Misfort Tax Consultancy

Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce income. Tax deductions are a form of tax incentives, along with exemptions and credits.

• Deductions are typically expenses that the taxpayer incurs during the year that can be applied against or subtracted from his gross income in order to figure out taxable income.
• Tax deductions reduce how much of your income is subject to taxes. Deductions lower your tax liability by the percentage of your highest income tax bracket. So, if you fall into the 25% tax bracket, a $1,000 deduction saves you $250.Section 15 of the income tax Act details those deductions that are permissible in the determination of taxable income
• When completion Self-Assessment Return (ITF 12C), no deduction is allowable in respect of following expenses which are prohibited (according to section 16 of the Income tax Act): –
• Any loss or expense which is irrecoverable under any contract of insurance
• Cost incurred in the maintenance of the taxpayer or his family
• Domestic expenses including travel between home and business place
• Fines and penalties
• Provision for doubtful debts
• Entertainment expenditure
• Depreciation as charged in the accounts
• Tax levied on income and/or interest charged on overdue tax
• Any loss or expense which is irrecoverable under any contract of insurance
• Unproductive interest
• Restraint of trade

The importance of a Lease Agreement with regards to taxation.

More often when Zimra is conducting audits, they request this document where the Registered Operator does not own the place of operation. This shows that this is not a mere document in the eyes of the tax man but a source of vital information during audit.

Some of the vital informational that is found in the Lease Agreement

• Monthly rentals
• Any premium or deposit paid
• The duration of the lease
• Any obligation on improvements

Taxation of Lease premium

Today we are focusing on the lease premium

• Lease premium- also known as a deposit, this is a once off payment made by the lessee to the Lessor over and above the monthly rentals mostly at the inception of the lease.
• To the lessor it is taxable income and the whole amount is accounted for in the year of receipt
• To the lessee it is an allowable deduction under the following conditions:
• The premises should be used for the purpose of trade, apportion where there is dual use
• The premium is spread over the shorter of the lease period or ten years i.e. you cannot claim the full amount even though you paid it in full.
• If the contract is terminated prematurely, the outstanding lease premium is forfeited

• The definition of remuneration contained in the 13th Schedule of the Income Tax Act
includes amounts such as salary, leave pay, allowances, wages, overtime pay, bonus,
commission, fees and benefits. Fees payable to or earned by the director are
considered part of remuneration and therefore subject to employees’ tax if paid to a
director of a company or paid to a chairman or member of any board of a statutory
corporation from which the individual also receives other amounts constituting
remuneration.
• Director’s fees are paid to both Executive and Non-Executive Directors
• Executive directors are taxed through the payroll under PAYE
• For non-executive directors, the fees are taxed at 20% withholding tax
• The due date for payment of WHT is on or before the 10th day from the date of
payment of the fees
• Finance Act Amendment No. 3 of 2019 exempts non-executive directors from 10%
WHT for lack of tax clearance certificate. The amendment further exempts the NED
fees from income tax computations on the 3rd schedule, paragraph 4(w).
• This means NED fees become a final tax, no need for filing a return unless the
director has other income apart from the fees
• The director should meet conditions of an independent contractor. If s/he receives
benefits and allowances over and above board fees, Zimra may bring taxation of fees
under PAYE as the amounts will be viewed as remuneration

WHAT IS A TAX RETURN?
A tax return is a documentation fully completed that shows the amount of tax liability, submitted in paper or online to ZIMRA together with full details of the tax payer on or before specified date. The said return is then used by Zimra to assess liability of the taxpayer. These differ in terms of the tax head of the return being submitted to such as Paye return, Vat Return, Capital Gains Tax Return among other returns. The Tax return is designed in such a way that, it allows the taxpayer to calculate tax-liability and tax payments. The returns are then submitted on ZIMRA online platform called ZIMRA Eserices; the system automatically calculates the tax liability and payments and it came as a panacea to reduce frequent visit to the tax authority.
IMPORTANCE OF RETURNS SUBMISSION
a) Filing returns is mandatory
Filing of returns in a Zimbabwean context is mandatory to the extent of taxpayer’s registration. The taxpayer is obligated to file returns of the tax heads registered failure of which will result in excessive interest and penalties or even litigation. As they say “ignorance of the law is no defence”. Taxpayers are expected to know the implications of not submitting returns as they should. Most of these costs can be avoided because they negatively impact on the cash flows of businesses and the taxpayer’s reputation.

