STUDY GUIDE
Index
Part Self assessment 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 History & background to VAT Interpretation of law Outline of VAT in Zimbabwe Definitions/ Interpretation Registration Tax periods Accounting basis for VAT Deemed supplies Time of supply Value of supply Zero rated supplies Exempt supplies Importation of goods Imported services Input tax Calculation of VAT payable Tax invoices Credit and debit notes Record keeping Refunds Penalties and interest Assessments Objections & appeals Offences and penalties Topic Page
The Zimbabwe Government chose to introduce a destination type VAT i.e. the tax will be levied in the country where the goods or services are consumed. Therefore, VAT is payable on imports of goods (whether or not the importer is a registered operator), and certain services for the domestic market. Importers who are registered operators are entitled to claim credit for tax paid on imports in the same manner as for tax invoiced to them on domestic supplies. Direct exports of goods from Zimbabwe to other countries pay VAT at a special rate known as the zero (0%) and therefore do not effectively pay any tax on such supplies. This is a fundamental principle of a value-added tax system. Exporters who are registered operators will be entitled to claim an input tax credit for supplies invoiced to them (or paid on importation), in respect of the inputs acquired for their export sales. Certain other goods and services which are either difficult to tax, or, which are politically sensitive are also subject to the zero rate (e.g. certain basic foodstuffs) or are exempted such as financial services and passenger transport. As previously mentioned, a supply must occur before VAT may be charged. It is therefore imperative to determine the nature, time, and value of the supply. The tax element of most goods and services supplied will be determined by applying the tax fraction, which is expressed as follows: Tax Fraction r 100 + r Where r = the rate (percentage) of tax chargeable Furthermore, a registered operator who makes taxable supplies may claim the input tax, which he incurs on goods and services for the purposes of carrying on an enterprise (trade). The following example illustrates the above principles (Assuming a 15% rate of tax)
Purchases Manufacturer Wholesaler Retailer Total VAT collected by taxing authority 0 1 000 3 000 -
There are several ways where certain types of goods and services or classes of traders will require special treatment. For example: Business with a turnover which is less than the registration threshold fall outside the scope of the VAT Act Associations not for gain and farmers have special provisions relating to them: and Certain classes of goods or services can be exempted or subjected to the special zero rate of 0%. Exemption means that no liability to charge, collect and return tax arises, when an otherwise taxable transaction is performed. A trader who makes exempt supplies may not claim any credit for input tax paid on any material inputs including capital goods, and other goods and services invoiced by his suppliers and paid on importation. Thus, VAT cannot be charged on exempt supplies. A trader who is exempt may of course recoup any irrecoverable input tax borne by him by raising prices charged to his customers. However, an exempt trader will not be permitted to show or charge tax on any invoice, which he issues. The tax paid by the exempt person will be incorporated in his prices in a similar manner to the sales tax system. If goods and services, which are supplied by an exempt person, are purchased by a registered operator, no credit for any tax charged by any other trader in the supply chain will be available to him. This means that an exempt trader could be at a disadvantage when supplying goods or services to a trader, who will then not be entitled to an input tax credit. Relief for goods and services can also be obtained by applying a zero rate of tax. Applying a zero rate of tax to a transaction or a class of goods brings it within the scope of taxable supply and the trader can claim any input tax incurred. The person carrying out the transaction is accountable in the normal way, but the rate of output tax is zero percent, thus allowing the trader to recover any input tax paid by him.
The VAT liability of a trader (retailer) who makes zero-rated supplies is calculated in the following example: Purchases Manufacturer Wholesaler Retailer Total VAT collected by taxing authority 0 1000 3000 Input tax 0 (150) (450) (600) Sales 1000 3000 4000 Output tax 150 450 0 600 Net Vat 150 300 450 0
It should be noted from the above example that despite the fact that the trader (retailer) does not charge VAT on his zero-rated supplies, he is entitled to an input tax credit. The zero rating applies only if the supply would otherwise be taxable at the standard rate. Supplies that are taxed at either a standard rate or zero rate are termed taxable supplies
1.5
All registered operators are issued with a VAT Registration number, which should be recorded on all tax documents. The registration number will be computer generated.
