Nqobile Bhebhe
Zimbabwe and the Swedish Federation signed a landmark Agreement on Wednesday to prevent double taxation on income and capital gains while combating tax evasion.
The signing comes as the Zimbabwean government strengthens its economic, diplomatic, and political ties with countries worldwide under President Mnangagwa’s engagement and re-engagement strategy.
Double taxation occurs when two or more tax jurisdictions impose taxes on the same income or profit.
To address this, Double Taxation Agreements (DTAs) have been established as an international tax mechanism to ensure that income or capital is not taxed in both jurisdictions during the same period.
These agreements also promote international tax compliance and the exchange of tax-related information.
Speaking at the signing ceremony, Deputy Minister of Finance, Economic Development, and Investment Promotion, Kudakwashe Mnangagwa, highlighted the significance of the agreement in fostering economic cooperation and enhancing investment between Zimbabwe and Sweden.
“Double Taxation Agreements provide protection to taxpayers against double taxation of the same income in two tax jurisdictions. This Agreement is a testament to the strong diplomatic relations shared and the mutual desire to create a conducive environment for investment,” said Deputy Minister Mnangagwa.
He noted that companies from both countries are already actively investing in each other’s economies, engaging in cross-border trade involving goods such as gold, ferroalloys, nickel ore, coffee, tea, edible fruits, and tobacco.
“The signature of the Tax Treaty will, thus, pave way for the enhancement of investment, in particular, through Permanent Establishment of companies, which is key in the growth of both economies.
“It is pleasing to note that the Agreement conforms to international best practices, including the emphasis on the importance of exchange of taxpayer information, which is a topical issue worldwide,” he added.
Recently, Minister of Finance, Economic Development, and Investment Promotion, Professor Mthuli Ncube, endorsed the Yaoundé Declaration, an initiative aimed at improving transparency and cooperation in tax matters among participating countries.
“In addition to the elimination of double taxation of the same income, it is important that such Agreements enhance transparency in tax matters and exchange of taxpayer information or transactions, subject to legislated guidelines governing taxpayer confidentiality.”
Deputy Minister Mnangagwa further stressed the importance of international collaboration in tax compliance, particularly in light of increasing cases of tax evasion and avoidance.
He noted concerns about sophisticated cross-border transactions where taxpayers conceal incomes through manipulation of Permanent Establishment and Residency concepts, thereby undermining domestic resource mobilization efforts.
The agreement, he explained, is based on principles of equity, fairness, and transparency, ensuring clarity in the taxation of cross-border income, as well as the treatment of natural persons and independent consultants in both jurisdictions.
To combat tax-related malpractices, Deputy Minister Mnangagwa emphasised the need for continuous review of existing tax treaties to align them with evolving international standards.
“Pursuant to the need to combat malpractices in the utilisation of concessions provided in such Agreements, Treasury will, in collaboration with other Contracting Parties, undertake a deliberate and robust review of Tax Treaties that have since been overtaken by international developments.
“What is critical, especially after signature of such Agreements, is to ensure that the necessary legal instruments are timeously published.”
He assured that Treasury is ready to complete all necessary processes to implement the agreement, reinforcing Zimbabwe’s commitment to enhancing investment and economic relations.
