Capital gains tax on business acquisitions Acquisitions can be through purchase of existing shares or shares already in issue

On 16 February 2023 I wrote an article titled “Understanding capital gains tax”. I explained capital gains tax (CGT) in general. In the current article I look at CGT as it relates to acquisition of businesses.

Capital Gains Tax Act In Zimbabwe capital gains tax is administered in terms of the Capital Gains Tax Act (Chapter 23:01), (CGT Act or“the Act). CGT is a tax levied on the capital gain arising from the disposal of a specified asset.

The capital gain, if not exempt, is then taxed at the tax rate applicable at the time.

Specified asset

In terms of section 2 of the Act the term “specified asset” is means and includes the following:

Immovable property or

Any marketable security.

With effect from 1 January 2017 any right or title to property whether tangible or intangible that is registered or required to be registered in terms of:

(i) the Mines and Minerals Act (Chapter 21:05); or

(ii) the Patents Act (Chapter 26:03); or

(iii) the Trade Marks Act (Chapter 26:04); or

(iv) the Industrial Designs Act (Chapter 26:02); or

(v) the Copyright and Neighbouring Rights (Chapter 26:05); or

(vi) the Brands Act (Chapter 19:05); or

(vii) the Geographical Indications Act (Chapter 26:06); or

(viii) the Integrated Circuit Layout-Designs Act (Chapter 26:07).

Capital Gain

According to section 8(1)(c) of the Act capital gain means the amount remaining, after deducting from the capital amount of any person all the amounts allowed to be deducted from a capital amount under this Act.

Acquisition of companies involves exchange of shares. Acquisitions can be through purchase of existing shares or shares already in issue, the company issuing new shares in exchange for consideration from the investor or a combination of the two.

Ordinarily acquisitions involving sale of existing shares have CGT implications as shares or marketable securities are specified assets in terms of section 2. Their disposal, unless exempt, attracts CGT. I analyse CGT in the situations explained below.

Zimbabwean investors buy shares in a Zimbabwean company Unless exempt, the purchase of shares in Zimbabwe attracts CGT on the part of the shareholder selling the shares.

Direct purchase of shares in Zimbabwe by a foreign shareholder

Unless exempt, ordinary such transactions attract CGT on the part of the shareholder selling the shares in a company in Zimbabwe. This is because the specified will be in Zimbabwe.

Indirect purchase of shares in Zimbabwe by a foreigner In this case there are at least three parties involved. It may very well happen that a foreign shareholder in one country (such as China) owns shares in a company in another country (such as South Africa) which in turn owns shares in a company in Zimbabwe.

The Chinese parent company may then sell its shareholding in the South African company to another investor in China or elsewhere without the South African company selling its shares in Zimbabwe.

So foreign shares are exchanged offshore.

In my view, ordinarily there is no CGT payable when the Chinese company sells its shares in the South African company. However, one needs to check if there are any tax treaties or Double Taxation Agreements between Zimbabwe and the country in which the selling shareholder is domiciled. There are also decided cases which have implications on CGT involving offshore indirect transfers (OIT).


Capital Gains Tax is encountered in many situations including in acquisition of businesses where one shareholder sells shares to another. Unfortunately this aspect is usually overlooked at deal consummation or negotiation.


This simplified article is for general information purposes only and does not constitute the writer’s professional advice.

 Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions.

He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity.

He can be contacted on +263 772 246 900 or [email protected]

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