2. INTERPRETATION OF LAW
2.1 INTENTION OF THE LEGISLATURE
A study of tax cases shows that in the interpretation of a taxation statute, the intention of the legislature is sought. The courts are not prepared to depart from a literal interpretation where there is doubt as to the legislatures intention, but where the intention is clear the courts will give effect to that intention, as is the case of all other Acts.
and may serve to show that the particular provision ought not to be construed as it would be if considered alone and apart from the rest of the Act.
2.7AND AND OR
It is important to take note of the words at the end of (and sometimes within the same) sentences, which indicate several criteria or conditions, which need to be evident before a particular section (or part thereof) can be applied in any situation. When using and this normally indicates a link between several conditions, all of which need to be evident. When using or this indicates an option between two or more conditions, where, if either one is evident, the law will or can apply. Pay special attention to sections of the Act which have a combination of and and or linking conditions, as these sections will be more difficult to interpret.
Transaction
Amount VAT
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1.
A farmer sells raw timber to a saw miller plus: VAT @ 15% Selling price VAT payable to Zimbabwe Revenue Authority Assuming there is no input tax to claim the full amount of tax collected is payable to the Zimbabwe Revenue Authority (Z$ 600-nil)
2.
The saw miller processes the timber and sells it to a furniture manufacturer. plus: VAT @15%
Selling price VAT payable to Zimbabwe Revenue Authority The tax paid to the farmer is deducted from that collected from the furniture manufacturer (Z$750 Z$600) 3. The furniture manufacturer makes tables and sells it to a furniture shop plus VAT @ 15% Selling price VAT payable to Zimbabwe Revenue authority The tax paid to the saw miller is deducted from that collected from the furniture shop (Z$975-Z$750) 4. The furniture shop sells the tables to the final consumer plus: VAT @ 15% Selling price VAT payable to Zimbabwe Revenue Authority. The tax paid to the furniture manufacturer is deducted from that collected from the consumer ($1200-Z$975) Total VAT collect by Zimbabwe Revenue Authority 8 000 1 200 9 200 225 1200 6 500 975 7 475 225 150
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4. DEFINITIONS/ INTERPRETATION-Section 2
4.1 REGISTERED OPERATOR A Registered operator is a person who is registered or is required to be registered for VAT.
4.2 TRADE
Trade is a business in the broadest sense. It includes any activity carried on: Continuously or regularly By any person In or partly in Zimbabwe In the course of which goods or services are supplied to any other person for a consideration, i.e. some form of payment. Whether or not for profit.
It therefore includes Business transactions to start or close down business Ordinary businesses-manufacturers, traders, auctioneers, lessors, contractors etc Trades and professions builders, electricians, plumbers, doctors, lawyers, accountants, etc Non profit organizations- sporting/ social clubs, charitable organizations
As well as the following special inclusions: Public authorities government departments, provincial authorities Local authorities Charitable organizations
A number of activities are excluded from the definition of trade, namely: Services rendered by an employee (who earns remuneration) to his employer or by the holder of any office in performing the duties of office, e.g. salary/wage earners or a company director. A private independent contractor does not fall within this exclusion. The supply of goods or services by a concern from a branch or main business which is permanently located at premises outside Zimbabwe if the branch or main business can be separately identified and maintains its won system of accounting. Private or recreational pursuits or hobbies (unless structured like a business) Private occasional transactions, e.g. occasional sale of domestic/household goods, personal effects or private motor vehicle Any activities to the extent that they are of exempt supplies.
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The definition of trade is one of the most important definitions in the VAT Act and every person who is required to register or who applies for voluntary registration must meet the criteria in the definition.
