There are no restrictions on foreign investors directly purchasing real estate. In terms of section 71 (2) of Constitution of Zimbabwe Amendment (No. 20) Act of 2013, “…every person has a right, in any part of Zimbabwe, to acquire, hold, occupy, use, transfer, hypothecate, lease or dispose of all forms of property, either individually or in association with others.” Foreigners may invest by directly purchasing a commercial estate asset or may do so through corporate vehicles.
Last modified 12 Jun 2024
It is not necessary for foreign-based investors to establish a permanent establishment in order to invest in real estate in Zimbabwe.
If a foreign investor wishes to form a permanent establishment, a branch of a foreign company will be considered a permanent establishment for the purposes of investment. Approval from the Ministry of Justice, Legal and Parliamentary Affairs is required before a branch can be established. The application to the Ministry must be accompanied by details of the foreign company’s incorporation documents, as well as details of the directors or principal officer who will be the representatives of the company in Zimbabwe. The statutory costs for establishment of a branch are US$1,400, and the process takes approximately one month. Once approval has been granted, the Registrar of Companies will issue a branch registration certificate.
The other form of entity regarded as a permanent establishment is the representative/liaison office. The registration requirements, timelines and costs of registration of a representative office are similar to that of the branch of a foreign company outlined above.
Aspects of corporate governance in relation to Zimbabwean company law also apply to foreign branches or representative offices and duties of its members/directors or representatives and accounting of financial records.
Last modified 12 Jun 2024
Because there are no distinctions between local and foreign investors or their rights in respect of ownership of property, it is often not necessary for non-Zimbabweans to set up investments in real estate through a Zimbabwean registered entity.
Any person can hold real estate assets in Zimbabwe be it a business or an individual. The Constitution of Zimbabwe states that every person has the right in any part of Zimbabwe to acquire, hold, occupy, use, transfer, hypothecate or dispose of all forms of property, either individually or in association with others.
Furthermore, the Constitution does not stipulate that only citizens of Zimbabwe can hold title in respect of title deeds and the owner of a title deed capable of registration is defined in terms of the Deeds Registries Act [Chapter 20:05] merely as any person, company or trustee.
However, from an investment structuring perspective, foreign investors who wish to invest in real estate through a corporate vehicle, may elect to do so.
The main types of vehicle available to investors are:
Last modified 12 Jun 2024
Most local asset management or insurance firms operate unit trust funds which hold property assets. The real estate investment sector is dominated by insurance firms because it is predominately insurance companies that have the capacity and access to build up long-term capital.
The various funds are characterized by different investment strategies and portfolios and these unit trusts are open as an investment vehicle to individuals to companies, trusts or syndicates. In Zimbabwe, in terms of the Collective Investment Schemes (Internal Schemes) (Amendment) Regulations, 2019, Real Estate Investment Trusts (REITS) are considered to be a scheme or property fund registerable in terms of the Collective Investment Schemes Act [Chapter 24:19].
Funds are often structured to suit different investors’ requirements and added flexibility as the unit trusts tend to offer good investment prospects. Property unit trusts in Zimbabwe are registered and licensed under the Collective Investment Schemes Act and its operations are regulated and governed by the Act and the Regulations.
Unit trust schemes in property are restricted to investment in the shares of property-owning companies (fixed-property companies) and in approved securities, pending investment of cash resources into property according to the Zimbabwe stock exchange listing rules.
The Zimbabwe Stock Exchange Listing Rules specifically provide as follows:
The management company must be formed solely for the purpose of establishing, carrying on or managing unit trust schemes in property shares and issuing unit certificates thereunder, and confine its activities solely to those purposes; be registered as a public company under the Act and have a paid-up share capital and non-distributable reserves which together amount to not less than the amount actually employed or immediately available for employment in its unit trust business.
A unit trust scheme in property shares is governed by a trust deed entered into between the management company and the trustee. The trust deed will outline the responsibilities, investment policy and restrictions under which the management company may operate.