b) Filing returns is a sign you are responsible
The government mandates that taxpayers who are registered with ZIMRA must submit income tax return on or before 30 of April of subsequent year of assessment. The tax as calculated must be paid and failure to pay will invite penalties and interests. Upon submission of the returns, the taxpayer must keep the copy of it as evidence for future audits. Tax is a major source of revenue hence filing returns and making payments on time ensures the availability of public goods and services being funded by responsible tax payers.
c) Adjustment or Refunds processing
Filing returns has many advantages regardless of whether you draw the prescribed level of income necessary to file returns. In circumstances where taxpayer wants to claim a refund, it could be denied where the taxpayer fails to furnish the commissioner with the requested information by the officer responsible for auditing the refund.

d) Tax Audits
Returns are vital during audits and they show what really transpired during the period in question. They play a vital role in giving evidence of taxpayer’s defence.

Businesses should undergo periodic health checks, just like people to guarantee survival. Tax health checks have never been more necessary than now when the Zimbabwean government through Zimbabwe Revenue Authority (ZIMRA) has automated almost all of its revenue collection systems. The government is also targeting the informal sector (which thrives in highly inflationary environment) to increase revenue for the consolidated revenue fund. The need for tax health checks is also heightened by uncertain tax positions inherent in our laws and the need for companies to continually review their businesses in view of recent legal precedents on combative matters.

Businesses that intend to endure their owners need to proactively consider policies which will help alleviate challenges that may arise from the revised tax collection measures by assuming periodic tax health checks

Why conduct tax health checks

A tax health check is a review of a taxpayer’s tax records to ascertain the level of compliance with applicable tax legislation. The exercise may also involve measuring the potential tax risks and assessing recommendations for enhanced compliance. The exercise may aid the following purposes:

• It may be conducted as part of preparations for an upcoming tax audit or investigation exercise. In this context the health check will involve reviewing the company’s position to decide on the strategy for resolving the issues that may be raised by the tax authorities during the audit. However, it is not usually a good idea to wait for tax audit notification letters before conducting health checks. This is because it might be too late to adopt proactive strategies to manage tax risks by the time a taxpayer receives the audit notification letter.

• The exercise may also be conducted with a view to assessing the robustness of a company’s tax function and processes. Through the exercise, the composition of the tax department (if available) can be reviewed to ensure it is adequately staffed and that such personnel have the requisite knowledge and experience to meet the demands of the tax function.

• A tax health check could also take the form of a tax due diligence, where a potential investor evaluates the tax status of an existing entity it intends to invest in. Although some other considerations typically prevail in determining whether to acquire or not, the importance of the tax health check in ascertaining the actual liabilities of the existing business cannot be overemphasized.

• For tax payers who apply for refunds, this is to avoid a situation where a supposed tax refund reverses into a tax debt for the taxpayer. Taxpayers that intend to apply for tax refunds also need tax health checks given that the associated audit exercises that legally precede refunds, are usually overly intensive and covers all tax types.

• It may result in a tax saving opportunity when as organisation correct its own wrongs in time before audits and investigations by the tax authority. Thus, based on the findings from a tax health check, a taxpayer can design an effective strategy for implementing a robust tax risk framework that identify and mitigate tax risks in the organisation.

The rising need for tax health checks

Recently, companies operating in Zimbabwe have been faced with increased level of tax risks. Tax risks is the risk that transaction and events will have unintended and adverse consequences. The increased tax risks are not unconnected to some uncertainties, doubts and changes in our tax laws and regulations.

Conclusion 

Tax health checks are a cost-effective way to proactively manage tax risks and avoid potential exposures. Tax payers are advised not to wait until they receive audit notifications letters from the tax authorities before conducting tax reviews, just as it is advisable not to wait until the outset of an illness before going for a medical check-up.

What is a Tax clearance certificate?
This is the document that is issued by the ZIMBABWE REVENUE AUTHORITY (ZIMRA) Commissioner General to a person accountable to pay under any act which is administered by ZIMRA. It is only issued to clients who are fully paid up in all tax heads.

Why you need a tax clearance certificate?
1. Tax clearance is needed when bidding for tenders or trading with many other organisations that is serious with business.
2. There will be no 10% Withholding Tax which is deducted when payments are made for goods and services supplied.
3. Tax Clearance Certificate is a prerequisite when applying for licences issued by local authorities.
4. No Tax will be levied on importations.
5. Companies have confidence and prefer doing business with compliant taxpayers and a tax clearance stand as proof of compliance.
6. Possession of a valid tax clearance also shows that you are a responsible citizen and seek to pay your dues in time, for the benefit of all (your business, the government and the entire citizenry).