4.3 PERSON
The term person includes: Sole proprietor, i.e. an individual carrying on business in his own name or under a trade name A company A partnership or joint venture A deceased estate or insolvent estate Trusts Incorporated body of persons e.g. an entity established under its own enabling act of parliament Unincorporated body of persons, e.g. club, society or association with its own constitution. Local and public authorities
4.4 SUPPLY
The definition is very wide and includes all forms of supply irrespective of where the supply is effected, (even including things that happen by law e.g. expropriation) and any derivative of supply shall be construed accordingly
4.5 CONSIDERATION
This term refers to that which is given in return to the supplier as payment for the supply. Normally the consideration is in money but it also includes barter transactions where other goods are given or services rendered to the supplier as payment. Any act of forbearance whether voluntary or not for the inducement of a supply of goods or services will constitute consideration, but it does not include any donation made as an unconditional gift to an association not for gain. Also excluded is a deposit which is lodged to secure a future supply of goods or services. However, a deposit paid on a returnable container does constitute consideration
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4.6.
GOODS
The term goods includes Corporeal (tangible) movable things, goods in the ordinary sense Any real right in those corporeal movable things Fixed property, land & buildings Any real right in such fixed property e.g. servitudes, mineral rights, notarial leases e.t.c. Sectional title units (inc. timeshare)- get title deeds to a share of flats Shares in a share block company- no title deeds but you own shares Postage stamps
The term goods excludes: Money i.e. notes, coins, cheques, bills of exchange e.t.c. (Except when sold as a collectors item) Value cards, revenue stamps etc which are used to pay taxes (except when sold as a collectors item) Any right under a mortgage bond Farm land
4.7 SERVICES
Services means anything done or to be done. The term services includes: Granting, assignment, cession, surrender of any right Making available of any facility or advantage Certain acts which are deemed to be services i.t.o. Section 7 The term services excludes A supply of goods Money Any stamp, form or card which falls into the definition of goods
Examples of services: Commercial services- electricians, plumbers, builders Professional services- doctors, accountants, lawyers Advertising agencies Intellectual property rights- patents, trade marks, copy rights, know-how Personal right- restraints of trade
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Where the supplier (being a registered operator) has charged tax on the supply and has provided the recipient with a tax invoice as required. Where the importer (being a registered operator) has paid VAT on the importation of goods or services and is in possession of a bill of entry as required. Where second-hand goods have been purchased from a non-registered operator, and the recipient has paid for the supply and has kept the necessary details of the supplier and the transaction in terms of the prescribed documentary requirements. This is sometimes called a notional input and is calculated by multiplying the tax fraction (15/115) by the amount paid. There are special rules where the second-hand goods constitute fixed property. In this case the input tax is limited to the stamp duty. If 6% stamp has been paid on the fixed property (from a non-registered operator) notional input tax is limited to the stamp duty paid. It is not the notional VAT that should be granted. Where goods are repossessed from a debtor (non-registered operator) by the supplier of goods under an installment credit agreement (e.g. a bank). This is calculated by multiplying the tax fraction at the time the supply was originally made by the balance of the cash value still owing to the supplier.
Where goods or services were acquired only partly for taxable supplies and partly for some other purpose, a fair and reasonable portion may be claimed. Furthermore, the amount of input tax claimable in any tax period will depend on whether the registered operator is registered on the invoice or the payments basis.
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5 REGISTRATION- Section 23
5.1 INTRODUCTION
Any person who Carries on or intends to carry on any trade (s) and Whose taxable value of supplies exceed the prescribed limit and In the course of which taxable supplies (includes zero-rated supplies) are made, must register for VAT
NOTE It is the person not the trade, who is registered for VAT. A person is only registered once for all the trades/divisions/branches carried on, unless permission is granted to register them separately.
5.3
The value of taxable turnover (supplies) is calculated on an on-going basis. Two periods need to be considered, the past 12 months and the next 12 months.
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The value of Taxable Supplies for Registration Purposes: Includes Goods and services supplied in Zimbabwe. Goods exported to any country. Services rendered outside Zimbabwe Deemed supplies Excludes The sale of stock or assets i.r.o. cessation of or substantial and permanent reduction in the size or scale of any trade. The replacement of plant and machinery or other capital assets used in the trade. Exempt supplies. Unconditional gifts received by associations not for gain and charitable orgnisations VAT
5.4
VOLUNTARY REGISTRATION
A person can apply for voluntary registration even if the total value of taxable supplies is less than the prescribed amount per annum. As a general rule of thumb, it will be advantageous for a person to register if they supply goods or services mainly to other registered operators. The person must satisfy the Commissioner that they are carrying on trade.
