Staff Writer 
By Simbarashe Hamudi
THE Zimbabwe Revenue Authority (Zimra) has continued to sharpen its focus on how businesses report cross-border dealings and related-party transactions, underscoring the central role of transfer pricing compliance in protecting the national tax base.
In many countries, including Zimbabwe, large companies that trade with associated enterprises, whether in manufacturing, distribution, services, intellectual property licensing, or financing, can structure transactions in ways that influence profits and, ultimately, tax outcomes. To address this risk, taxpayers who deal with related party transactions are expected to have a transfer pricing document and complete a transfer pricing in return when they submit their income tax returns.
The transfer pricing return is not a routine administrative exercise. It is a compliance instrument tied to the Income Tax Act and Statutory Instrument 109 of 2019, and it is intended to capture the full picture of a taxpayer’s controlled and uncontrolled dealings with related parties.
The return applies to taxpayers that have international and/or domestic transactions, particularly those involving related or associated persons or parties, activities of branches or permanent establishments within Zimbabwe, and transactions with counterparties in specified countries. The overall objective is to allow tax authorities to assess whether pricing in these transactions reflects arm’s length principles, meaning that dealings should be priced as if the parties were independent and not under common control.
A key starting point in the Zimra transfer pricing return is the taxpayer’s identification details, including the company name, TIN number, and the financial year ended that are captured under the income tax return. The return also clarifies that it must be completed by taxpayers with relevant transactions for specified aspects.
Importantly, the instructions indicate that for the purposes of the return, any transaction under relevant sections is treated as controlled or uncontrolled. Taxpayers are further instructed to show values in whole dollars only, which signals the need for precision and avoidance of approximations that could lead to errors during review.
At the heart of the submission are two fundamental sections: international-related party information and domestic-related party information. The taxpayer is required to list the industry that best describes the business activity undertaken by the company relating to controlled or uncontrolled transactions.
The industries should be listed in descending order of total dollar value, with corresponding information for the three principal foreign locations of the international relation or associated persons also ranked by descending total value of dealings.
For each industry, the return seeks the total dollar value of related party dealings excluding loans, while any remaining transactions are included under a “balance” category. This structure encourages taxpayers to be transparent about where significant related-party activity is occurring globally, rather than presenting a generic total.
The return also includes a section for domestic related parties. Here, taxpayers must list the industry describing the relevant business activity, again in descending order of total value. For each industry, the taxpayer identifies the three principal domestic related parties, ranked by total value, and records the total dollar value of related party dealings excluding loans.
Remaining items fall under “balance.” Together, these sections create a map of the taxpayer’s relationships, both within Zimbabwe and abroad, relationships that can impact profit allocation through transfer pricing arrangements.
After identifying related-party relationships, the return moves into a detailed accounting of revenue and expenditure items. This section requires taxpayers to list details of revenue or expenditure items in dollar terms in relation to international or domestic dealings with associated enterprises. This section is divided into two major parts.
The part that focuses on business activities undertaken and requires the taxpayer to specify the nature of transactions with associated enterprises, the aggregate amount of those transactions, the territories covered by the transactions, and the method(s) applied to determine the pricing. Taxpayers must indicate which transfer pricing approach they applied for by ticking the appropriate boxes, with options that include Comparable Uncontrolled Price (CUP), Resale Price, Cost-plus, TNMM (Transactional Net Margin Method) and Profit Split.
The return also covers income categories such as sales of stock and raw materials, sales of other items, services (including management, financial, administrative, marketing and training), research and development, technical and construction services, and other services, as well as commissions and multiple types of royalties. It further includes rent and financial items, such as interest, discounts, insurance, derivative financial instruments, and other income.
On the expenditure side, the first part requires taxpayers to report purchases, service fees, research and development, technical and construction costs, commissions, and royalty categories, together with rent and financial charges such as interest, discounts, insurance, derivative financial instruments, and other expenses. The breadth of these categories shows that Zimra expects transfer pricing analysis to extend beyond product sales to include the full set of economic flows typical of modern corporate groups.
A major section addresses the acquisition and disposal of assets. Taxpayers must describe asset acquisitions and disposals involving associated enterprises, stating the nature of the transactions and the territories covered, and indicate the method(s) applied using arm’s length pricing logic and the specified transfer pricing approaches.
Assets covered include patents, trademarks or trade names, goodwill, intangible personal property, tangible personal property, and real property. The same asset categories apply for disposal. This is especially relevant where groups license intellectual property, restructure brand ownership, or transfer rights and tangible assets between group entities.
The return also includes a dedicated loans section. For loans with international or associated domestic parties, taxpayers must report opening and closing balances and distinguish between interest-bearing loans, interest-free loans, and current accounts receivable and payable, including amounts borrowed, loaned, received, and paid. This matters because interest rates can significantly affect taxable profits; failing to apply arm’s length terms can lead to adjustments.
Other areas include non-monetary considerations (whether value was exchanged with related parties and details if yes), country-based transaction disclosures, and documentation coverage (whether documentation exists and what percentage of international transactions it supports).
Finally, the last section addresses permanent establishment awareness by asking whether taxpayers know of any foreign entity operating specified activities or sites in Zimbabwe, and requiring details such as entity name, residence country, Zimbabwe address, representative contacts, and email addresses.
In summary, Zimra’s transfer pricing return framework represents a structured approach to managing the complexities of related-party trade. By requiring detailed disclosure of international and domestic relationships, revenue and expenditure flows, asset transfers, loans, non-monetary considerations, transactions involving specified countries, documentation coverage, and permanent establishment awareness, the return provides a comprehensive basis for tax review.
Hamudi is Tax Partner at Baker Tilly Central Africa, based in Harare, Zimbabwe. He can be contacted at +263 775 399 536 or simbarashe.hamudi@bakertilly.co.zw
