What is a partnership?
A partnership is defined as a business arrangement where two or more individuals or entities collaborate to operate a business for profit. A partnership is not a legal persona; section 2 of the Income Tax Act specifically excludes a partnership from the definition of a person. As such, a partnership is not a taxpayer on its own. Partners are taxed on their share of partnership profits and on income earned from employment with the partnership.
Accrual of partnership profit:
Section 10(2) of the Income Tax Act stipulates that income received by, or accrued to, or in favour of a partnership in any period ending on an accounting date shall be deemed to be income received by, or accrued to, or in favour of the partners on such accounting date in the proportions in which the partners agree to share the profits of the partnership as at such date.
How are partnerships taxed?
Partnerships are not taxed as separate entities. Instead, they are treated as "pass-through" entities. This means that the income generated by the partnership is taxed at the individual partner level rather than at the partnership level. Each partner must include their share of the partnership's income in their personal or corporate tax returns.
Key steps in declaring profit
- Determine total income: The partnership must first calculate its total income from all sources, which may include sales revenue, interest, and any other income streams.
- Deduct allowable expenses: Next, the partnership can deduct allowable business expenses, such as operating costs, salaries, rent, and utilities. It’s essential to maintain accurate records of all income and expenses to substantiate these deductions.
- Calculate net profit: The net profit is determined by subtracting total expenses from total income. This figure represents the profit that will be distributed among the partners.
- Allocate profit to partners: Based on the partnership agreement, the net profit is allocated to each partner. Once the profit has been allocated, each partner must report their share on their personal income tax return./
What are the compliance and filing requirements for partnerships?
Partnerships must comply with several tax obligations, including:
- Tax registration: Partners must register with the Zimbabwe Revenue Authority (ZIMRA) for tax purposes.
- Filing returns: Each partner must file annual income tax returns, reporting their share of the partnership's income.
- Payment of provisional tax: Partners may be required to make provisional tax payments based on their estimated income.
Can a partnership register for other tax obligations?
Partnerships with employees are required to apply for PAYE. Partnerships can register for VAT if they deal with the supply of taxable goods or services.
My Taxes, My Duties: Building my Zimbabwe
Taxation of Partnerships published on 04/09/2025.
Disclaimer
This article was compiled by the Zimbabwe Revenue Authority for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.