5.5
REGISTRATION PROCEDURE
Application for compulsory and voluntary registration must be made on the prescribed registration form together with any other documents, which the Commissioner may require from time to time (i.e.. company registration particulars, bank details, etc) For compulsory registration, this must be completed not later than 30 days from the date of liability.
5.6
The Commissioner may refuse to register a person for voluntary registration if any one of the following criteria are not met: Has no fixed place of abode or business Does not keep proper accounting records
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Has not opened a banking account Has previously been registered as a registered operator under VAT or i.t.o. the repealed Act (Sales Tax) and failed to perform his duties under either Act.
5.7
SEPARATE REGISTRATION
A registered operator may register separately any trades, branches or divisions carried on by him for VAT purposes. This means that it is possible for a registered operator to have more than one VAT registration number if he carries on his trade in branches or divisions. It is important to note that if a person who operates several trades or who operates any trade in branches or divisions (other than an association not for gain) cannot avoid the liability to register for VAT by considering the turnover of each branch or division individually. In such cases, the turnover of all his trades/divisions/branches must be aggregated to determine the total value of the supplies. There are two conditions under which separate registration can be granted, namely: It must maintain an independent system of accounting for each trade/division/branch, and It must be capable of being separately identified (i.e. nature of the activities or the location)
The implication of separate registration is that each separately registered trade/division/branch is treated as a registered operator in its own right. It will have to: Retain the same tax period as the representative branch (except for farmers) and Retain the same accounting basis as the parent body Remain registered until cancelled by the parent body or until the parent bodys registration is cancelled.
Transfers of taxable goods or services between any separately registered trades/divisions or branches must be accounted for on the prescribed return covering that period. Tax invoices are to be issued to these trades/divisions/branches and each trade/division/branch has to: Keep its own accounting records Submit returns and Account for VAT to the Zimbabwe Revenue Authority
A separate application form (as prescribed) must be completed for each such trade/division/branch for which a separate registration is required. The person who applied
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for separate registration of any trade/division/branch will be held responsible in the event of any default under the VAT Act by such trade/division/branch.
NOTE 1 A subsidiary company cannot be a branch or division of a holding company, even if it carries on business as a branch under the same trading name as it is a separate legal entity. For example if each of Edgars` branches are registered in separate companies, then they do not constitute a branch for VAT purposes. However, if all the branches are registered under one company, each of the different stores can be registered as a branch of the Head Office. NOTE 2 There are special concessions for associations not for gain in that its activities can be divided into separate trades/divisions/branches without being aggregated to establish the registration threshold if the association so elects. The effect of this is that one identifiable activity may be registered and another not.
5.8
A registered operator may be deregistered if: If the value of his taxable supplies falls below the registration threshhold He ceases to carry on any trade and will not carry on any trade within 12 months after that date Where he has applied for registration in anticipation of commencing a trade and has not commenced that trade. A registered operator has successfully applied for voluntary registration and it subsequently appears that he has not complied with the requirements.
Cancellation of registration, with the approval of the Zimbabwe Revenue Authority will take effect from the last day of the tax period on which the application is made. A person who ceases to be registered remains responsible for any duties or obligations under the Act while he was registered.
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The registered operator being the parent body applies in writing to the Zimbabwe Revenue Authority. When for any reason, the main (parent body) registration is cancelled. It appears to the Commissioner that the duties under the VAT Act have not been carried out by the separately registered trades/divisions/branches.
