VOLUNTARY DISCLOSURE
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1. What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax levied on the capital gain arising from the disposal of a specified asset. Specified asset means
immovable property (e.g. land and buildings) and
any marketable security (e.g. debentures, shares, unit trusts, bonds and stock).
With effect from 1 January 2017 the definition of specified assets now includes the following any right or title to tangible or intangible property registered or required to be registered in terms of
i Mines and Minerals Act
ii Patents Act
iii Trade Marks Act
iv Industrial Designs Act
v Copyright and Neighbouring Rights Act
vi Geographical Indications Act
vii Integrated Circuit Layout Designs Act
It should be noted that with effect from 1 January 2014, disposal of property for which the seller does not hold title deeds (cessions) are also liable to Capital Gains Tax.
2. Who is liable to pay or remit Capital Gains Tax?
– The seller
– Depositary (A conveyancer, legal practitioner, estate agent, building society, Sheriff or Master of the High Court, stockbroker or financial institution)
With effect from 1 January 2017, the definition of depository now includes the registrars or other registering officials responsible for registering rights, titles, transfers, or amendments in any of the Acts mentioned above. These officials are now required to withhold capital gains withholding tax where they hold any monies in respect of the disposals.
3. What are the rates of Capital Gains Tax?
– Where the specified asset being disposed of/sold was acquired after the 1st of February 2009, Capital Gains Tax is chargeable at the rate of 20% of the capital gain.
– Where the specified asset being disposed of/sold was acquired before 1st February 2009, Capital Gains Tax is chargeable at the rate of 5% of the gross capital amount realized from the sale.
These rates will also apply on the disposal of these additional assets.
4. Disposals Where Capital Gains is not payable
– Transfers of any specified assets between spouses.
– Transfer of principal private residence between former spouses in pursuit of a divorce order
– Transfer/disposal of a specified asset by a deceased estate
– Transfer/disposal of a principal private residence by an individual who is of or above the age of 55 as at
date of sale/transfer.
– Disposal of a principal private residence by an individual where all the sale proceeds are used to
acquire/construct a new principal private residence.
– Transfer of business property used for the purposes of trade by an individual to a company under his/her
control where such company will continue to use the property for the purposes of trade.
– Donation of housing units to a local authority, approved employee share ownership trust or community
share ownership trust or scheme.
5. Valuation of Assets for Capital Gains Tax Purposes
Ordinarily the practice is to accept values of properties as declared by clients for Capital Gains Tax purposes. However, in certain circumstances, if in the opinion of the Commissioner, the value declared falls short of and is outside of fair/open market values for similar properties, then the Commissioner may invoke his power under Section 14 of the Capital Gains Tax Act to either uplift the value or call for a valuation report from a property valuer registered with the Valuers Council of Zimbabwe. Such circumstances may include, but are not limited to:
– Sale/transfer of property between related parties where the relationship affects the agreed price of the
property.
– Deliberately under-declaring value of a property in order to evade payment of full Capital Gains Tax.
– Sale of a property in settlement of a debt by private treaty where the seller may deliberately under-declare
the value of the property to “free” funds to cover a debt.
6. Application for Capital Gains Tax Clearance Certificate.
Both the buyer and seller, or their authorized representatives will be required for separate interviews with ZIMRA as part of the process towards assessment of the Capital Gains Tax due or conclusion of the transaction whether or not Capital Gains Tax is payable.
a. For Disposal of Property (Land or Building) Under Cession
For the Capital Gains Tax Certificate to be processed our valued clients are required to produce, depending on circumstances of the sale, some or all of the following documents:
– Cession letter/ Letter from Council (authorizing disposal)
– Cession Agreement
– Letter of undertaking by conveyancer (where purchase amount is held in trust)
– Certified copies of national identity cards for both the seller and the buyer
– Proof of payment in the form of a bank statement for the seller showing the deposited amount for the
property disposed.
– Completed ZIMRA registration form (REV1)
– Capital Gains Tax return (CGT1)
– Valuation Report for the property (in the case of commercial property or on request by ZIMRA)
b. For Disposal of Property with Deeds
The following documents are required for processing of a Capital Gains Tax clearance certificate.
