fiscal incentives. The introduction of foreign currency payment options for duties, the detailed updates to the Harmonized System, and the sector-specific suspensions and rebates highlight a nuanced approach to revenue management and economic stimulation.

Practitioners must remain vigilant in monitoring these evolving regulations, particularly concerning product classification, eligibility for duty suspensions and rebates, and the implications of foreign currency payment options. The emphasis on supporting local production, while also facilitating key sectors like tourism and mining, suggests a continued focus on balancing protectionist measures with broader economic growth objectives. Businesses should regularly consult ZIMRA's public notices and the latest statutory instruments to ensure full compliance and to leverage any available duty relief, as non-compliance can lead to severe penalties, including forfeiture. The dynamic nature of these duties necessitates ongoing legal review and strategic planning for all entities involved in import, export, or manufacturing activities in Zimbabwe.