The effect of the cancellation is that all duties under the Vat Act revert to the registered operator (parent body). A separately registered trade/division/branch may become the main branch if it continues to trade after the main branch has deregistered (see notes above)
A VAT return in the prescribed form must be submitted to the Authority for each tax period. The VAT return must reach the authority on or before the 20th of the month after the end of a tax period, or where such day falls on a public holiday or a weekend, the last business day before that date. The month in which a registered operator`s tax period ends will be determined by the Zimbabwe Revenue Authority. Tax periods do not all end at the same time for all registered operators. These are as follows: Category A & B =2 months (i.e. every 2 months) Category C=1 month (i.e. monthly) Category D= Any other tax period
The VAT return form is completed to show the taxable supplies made and received as well as any tax adjustments for the period. A return will be sent to each registered operator prior to the end of his tax period. The form (whether there is an amount payable or a refund claimed) is to be completed and returned to the Zimbabwe Revenue Authority within the period allowed.
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A special return for sales in execution (i.t.o. Section 7 (1)) to be made within 30 days from date of sale. Such sales to be excluded from ordinary Return.
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This tax period is not available to any registered operator who has been allocated a Category C tax period
*Note
Pay attention to the bolded words and and or and the interpretation thereof. See Chapter 2 of this document for more details
And thereafter for the 2 monthly tax period. Example 2: Change from Category B to Category A A farmer with a 2-month tax period submits a return on 18 May for the period 1 March to 30 April and applies to change to a 6-month period ending in November and May. Approval is granted with effect from 1 July. He should submit a return for the period: 1 May to 30 June 1 July to 30 November (5 months)
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Example: Registered operator A (Category B) who accounts for VAT on the invoice basis, purchases a fridge for resale in October and receives a tax invoice for $3450 (incl. VAT @15%). He pays the supplier $2300 on 30 November. He may claim the full input tax of $ 450 in the period ending October even though he has not yet paid for the goods in full. He then sells the fridge for Z$ 5750 (incl. VAT @ 15%). He issues an invoice on 15 December. Payment is received on 20 January. Registered operator A accounts for Z$750 VAT in the tax period covering December irrespective of whether he has received any payment or not. Advantages Claim VAT incurred on purchases prior to payment Suit existing accounting system Easy to calculate as it is based on invoiced sales and purchases Disadvantages Account for VAT on sales prior to receiving payment from debtors List of debtors and creditors must be retained at the end of each tax period Can lead to cash flow problems
PAYMENTS BASIS
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The payments basis (or cash basis) uses the same time of supply rule mentioned above, but the registered operator only accounts for VAT on actual payments made and received i.r.o. taxable supplies during the period.
The payments basis is only available to registered operators who have applied to the Authority in writing. Advantages Suits small business Facilitates cash-flow Advantageous when required to give lengthy periods of credit Disadvantages Not available to everyone Claim VAT only after payments made to suppliers More difficult to calculate accurately
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7 (8) 7 (9) 7 (10) 7 (11) 7(12) 7 (13) 7 (14) (a) & (b) 7 (14) (c)
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trade, if the property was used as private residence and no deduction has been made. An agent for a foreign principal is deemed to be the importer and not the foreign principal in certain circumstances. The transfer of loan account or shares in a share block company (which is a Registered Operator) to a shareholder is a deemed supply.
8 (2) (b) 8 (2) (c) 8 (2) d 8 (2) (e) 8 (3) (a) 8 (3) (b) 8 (3) (c) 8 (3)(d) 8 (3) (e) 8 (3) (f) 8 (3) (g) 8 (4) 8 (5) 8 (6)
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Fringe benefits. At the end of each month where the cash equivalent is required to be included in remuneration, or where not required to be so included, at the end of the year of assessment. Repossessed goods. The day the goods are repossessed or the day after the last day where the debtor may be reinstated. Deemed importation by agent for a foreign principal. The time that the agent pays the VAT on importation.
9 (16) 9 (17)
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Where a taxable supply is not the only matter to which a consideration relates the supply shall be deemed to be for such part of the consideration as is properly attributable. Management of a superannuation scheme. Greater of the cost of making the supply or any consideration for the supply. Deemed importation by agent for a foreign principal. Consideration for the supply is deemed to be the value for purposes of the importation plus any tax levied on importation. Where any supply is made for no consideration, the value is nil. Different rules may apply for connected persons.