– Fully completed Capital Gains Tax form (CGT1)
– Completed ZIMRA registration form (REV1)
– Agreement of sale (copy & original)
– Deed of transfer/share certificate (copy & original)
– Copy of proof of payment
– National identification for the seller and the buyer (copy & original)
– Copies of two different utility bills if seller is claiming rollover/exemption
– Power of attorney sealed by notary public if the buyer/seller is out of the country and is being represented (copy & original)
A Capital Gains Tax clearance certificate will be issued once any amounts due have been paid and the transaction has been finalized by ZIMRA. This clearance certificate will be used to facilitate the transfer of the property to the new owner
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Section 49 of the VAT Act
A representative or agent should be registered if he is receiving monies on behalf of his principal which meet or exceed the registration threshold. The agent shall be liable for payment of any “tax, additional tax, penalty or interest chargeable under this Act in relation to such monies or transactions as though such liability had been incurred by him personally, but such liability shall be deemed to have been incurred by him in his representative capacity only.”
Take note of the last statement that such liability is in his representative capacity only. If negligence is not noted from the agent, payment of any tax should be recovered from the assets of the principal held in the agent’s possession. The said tax shall not be recovered from the Public Officer but the Principal Company.
Any tax paid by the representative tax payer shall be recovered from the company that he represents. The following situations hold the agent responsible for payment of tax in his personal capacity:
The above two situations are the only instances that holds the agent personally responsible for payment of taxes.
Note that the Act is silent on the issue of the agent failing to charge a particular tax. In your case if the agent is not charging Informal Traders Presumptive tax, he can still recover that from your monies in his possession.
Section 50 of the VAT Act empowers the Commissioner to attach any of your property that is held by the agent to recover any outstanding taxes.
Document Compiled by tax expert: P. Gurumani
MD at Misfort Tax Consultancy
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Any individual earning income from employment, trade or investments which is taxable can claim tax credits which may reduce their chargeable tax.
What is the purpose of tax credits?
Credits are meant to reduce the tax payable and therefore increase disposable income for the taxpayer. Credits are designed for specific categories of taxpayers to address special social welfare needs such as expenses towards improvement or maintenance of health and/or the control of permanent physical, mental and visual disability.
Categories of Tax Credits
Mentally or Physically Disabled Persons’ Credit
In that case, both spouses should complete and submit separate returns for the relevant tax year so that the transfer of the credit can be facilitated, each person claiming the portion not claimed by the other.
To claim the disability credit, the taxpayer must have been ordinarily resident in Zimbabwe in the period of assessment.
Elderly Person`s Credit
Blind Person`s Credit
In that case, both spouses should complete and submit separate returns for the relevant tax year so that the transfer of the credit can be facilitated, each person claiming the portion not claimed by the other.
Credit for the Cost of Purchasing Invalid Appliances
The credit for this category is 50% of the total cost of the appliance used by the taxpayer, his/her spouse or any of his/her children including step children and legally adopted children in respect of any of the following appliances:
The taxpayer should submit evidence of such purchase and proof of the cost thereof for consideration to their employer or complete a return and attach evidence of such purchase and proof of the cost thereof.
Please note that this credit is open to residents of Zimbabwe only.
Medical Expenses Credit
The credit for this category is a total of 50% for ‘‘medical expenses” paid for.
These should be expenses incurred by the taxpayer and paid by him for services rendered to him/her, his/her spouse and minor children, including step children and legally adopted minor children and cannot be extended to anyone else. A credit will not be allowed to the extent that the taxpayer is entitled to a refund or payment from any source whatsoever in connection with the expense (for example, a credit is not allowed where a refund is awarded by a medical aid society).
These medical expenses include expenses paid for the following:
In claiming the credit, the taxpayer should attach evidence of the expenses claimed in their original forms.
To claim the medical expenses credit, the taxpayer must have been ordinarily resident in Zimbabwe in the period of assessment.
