Introduction

In response to Zimbabwe’s increasing use of electronic transactions, the government introduced the Intermediated Money Transfer Tax (IMTT), popularly known as the 2% tax, to widen the tax base and fund public services. Since its inception in 2018, the tax has generated significant revenue for the state while sparking intense debate among businesses, individuals, and economists.

This comprehensive guide explores the origin, structure, rates, exemptions, implications, and compliance strategies of the IMTT to help you navigate its impact on personal finance and business operations in Zimbabwe.

What is the Intermediated Money Transfer Tax (IMTT)?

The Intermediated Money Transfer Tax (IMTT) is a transaction-based tax levied on electronic money transfers initiated through financial institutions, mobile money platforms, and payment service providers.

Commonly referred to as the 2% tax, it applies to a wide range of financial transactions including:

  • Bank-to-bank transfers
  • Mobile money payments (EcoCash, OneMoney, TeleCash)
  • Internal transfers within financial institutions
  • Card-based payments
  • ZIPIT transactions
  • RTGS and online banking payments

The tax is collected per transaction, making it one of the most pervasive forms of taxation in Zimbabwe’s financial system.

The IMTT is legislated under:

  • Finance Act [Chapter 23:04], as amended
  • Statutory Instruments (e.g., SI 205 of 2018, SI 142 of 2019)
  • Annual Finance Bills outlining changes in thresholds and exemptions

The tax is administered by the Zimbabwe Revenue Authority (ZIMRA), with financial institutions acting as withholding agents.

Objectives of the IMTT

The government introduced the IMTT to:

  1. Widen the tax base, especially targeting the informal sector
  2. Enhance domestic resource mobilization
  3. Reduce reliance on traditional taxes such as VAT and PAYE
  4. Promote fiscal inclusiveness and capture unregistered economic activity
  5. Fund critical infrastructure and public service delivery

IMTT Rates and Thresholds (2024–2025)

Although initially fixed at 2% of the value of each transaction, the rate and structure of IMTT have evolved over time to balance revenue collection with economic realities.

Current IMTT Rates:

Transaction Type

IMTT Rate

Minimum Threshold

Electronic Transfers

2%

ZWL 10 or USD 0.05

Person-to-Person USD Transfers

2%

USD 10 (exempt below)

Intra-company Transfers

Exempt

–

Government Payments

Exempt

–

Foreign Currency Card Use Abroad

2%

USD 10

Note: Rates may vary based on currency (ZWL vs USD) and whether the payer is an individual or company. The government periodically revises these rates via Finance Bills.

How IMTT is Calculated

The calculation is straightforward:

IMTT = Transaction Value × 2%

Example 1 – Mobile Money Transfer (ZWL):

  • Amount: ZWL 1,000
  • IMTT = 1,000 × 2% = ZWL 20

Example 2 – USD Bank Transfer:

  • Amount: USD 150
  • IMTT = 150 × 2% = USD 3

The tax is automatically deducted at the point of transaction by the bank or mobile money platform.

Who Pays the IMTT?

Everyone who initiates an electronic financial transaction in Zimbabwe is subject to IMTT unless an exemption applies.

Affected Entities:

  • Individuals using mobile money or bank accounts
  • Businesses making supplier payments, payroll, or interbank transfers
  • NGOs and development organizations
  • Schools and educational institutions
  • Public entities not exempted by law

The tax burden falls on the payer, and financial intermediaries are legally required to deduct and remit the funds to ZIMRA.

Exemptions from IMTT

To cushion the economic impact and support strategic sectors, the government has carved out several exemptions, including:

1. Salary Payments

  • Employers are not taxed for net salary payments to employees.

2. Internal Transfers

  • Moving money between your own accounts in the same institution is exempt.

3. Government Transactions

  • Payments involving the Reserve Bank of Zimbabwe (RBZ) or Ministry of Finance are excluded.

4. Donor and NGO Payments

  • Certain approved donor-funded projects are exempt upon request to ZIMRA.

5. Mining Royalties and Tax Refunds

  • Government tax refunds and royalty remittances by miners are exempt.

To claim an exemption, supporting documentation and formal approval from ZIMRA are often required.

Impact on Businesses

1. Increased Operational Costs

For companies making regular supplier payments, payroll, and utility bills, IMTT can inflate costs significantly — especially for large-value transactions.

2. Double Taxation Risk

Some businesses complain about “double dipping”, where VAT and IMTT apply to the same transaction, compounding the tax burden.

3. Disincentive to Go Digital

Despite Zimbabwe’s push for a cashless economy, the IMTT may discourage digital payments, leading to a resurgence of cash-based transactions.

4. Cash Flow Strain

Small and medium enterprises (SMEs) operating on thin margins can be disproportionately affected by recurring IMTT charges.

Compliance and Filing

Although individuals do not need to file IMTT returns (as it is deducted automatically), businesses should:

  • Reconcile IMTT deductions monthly
  • Maintain proof of remittance to ZIMRA
  • Claim valid exemptions using ZIMRA-prescribed forms
  • Consult ZIMRA for any overpayments or errors

Failure to comply may result in penalties, interest, or tax audits.

Penalties for Non-Compliance

  • Failure to Deduct: Institutions not deducting the IMTT are liable to pay the tax plus penalties.
  • Late Remittance: Attracts interest of 10% of the outstanding amount and possible fines.
  • Underreporting: May result in tax audits, loss of tax clearance, and legal action.

Strategic Tips for Tax Efficiency

1. Aggregate Payments

Consolidate payments into fewer, larger transactions to reduce the total number of taxable events.

2. Use Internal Transfers

Utilize internal account movements wherever possible, as these are exempt.

3. Confirm Exemptions

Always consult ZIMRA or your tax advisor before assuming a transaction is exempt.

4. Maintain Documentation

Keep proof of exemption letters, remittance schedules, and internal memos for audit purposes.

Criticisms and Controversy

The IMTT has been controversial since its introduction due to:

  • Regressive impact on low-income earners
  • Overburdening formal businesses
  • Encouraging a shadow (cash-based) economy
  • No visible improvements in public services despite high revenue collection

However, government officials argue that the tax is critical for infrastructure development, healthcare, and national debt repayment.

Contribution to National Revenue

According to the Zimbabwe Ministry of Finance, IMTT was among the top three revenue streams in 2023, contributing over ZWL 250 billion to the fiscus. The funds have been used for:

  • Road rehabilitation projects
  • COVID-19 healthcare financing
  • Education infrastructure
  • Social safety nets

For more information, visit the Ministry of Finance and Economic Development website.

Future Outlook

Given the tax’s revenue significance, the IMTT is likely here to stay. However, future reforms may include:

  • Lower rates for essential sectors
  • Enhanced digital exemption systems
  • Tiered IMTT based on transaction purpose or entity type
  • Integration with automated compliance systems

Businesses and individuals must stay updated with national budget statements and ZIMRA circulars for policy changes.

Conclusion

The Intermediated Money Transfer Tax (IMTT) in Zimbabwe plays a critical role in funding government operations but also adds cost pressures to digital transactions. While compliance is non-negotiable, smart financial planning and awareness of exemptions can minimize the impact.

Whether you’re an individual using mobile money or a large company managing payroll and supplier payments, understanding and navigating IMTT is essential for maintaining financial efficiency and legal compliance in Zimbabwe’s evolving tax environment.