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(j) Services rendered in connection with the repair of a train operated by non-residents, not carrying on business in Zimbabwe (k) Services rendered whilst physically outside Zimbabwe (other than telecommunication services utilized in Zimbabwe). (l) Services supplied to a non-resident who is outside Zimbabwe at the time the services are rendered, except where related to land and improvements thereto, or movable property situated inside Zimbabwe. (There are some exceptions to this rule) (m) Patents and other intellectual property for use outside Zimbabwe. (n) Deemed Services i.t.o s7 (5) supplied by a charitable organisation to a public or local authority. (o) The supply of services by a registered operator to his branch situated in an export country (p) Transfer payments received from Government Departments Section 10 (3) Documentation The above goods and services can only be zero rated if the registered operator obtains and retains the necessary documentary proof acceptable to the Commissioner, or as prescribed in the circumstances
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Example 1 Registered operator A, who manufactures widgets, pays a technical license fee to a UK based company for the right to manufacture the widgets in Zimbabwe and for know-how.
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Although the service, in respect of which the technical license fee is paid, is supplied by a supplier who is resident outside Zimbabwe to a recipient who is resident in Zimbabwe, the services supplied do not fall within the definition of imported services as they are consumed in the course of registered operator A`s taxable activity of manufacturing and selling widgets. VAT would therefore not be payable in this situation as the services do not meet the definition of imported services in Section 2 of the VAT Act.
Example 2 Company B, a life insurer, employs a UK based advertising agency to run an advertising campaign for a new life policy, which it intends marketing. VAT will be payable in this situation as the services are consumed by company B in the course of an exempt activity, i.e. the provision of life insurance.
14.6 EXEMPTIONS
VAT is not payable on imported services if: The supply would be exempt from VAT or zero-rated if supplied in Zimbabwe: or The supply of the service is subject to VAT at the standard rate of 15% in Zimbabwe
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To qualify as input tax, two requirements have to be met, namely: The goods or services must be acquired by the registered operator wholly or partly for the purpose of consumption, use or supply in the course of making taxable supplies. The goods supplied must have been subject to VAT at the standard rate or the goods must qualify as second hand goods (previously owned and used) as defined in section 2 which have been acquired from a non-registered operator.
Where goods or services are acquired for a purpose other than making taxable supplies, the VAT will not qualify as input tax. A deduction of input tax can be made in respect of a supply only if the registered operator (or his authorised agent) is in possession of: A valid tax invoice which has been issued to him by the supplier (being a registered operator) Sufficient records in respect of any non-taxable supply of second-hand goods purchased or
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A customs bill of entry or other prescribed customs document for any importation of goods or services on which tax has been paid.
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15.3.1 Entertainment
Common place examples are as follows: Staff refreshments such as tea, coffee and other beverages and snacks Food and other ingredients purchased in order to provide meals to staff, clients and business associates Catering services acquired for staff canteens and dining rooms Equipment and utensils used in kitchens Furniture and other equipment and utensils used in canteens and dining rooms Christmas lunches and parties, including the hire of venues Gold days for customers and clients Beverages, meals, other hospitality and entertainment supplied to customers and clients at product launches and other promotional events Entertainment of customers and clients in restaurants, theatres and night clubs Capital goods such as holiday houses, yachts and private aircraft used for entertainment N.B. The above list is not exhaustive The VAT Act does, however, provide for certain exceptions to this rule. These exceptions are listed below: Registered operators in the business of supplying entertainment at a charge that at least covers the direct and indirect costs of providing the entertainment Personal subsistence of employees only where employees incur expenditure on personal subsistence on behalf of their employer, and the actual expenditure is reimbursed. It is a condition for the claim that the employee must be away on business overnight from his/her normal place of work and residence. Where an allowance is paid to the employee for this expense, no input tax credit will be allowed. Furthermore any expenses relating to recreation or amusement such as theatre or movie tickets will not qualify for the deduction Meals or refreshments supplied by operators of taxable passenger transport services (e.g. air transport where meals are provided) Meals or refreshments supplied by organisers of seminars and similar events (once again, subject to the costs being covered by the entrance fees) Sport or recreational facilities provided by local authorities and Charitable organisations
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The implication of this rule is that medical and other benefit schemes are not registered for VAT insofar as the provision of these benefits are concerned to their members. Consequently, no input tax may be claimed by these schemes on any medical and dental services incurred by the members, which are in turn submitted to the scheme/fund for payment
Converted vehicles Where a motor vehicle is modified or converted prior to delivery and the final product is supplied to the purchase in that state, no input tax at all can be claimed. If the purchaser takes delivery of the motor vehicle and subsequently modifies or converts it, the VAT paid on such modification or conversion may be claimed. Provided that the modified motor vehicle is used for making taxable supplies. The VAT paid on the vehicle itself will, however, still be denied. Demonstration vehicles The VAT paid on demonstration vehicles used by motor vehicle dealer to display and demonstrate will be allowed.