A private limited company is formed and registered under the Companies and Other Business Entities Act [Chapter 24:31] (COBE Act) which has a separate legal personality. This is an entity incorporated with one or more members through share subscription.
This is a public company formed and registered under the COBE Act and it has a separate legal personality. Shares are freely tradable and open to the public. It must meet certain minimal capital requirements set from time to time.
Last modified 12 Jun 2024
Investment management companies (asset managers) and collective investment schemes are regulated by the Securities and Exchange Commission of Zimbabwe (SECZ). In terms of the licensing requirements, the collective investment schemes and the asset management company must have Capital adequacy requirement of net assets of USD500,000.
In terms of statutory instrument 218 of 2022, the initial listing fees for REITs are set as 0.05% of the value of securities, subject to a minimum fee of USD5,500 and maximum fee of USD67,300.
The annual listing fees, which are dependent on the market capitalisation are prescribed as follows:
|
Market Capitalization (USD) |
|||
|
Tier |
Lower |
Upper |
Fee |
|
1 |
- |
785,000 |
5,400 |
|
2 |
785,001 |
3,900,000 |
8,200 |
|
3 |
3,900,001 |
7,800,000 |
12,800 |
|
4 |
7,800,001 |
15,700,000 |
15,300 |
|
5 |
15,700,001 |
23,600,000 |
19,300 |
|
6 |
23,600,001 |
31,400,000 |
27,200 |
|
7 |
31,400,001 |
39,300,000 |
30,600 |
|
8 |
39,300,001 |
55,100,000 |
36,300 |
|
9 |
55,100,001 |
78,700,000 |
40,500 |
|
10 |
78,700,001 |
118,100,000 |
43,400 |
|
11 |
118,100,001 |
157,400,000 |
45,400 |
|
12 |
157,400,001 |
- |
50,000 |
Applicable additional Listing Fees are determined as being 0.05% of the value of securities subject to a maximum fee of USD43,000 prorated from the date of listing to the next billing date.
There are no minimum subscription requirements for a private limited company although in practice, companies usually start up with a low nominal amount of capital to avoid high stamp duties.
No minimum capital requirements are contained in the COBE Act. However, public limited companies may be required to have a certain amount of capital in the form of shares and the company must be listed on the Stock Exchange.
According to the Zimbabwe Stock Exchange listing rules, property companies and listed companies which carry out certain property-related transactions are subject to additional disclosure requirements, principally relating to valuations. Property dealing companies may be subject to different treatment depending on the circumstances of each case.
Last modified 12 Jun 2024
These vary from trust to trust. General asset management license fees are payable in accordance with the fees set in the Securities and Exchange (Registration, Licensing and Corporate Governance) Rules, 2010 depending on the type of license applicable in each case. These licences come with annual registration fee of USD 25,000.
Costs vary depending on complexity. An off-the-shelf company can be purchased for a nominal figure of approximately USD500. Registrations of new companies will also cost approximately ZWD3,800 excluding professional fees.
Costs vary depending on complexity and the listing requirements. Registration of Public limited company costs ZWD7,800 excluding professional fees.
Last modified 12 Jun 2024
This may vary from trust to trust, depending on the formalities to be completed.
The incorporation process normally takes approximately two weeks and will become operational immediately thereafter.
The registration process for a public limited company takes approximately four weeks.
Last modified 12 Jun 2024
The asset manager acts as the custodian and overseer of the fund, which will be monitored and overseen by the relevant regulators, that is the Securities and Exchange Commission.
According to the Zimbabwe Stock Exchange listing rules, property companies and listed companies which carry out certain property-related transactions are subject to additional disclosure requirements, principally relating to valuations. Further, property dealing companies may be subject to different treatment depending on the circumstances of each case.
The trustee’s duties are custody of the underlying securities and ensuring that the management company complies with the provisions of the trust deed. The trustee must be qualified under the Collective Investment Schemes Act to act as a trustee
The Zimbabwean Companies and Other Business Entities Act [Chapter 24:31] (COBE Act) provides a detailed synopsis of the rights and regulations of directors and shareholders of a company. The provisions of this Act apply to both the locally resident and foreign shareholders and directors. Further, the Memorandum and Articles of Association of the company will also set out such rights and obligations.
