1. What is VAT?
Value Added Tax (VAT) is an indirect tax on consumption, charged on the supply of taxable goods and services. It is levied on transactions rather than directly on income or profit, and is also levied on the importation of goods and services. This tax was introduced in 2004 to replace the former sales tax regime.
Enabling Legislation: –
Value Added Tax Act (CHAPTER 23:12)
Value Added Tax (General) Regulations (Statutory Instrument 273 of 2003
2. Rates of VAT
i Standard rate of 15%
• Generally, all goods and services are standard rated unless specifically exempted, zero-rated or subject to VAT at a special rate.
ii Zero-rate (0% )
• Exports of goods from Zimbabwe to an address in an export country.
• Basic foodstuffs such as sugar etc.(listed in the Vat Regulations)
iii No value added tax is chargeable on exempt supplies.
Examples of exempt supplies include:
• Financial services.
• Provision of electricity for domestic use
• Provision of piped water for domestic use
• Rates charged by Local Authorities.
Provisions covering the treatment of supplies for VAT purposes are specifically covered in the VAT Act and the VAT Regulations and taxpayers are encouraged to familiarize with both pieces of legislation.
SI 26 A of 2017 removed some goods from zero rating and standard rating and placed them under exempt supplies.
3. Who should charge VAT?
Any person who is registered or required to be registered for VAT is required to charge value added tax. This means any person who is carrying on trade as defined in the legislation. Taxpayers should check with the Zimbabwe Revenue Authority and obtain clarification on what is considered trade for the purposes of registration for value added tax.
4. What are the Requirements for Registration?
a. Compulsory Registration
Applicable to traders whose taxable supplies exceed or are likely to exceed $60,000.00 in a period of 12 months. Failure to register as soon as a trader meets or exceeds the threshold result in Zimra allocating an effective date of registration which is the date when the trader met the threshold and this is regardless of how late the trader applied to be registered. All the sales made after that date will be subjected to VAT plus interest and penalty for late payment.
b. Voluntary Registration
Applicable to traders who wishes to register voluntarily and whose taxable supplies do not meet or exceed the $60,000.00 threshold and have in the past not been found having failed to comply with the legislation. The trader will be required to have a fixed place of abode or business and should maintain records of his transactions.
Application for value added tax is done online through the ZIMRA e-services portal, and attach soft copies of required documents to the application. Required documents for compulsory registration are sales records, invoices or projections and certified copy of the current bank statement among others.
ZIMRA will process the application and carry out visits to the premises of the applicant to verify the indications and attachments included in the application. When everything is in order, ZIMRA will be able to register successful applicants within 14 days.
5. Obligations of a Registered Operator
The registered operator is required to: –
• Charge VAT
• Issue tax invoices within 30 days of supply and these invoices should have the features, which are outlined in the Act.
• Remit the VAT to ZIMRA and submit a VAT return on or before the 25th day of the month following the month in which the VAT was collected.
• Maintain a record of all transactions.
6. How does a Registered Operator Calculate the Tax that should be Paid to ZIMRA?
The registered operator completes a value added tax return (VAT 7) on which he declares the total sales (both cash and credit) and tax that he charged (output tax), and the total purchases and the tax he was charged (input tax).
He then subtracts the tax on purchases (both cash and credit) from the tax on sales. In the event that the result is positive, that amount should be paid to ZIMRA and where the result is negative, ZIMRA will refund this to the taxpayer.
Where the refund is $60 or less, the amount is held in credit in the taxpayer’s account and will be refunded together with any future refunds when such cumulative refunds reach or exceed $60.
Returns should be submitted online and payments should be made through the banks. A schedule of the input tax should be attached to the vat return. The input tax schedule should be in the following format:
Name of supplier Vat number Date of invoice Description of goods or services Amount before VAT Input tax Invoice number
NB the input tax schedule should only include goods or services bought to make taxable supplies.
7. What are the requirements for one to claim tax on purchases (Input Tax)?
The claim must be made on the VAT return within 12 months of the date of invoice for the expenses incurred by the registered operator.
The registered operate must be holding the tax invoices, bills of entry, credit notes, debit notes, or other sufficient documents in support of the expenses incurred.