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Input tax may be claimed if it is a condition of employment that such fees are to be paid by the employer for the employee (s) concerned.
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Output Tax Supply of goods or services Higher rare (25%) Standard rate (15%) Zero rate (0%) Deemed supplies/adjustments Capital assets > $50 000 cost now applied for non-taxable purposes Section 17(2) Capital assets> $50 000 decrease in extent of taxable application (annually) s.17(2) Fringe benefits. Section 17(3) Other deemed supplies such as indemnity payments received. Sec 7(7) Credit note received Recipient. Sec 21(2)a Debit note issued Supplier. Sec 21(3)b Consideration not paid within 12 months Sec 22(4) Less: Input Tax Supplies to registered operator (only i.r.o. making taxable supplies) Goods or services (excluding 0% and exempt supplies) Second-hand goods. Sec 15(3)a(ii) Imported goods. Sec 15(2)d Deemed input tax/adjustments Credit note issued (Supplier), Debit note received (Recipient) and irrecoverable debts. Sec 15(3)a(v) Capital assets > $50 000 now applied for taxable purposes. Sec. 17(5) Capital assets > $50 000 increase in extent of taxable application (annually. Sec 17(5) Other cases Indemnity payment made. Sec 15(3)b Betting transactions. Sec 15(3)c Tax invoice received late now claimed. Sec 15(3)f Claw-back portion previously not allowed now applied wholly for taxable purposes. Sec 15(3)g arw Sec. 17(2) Recoupment of discount coupon accepted. Sec 15(3)h Equal to Amount of Tax Payable or Refundable
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TAX INVOICE
Dragon Associates (Pvt) Limited Suite 4, 1st Floor Nehanda House 80 Chimurenga Avenue Harare Tax Invoice No: 89624 VAT Registration No: 4545884937 Our Ref: TD/mb/06715/T Date: 30 May 2002 To: Perplex (Pvt ) Limited 8 Horror Street, Granitesite Harare
DATE 30/11/2002
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In the case of goods being repossessed from a registered operator as contemplated i.t.o. Section 7 (9) and section 20(3) the person repossessing the goods (a registered operator - normally a bank) is required to create and furnish the defaulting debtor with a tax invoice.
SPECIAL CASES
Although the general rule is that a registered operator must have a tax invoice before he will be allowed to claim any input tax in relation to the supply, there are a few exceptions to the rule.
Where the goods concerned have been repossessed from a non-registered operator, the person (registered operator) exercising his right of repossession is required to keep details as mentioned above.
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Part of or all the goods or services are returned to the supplier. (This does not apply in respect of the return to the supplier of any returnable container unless such container was included in goods in respect of any supply of which any tax invoice was issued by the supplier to the recipient. And the supplier has Issued a tax invoice and the tax charged is incorrect as a result of the above mentioned circumstance(s) or Furnished a VAT return in which he accounted for the incorrect amount of output tax as a result of the above mentioned circumstance (s)
6 May 2002
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6 May 2002
Credit notes issued may not be offset against the sales made or debit notes set off against purchases. However, when a debit/credit note is issued in the same tax period in which the supply has taken place, then the amount of such debit/credit note may be set off against the consideration. This concession is to allow for the computerised accounting packages of certain industries, which would automatically offset the amounts.