The COBE Act also provides the statutory rights and obligations of the shareholders and directors of the company. The obligations of the company and its officers are more onerous in respect of public limited companies regarding corporate governance, especially as it relates to public share offerings and listing requirements on the Stock Exchange.
Last modified 12 Jun 2024
Annual administration costs are absorbed by the investors, as a proportion of funds invested. The unit trust will also have to pay annual management fees and any performance-related fees for the manager. The fees size and types of fees payable will normally differ depending on the type of fund but these may typically include bank charges and the fund’s audit fees. Renewal license fees for asset management companies by the Securities Exchange Commission is ZWD 138,000.
Recurring costs include maintaining the company secretarial function and a registered office, and the production of annual accounts where required, including filing of annual returns of the company at the Registrar of Companies.
Recurring costs include maintaining the company secretarial function and a registered office, and the production of annual accounts where required, as well as presenting and publishing of audited financial records of the company. In the case of listed companies, there are attendant ongoing compliance requirements
Last modified 12 Jun 2024
Property unit trusts are subject to capital gains tax which is levied on the capital gain arising from the disposal of a specified asset, which will include any marketable security, such as unit trusts
By virtue of a company’s separate legal personality, it is individually liable for corporate tax. Its income is taxed in its own name as tax on profits. Furthermore, once a dividend is declared, it is subject to withholding tax when distributed to shareholders. The distribution of dividends to shareholders is subject to non-resident withholding tax at the rate of 10% for dividends from listed shares and 15% for other dividends, unless an applicable tax treaty reduces the tax to a lower level.
Where remuneration is paid to a director, the Companies and Other Business Entities Act [Chapter 24:31] states that it is unlawful for such remuneration to be paid free of any taxation in respect of income, or otherwise calculated by reference to or varying with the amount of such taxation or with the rate of taxation on incomes.
Companies can offset or reduce tax as provided by Section 15 of the Capital Gains Tax Act [Chapter 23:01] and section 15 of the Income Tax Act [Chapter 23:06] .
By virtue of a company’s separate legal personality, it is individually liable for corporate tax. Its income is taxed in its own name as tax on profits. Once a dividend is declared, it is subject to withholding tax when distributed to shareholders. The distribution of dividends to shareholders is subject to non-resident withholding tax at the rate of 10% for dividends from listed shares and 15% for other dividends, unless an applicable tax treaty reduces the tax to a lower level.
Where remuneration is paid to a director, the Companies and Other Business Entities Act [Chapter 24:31] states that it is unlawful for such remuneration to be paid free of any taxation in respect of income, or otherwise calculated by reference to or varying with the amount of such taxation or with the rate of taxation on incomes.
Companies can offset or reduce tax as provided by Section 15 of the Capital Gains Tax Act [Chapter 23:01] and section 15 of the Income Tax Act [Chapter 23:06].
Last modified 12 Jun 2024
Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
It is not necessary for foreign-based investors to establish a permanent establishment in order to invest in real estate in Zimbabwe.
If a foreign investor wishes to form a permanent establishment, a branch of a foreign company will be considered a permanent establishment for the purposes of investment. Approval from the Ministry of Justice, Legal and Parliamentary Affairs is required before a branch can be established. The application to the Ministry must be accompanied by details of the foreign company’s incorporation documents, as well as details of the directors or principal officer who will be the representatives of the company in Zimbabwe. The statutory costs for establishment of a branch are US$1,400, and the process takes approximately one month. Once approval has been granted, the Registrar of Companies will issue a branch registration certificate.
The other form of entity regarded as a permanent establishment is the representative/liaison office. The registration requirements, timelines and costs of registration of a representative office are similar to that of the branch of a foreign company outlined above.
Aspects of corporate governance in relation to Zimbabwean company law also apply to foreign branches or representative offices and duties of its members/directors or representatives and accounting of financial records.
Last modified 12 Jun 2024