Staff Writer 
Simbarashe Hamudi
CHURCHES and other religious organisations play a vital role in Zimbabwean society. Beyond their spiritual mandate, they contribute significantly to social development through charitable outreach, education programmes, health initiatives, and community support services.
Because of their non-profit and faith-based nature, many people assume that churches are entirely exempt from taxation. However, Zimbabwe’s tax framework draws important distinctions between religious activities and commercial or employment-related activities. While certain income streams are exempt, churches are not automatically excluded from all tax obligations.
The Zimbabwe Revenue Authority (Zimra), which administers tax laws in the country, requires churches to comply with various statutory requirements depending on the nature and scale of their operations. Understanding these obligations is essential for church leaders, trustees, treasurers and administrators who oversee financial management.
Under Zimbabwean tax law, income tax is levied on business profits derived from or deemed to be from a source within Zimbabwe. Churches benefit from a specific exemption regarding income that arises directly from their religious function. Donations, tithes, offerings and other voluntary contributions made by members are not subject to income tax. These receipts are considered to support the religious and charitable objectives of the organisation rather than constituting commercial gain.
However, the exemption is not unlimited. When churches engage in activities that generate income beyond voluntary member contributions, that income may fall within the definition of business profits and therefore becomes taxable. For example, many churches operate bookshops that sell religious literature, Bibles, devotionals, branded clothing, wristbands and other merchandise. If these activities generate surplus income after expenses, the profits may be subject to income tax.
Similarly, some churches rent out their halls, conference facilities, parking spaces or other properties for weddings, seminars or community events. Rental income earned from such arrangements may also be considered taxable if it constitutes a commercial activity. The same principle applies to income earned from operating schools, training centres or other ventures that charge fees.
The key distinction lies in whether the income arises purely from religious donations or from structured business operations. Churches are therefore expected to maintain proper financial records that clearly separate exempt receipts from potentially taxable income streams. Failure to do so may expose the organisation to assessments, penalties or interest.
Churches that employ staff must comply with Employees’ Tax, commonly known as Pay As You Earn (PAYE). In Zimbabwe, any entity that pays remuneration to individuals for services rendered is regarded as an employer and is required to register with Zimra within 14 days of becoming an employer.
In the church context, employees may include pastors, priests, bishops, administrative staff, accountants, youth coordinators, musicians, security personnel, drivers and cleaners. Remuneration may consist of salaries, wages, allowances, housing benefits, transport allowances or other forms of compensation.
Once registered for PAYE, the church must deduct tax from employees’ earnings according to the prevailing tax tables issued by Zimra. These deductions must be remitted to the revenue authority by the 5th day of the month following the month in which the salaries were paid. The employer is responsible for ensuring that the correct amounts are withheld and paid on time.
Even where clergy members are regarded as spiritual leaders rather than conventional employees, the payment of regular remuneration may still trigger PAYE obligations. Churches must therefore evaluate their employment relationships carefully to determine whether tax deductions are required. Failure to register, deduct or remit PAYE can result in financial penalties and interest charges. In some cases, the employer may be held personally liable for the unpaid tax.
Value Added Tax (VAT) is an indirect tax charged on the supply of goods and services. Churches are not automatically exempt from VAT registration. If the value of their taxable supplies exceeds the prescribed registration threshold of US$25,000 within a 12-month period, they are required to register for VAT.
Taxable supplies may include the sale of goods such as books or merchandise, provision of catering services, rental of facilities, or any other services offered for a fee. Once registered, the church must charge VAT on taxable transactions and remit the tax collected to Zimra by the 15th day of the month following the month in which it was collected.
VAT-registered churches are also permitted to claim input tax credits on VAT paid for goods and services used in making taxable supplies. However, if a church is not registered for VAT, it cannot claim such credits, and VAT paid on purchases becomes part of its operating costs. It is important to note that even churches that do not meet the registration threshold are still required to pay VAT on goods and services they purchase from VAT-registered suppliers. For example, VAT may be charged on building materials, office equipment, musical instruments or professional services. This VAT forms part of the cost incurred by the church.
Churches may also be subject to withholding tax obligations under specific circumstances. Withholding taxes are required when payments are made to certain categories of recipients, particularly non-residents or contractors. For instance, if a church invites a foreign preacher or motivational speaker and pays professional fees, non-residents tax on fees may apply. If royalties are paid for the use of copyrighted music, videos or publications, non-residents tax on royalties may be triggered. Churches that enter into contracts for services may also be required to withhold a percentage of the payment and remit it to Zimra.
Churches that import goods such as vehicles, equipment or building materials may also be liable for customs duties and import VAT unless a specific exemption is granted. Applications for exemptions must comply with customs regulations and procedures.
The taxation of churches reflects the principle that all entities operating within Zimbabwe’s economy are subject to the law, even if their primary purpose is religious rather than commercial. While exemptions are provided for donations and core religious income, commercial activities and employment relationships bring churches within the scope of general tax rules.
Proper governance and financial stewardship are therefore essential. Church boards and trustees have a responsibility to ensure that accurate accounting systems are in place, statutory returns are submitted on time, and tax obligations are met.
l 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