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Where any amount of output tax claimed to be refundable to a registered operator has been borne by any other person, the Zimbabwe Revenue Authority must be satisfied that such amount will be refunded to that other person. As with routine refunds, if the amount refundable is $500 or less, the amount will not be refunded but will be carried forward to the immediately succeeding tax period.
Certain restrictions will be reflected in the Regulation, which deals with this issue. Example: Penalties & Interest
Tax period: 1 May 2002 30 June 2002 Due Date: 31/07/02 Amount payable: 58446.01 Date paid: 23/9/02 Interest Date: 1/8/02 Interest rate: 35% p.a. 29% per month or part of.
Therefore Amount to be paid (a) Tax = 58446.01 (b) Penalty = 58446.01 (c) Interest = 2 months x 2,9 per month x 58446.01 = 3408.57
If the tax is not paid within the prescribed period, an amount equal to the unpaid tax is charged as penalty for that month in which it was required to be paid. (i.e. 100%). The penalty is a once off amount and is not recurring. Payments in terms of sections 13 and 29 (imported services and sales in execution) If the tax is not paid within the prescribed period of 30 days, an amount up to the amount of the unpaid tax is charged as penalty for that month in which it was required to be paid. (i.e. maximum of 100%). The penalty is a once off amount and is not recurring.
Additional tax is an amount not exceeding 100% of the tax evaded, refunded in excess, or chargeable. This amount is usually only levied in the case of fraud being identified. It is not subject to the penalty of 100% (as contemplated above), but is subject to interest at the prescribed rate. If the Zimbabwe Revenue Authority is satisfied that a registered operator has: Failed to perform duties imposed under the VAT Act, or Omits to do anything, and With intent to evade the payment of VAT payable by him, or To cause a refund to him in excess of the amount properly refundable to him, then additional tax may be charged.
21.2 INTEREST
For any month(s) while it remains unpaid an additional percentage interest at the prescribed rate per month or part thereof will become payable. The effective rate is not subject to any ceiling, i.e. no maximum. This interest is only leviable from the first day of the month following the month in which the return is due. It is therefore clear that the penalty and interest are two separate penalties and are not imposed for the same reason. Note: month refers to calendar month
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The tax period to which the assessment relates Date by which the tax must be paid
23. OBJECTIONS & APPEALS Section 32, 33, 34 23.1 WHEN CAN OBJECTIONS BE MADE?
If a person is dissatisfied with an assessment, the person having been assessed may object to all or part of the assessment. Objections may be lodged against decisions made by the Authority, such as the liability for registration, the cancellation of a registration, the refusal of the Zimbabwe Revenue Authority to authorise a refund or a ruling, which the registered operator has good reason for disagreeing with.
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Failing to comply with a written notice by the Zimbabwe Revenue Authority to furnish information Obstructing, hindering or assaulting any officer engaged in carrying out the provision of the VAT Act or willfully failing to comply with any lawful demand made by such office in the performance of his duties. Failing to notify the Zimbabwe Revenue Authority within the stipulated time of any change of status, or failing to notify the Authority within the specified time of becoming a representative registered operator Knowingly including or adding on VAT where no VAT is payable on a supply, or which is in excess of the VAT properly leviable on a supply. Declaring to any person to whom goods or services are supplied that VAT has been included or will be added to the price of the goods or services where in fact VAT is not chargeable in respect of the supply. Knowingly issuing more than one tax invoice, credit note or debit note in respect of a taxable supply Failing, as a registered operator, to provide another registered operator, with a tax invoice, credit note or debit note as required by the VAT Act. As an agent or auctioneer acting on behalf of a registered operator, failing to keep proper records of transactions and failure to report regularly on same to the registered operator as required.
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Knowingly issuing any tax invoice showing an amount charged for VAT where the supply to which the VAT relates will in fact not take place With the intent to evade the payment of VAT, or to obtain any refund of VAT without entitlement thereto, or, with the intent to assist any other person to evade the payment of VAT or to obtain any refund of VAT without entitlement thereto.
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