New Income Tax – Transfer Pricing Regulations – Zimbabwe May 2019

There are more onerous transfer pricing documentation requirement regulations for companies as has been unveiled by Finance Minister, Mthuli Ncube . This is in line with Ncube’s objective of protecting and broadening the tax base of Zimbabwe and prevent Base Erosion and Profit Shifting.

Under Statutory Instrument 109 of 2019 published in the latest Government Gazette dated 10 May 2019, Ncube has with immediate effect introduced the new measures. The Statutory Instrument states that “A taxpayer must have in place contemporaneous documentation that verifies that the conditions in its controlled transactions for the relevant tax year are consistent with the arm’s length principle”.

Transfer pricing documentation is required to include:

  • An organizational overview and background of the taxpayers operations which includes shareholding and legal form.
  • A description of activities of group companies that are party to intercompany transactions.
  • Industry and market information.
  • Selection of the tested party.
  • Most appropriate transfer pricing methodology (together with appropriate profit level indicator) based on the functionality, assets and risks assumed of the tested entity in the supply chain of the intercompany transaction/s.
  • Description of the search criteria applied in identifying comparable companies.
  • Rejection matrix providing reasons for rejection of certain companies.
  • An industry analysis which would explain key factors in a taxpayers industry and market that could impact pricing.
  • Projections and budgets.
  • Conclusion on the arm’s length nature of pricing of intercompany transactions.
  • Any advance pricing agreements that may exist.