Misfort Tax Consultancy helps its clients to obtain this document without any trouble.

Contact us on
WhatsApp number : 0775583605
website : http://localhost/mtc/
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Send us an e-mail : marketing@misforttax.co.zw/info@misforttax.co.zw
Contact number : 0242 571990/570423/0775583605

Few reasons why you need to engage Misfort Tax Consultancy?

• The most important thing to note is Misfort tax consultancy is the first and only ISO Certified tax consulting firm in Zimbabwe which means you are guaranteed of quality service.

1. Tap expertise at the right time

Even if you would prefer to tackle all business matters personally, engaging us as an expert when especially complex or sensitive issues regarding tax arise can be an extra measure to ensure problems receive proper attention and are thoroughly resolved.

2. Save time and money

Saves your valuable time on complex task that also may be outside your area of expertise, can assist you with the development of strategies for making improvements on both fronts.

3. Navigate changing workloads

You could end up burdening your core staff and undermining them. But of course, you also want to avoid hiring more.

4.Experience

There are many ways for you to work with Misfort tax consultancy. Most important, perhaps, is that these resources can give you the valuable time needed to focus on what you do best: Developing your business and being an expert at whatever it is that led you to launch your own company in the first place.

 What is a Tax Audit?

A Tax audit is an examination of your tax issues to verify whether your tax returns and tax deductions are accurate and in hand with the legislation requirements. It entails a verification and closer look at your tax affairs. There are generally different types of audits depending on what the tax regulatory authorities (ZIMRA) request on that particular time.

Tax Audits in our Zimbabwean context are done randomly and to any particular industry. They may reveal inaccuracies, incorrect treatment of transactions which affect the tax due hence it may result to penalties and interests.

Who are the target people for the audit?

Every business in the country can be audited with regards to Tax.

What is a Tax health Check?

It is a closer review of the tax affairs of a business, which intend to highlight potential weaknesses or risks arising from errors or omissions in the business records and tax systems, as well as identifying potential tax liabilities. This involves a tax expert who goes through the company systems and contrast them with the legislation.

Who needs tax health check?

Every Business needs it in order to be able to meet their obligations and avoid tax risks.

Tax Advice

Be on the lookout be ready for audits hence contact us for Tax health checks for you to be equally ready. Stay alert with us.

Tax Expert Misfort tax consultancy

We are a consultancy company with experts in providing tax health checks to your organisation. We have experience and we have provided these services to different entities from Local board authorities, Manufacturing industry, Energy industry (Service stations) and Doctors.

Raise significant capital for your business

As a company, your ability to attract investors and raise money for your business will be easier. Registering your company gives you the ability to borrow and incur debt but more importantly, sell shares and raise equity capital.

Enhance your brand image and improve the relationships with your customers and suppliers

Registering your company enhances the reputation and perception of your business. Accountability is also established through the structure of your company, as well as the regulations. Becoming a registered company is also important for any future dealings with third parties, as many businesses will only hire or engage with registered companies.

Competitive advantage

Company registration gives you a competitive advantage over any other trader and thus more business.

Avoid conflict with your founders

Registering a company helps immensely when conflict arises between founders. When you register a company, the company owners are limited to the number of shares purchased. The owners will have a clear understanding that their investment in the company is determined by the number of shares they own and not by any pre-registration verbal or written promises.

Helps limit personal liability

As a sole trader or partnership, you are legally responsible for all aspects of your business, including any debts and losses. A company is a separate legal entity and it is an easy way to protect your personal assets from your business actions.

We make company registration easy and quick for you!

Zimbabwe Revenue Authority (ZIMRA) has noticed that there are businesses that are trading, withholding and collecting VAT, PAYE, Capital Gains Tax and other taxes in multi-currencies. Following this observation, ZIMRA has found it necessary to clarify that these businesses should remit taxes in the specific currencies in which they collect them without any conversion to RTGS, bond notes, local point-of-sale and mobile money.
Clients can remit their multi-currency taxes to ZIMRA through the following FCA Nostro (USD) accounts:
NAME OF BANK FCA NOSTRO (USD)
ACCOUNT NUMBER
CBZ 1122387740107
ZB 4158-368023-405
NMB 0000020881933
FBC 4870033840138
STANDARD CHARTERED 8740007099000
ECOBANK 181197600860401
NEDBANK 11990189627
BANC ABC 10164886633017
STANBIC 9140000939535

Clients wanting to remit in hard currencies other than the USD can enquire with the above listed banks for the appropriate FCA Nostro accounts.
Public Notice Number 45 of 2018