Additionally, understanding the difference between short-term and long-term capital gains tax is now more important than ever. These distinctions can significantly impact how much tax you owe when selling a property.
What is Capital Gains Tax?
Capital Gains Tax is a tax charged on the profit made when selling a property. It is calculated based on the difference between the buying price and the selling price.
For example:
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If you bought a house for $50,000 and sold it for $80,000, the $30,000 profit is subject to capital gains tax.
However, the tax rate depends on whether the property is classified as a short-term or long-term investment.
Short-Term vs. Long-Term Capital Gains Tax
The government taxes capital gains differently depending on how long you have owned the property:
1. Short-Term Capital Gains Tax (for properties owned less than 1 year)
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If you buy and sell a property within a year, the profit is considered a short-term gain and is taxed at higher rates, similar to normal income tax.
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In Zimbabwe, this could mean you are taxed at your usual income tax rate, which can be significantly higher than long-term capital gains tax.
Example:
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You buy a stand for $20,000 and sell it after 6 months for $30,000.
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The $10,000 profit is considered a short-term gain and taxed at a higher rate.
2. Long-Term Capital Gains Tax (for properties owned more than 1 year)
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If you have owned the property for more than one year, you qualify for lower tax rates.
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In Zimbabwe, this usually means:
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5% of the selling price (if the property was bought before February 2009).
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20% of the capital gain (if the property was bought after February 2009).
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Example:
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You buy a house for $50,000 and sell it after 5 years for $80,000.
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The $30,000 profit is considered a long-term gain, and you only pay 20% tax on the gain ($6,000 in this case).
Key Update from SI 22/2025
The new law affects interest rates on unpaid or overpaid capital gains tax:
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If you delay paying your CGT, the government will charge interest on the unpaid amount.
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If you overpay your CGT, the government will now pay you interest for the delay in refunding your money.
How This Affects Property Sellers
✔ If you plan to sell a property within a year, be prepared for higher taxes.
✔ Holding onto a property for more than a year can significantly reduce your tax burden.
✔ Make sure to pay CGT on time to avoid extra interest charges.
✔ If you’ve overpaid CGT, you can now expect to receive interest when claiming a refund.
What Should Property Sellers Do?
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Plan your property sales wisely to benefit from lower long-term tax rates.
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Consult a tax expert to ensure accurate CGT calculations.
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Budget for capital gains tax when setting your selling price.
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Keep all property purchase and improvement records to reduce your taxable gain.
Final Thoughts
Understanding the difference between short-term and long-term capital gains tax can save you thousands when selling a property. If you sell too soon, you might pay high short-term tax rates. But if you hold the property for more than a year, you can benefit from lower long-term tax rates.
Make sure you comply with the new tax rules in 2025 to avoid penalties and maximize your profit. If you have questions about capital gains tax, drop them in the comments!
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