Example of Tax Credits application
Below is an example of the computation covering some credits. Note that taxpayers may claim a combination of applicable credits where they qualify, for example, one may be blind (blind person’s credit) and suffer a physical disability (disability credit), necessitating the use of an orthopedic appliance the cost of which may also be claimable as a credit.
Hypothetically, let us take the case of a qualifying elderly person (over 55 years) whose income is US$3000 per month and who contributes US$120 to NSSA and US$200 to a medical aid society. Injured in a road accident, he incurs medical expenses amounting to US$350 and purchases an artificial limb for $150 during the period of assessment to replace an amputated leg.
His chargeable tax for the month, accommodating the applicable credits, will be calculated as follows:
Calculation of Tax Due | |||
Earnings |
3,000 |
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less: Allowable deductions- NSSA |
120 |
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Taxable Income |
2,880 |
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Tax There on (per tax tables) |
585 |
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Less Credits: Med Aid Contributions @ 50% of $ 200 |
100.00 |
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Medical Expenses @ 50% of $350 |
175.00 |
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Purchase of artificial limb@ 50% of $150.00 |
75.00 |
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Physical Disability Credit |
75.00 |
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Elderly Person’s Credit |
75.00 |
500 |
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Tax after credits |
85 |
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Add: Aids Levy @ 3% |
2.55 |
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Total payable |
82.55 |
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Please note that false claims will not only be disqualified, but constitute offences for which the taxpayer concerned may be penalised and/or prosecuted.
Our valued clients are reminded that the Value Added Tax for the month of March 2018 is due on or before 25 April 2018. Our clients are also reminded to take advantage of the TAX AMNESTY that is closing on 30 June 2018.
Disclaimer
This article was compiled by the Zimbabwe Revenue Authority for information purposes only |
Presumptive tax is levied in accordance with the Twenty-Sixth Schedule to the Income Tax Act [Chapter 23:06]. It is charged based on the presumed income of those persons engaging in any of the trades, occupations or undertakings.
Presumptive Tax was introduced to broaden the revenue base in view of the increase in informal business activities. Selected sectors of the economy were targeted to ensure the participation of informal businesses in tax payment in line with experiences of other developing countries. The presumptive Tax rates were reviewed downwards with effect from 1 January 2017 and are now payable monthly. Who is Liable to Pay and rates of presumptive tax?
Every operator of a hairdressing salon is required to pay Presumptive Tax amounting to US$10.00 per chair per month. The full amount should be paid by the 20th day after the end of the quarter. Amounts not paid by the due date are subject to interest charges. 2. Informal Traders All persons in receipt of rental income from an informal trader in respect of residential accommodation, premises or a place on which trade is carried on are required to recover an additional amount by way of Presumptive Tax equal to10% of the rent and this also includes local authorities. The amount should be remitted to ZIMRA within 30 days from the date the amount is recovered. Failure to recover or remit the Presumptive Tax renders the lessor personally liable for the payment of the Presumptive Tax and a penalty of 100% of the amount due. Failure or refusal on the part of the informal trader to pay the Presumptive Tax constitutes a breach of the lease and allows the lessor to terminate the lease without notice. 3. Small-Scale Miners With effect from 1st October 2014 Small Scale Miners Presumptive tax was reduced from 2% of the gross amount payable to 0%. Therefore no Presumptive tax will be collected from Small Scale Miners.
Cross border traders who import commercial goods into Zimbabwe are required to pay a Presumptive Tax equal to 10% of the value for duty purposes (VDP) of the commercial goods. The only exception are cases where the trader is registered with ZIMRA for Income Tax purposes and has a current tax clearance certificate (ITF263).
Every operator of a restaurant or bottle store is required to pay Presumptive Tax amounting to US$70 per month. The full amount should have to be remitted to ZMRA by the 10th day after the end of the quarter. Interest is chargeable on all amounts not paid by the due date.
Every person who owns, is in charge of a cottage industry regardless of it being licensed, or not is required to pay Presumptive Tax amounting to US$70 per month. Cottage industry operators include those in the furniture making or upholstery trade, metal fabrication and any other cottage industry that the Minister may, by notice in a statutory instrument, prescribe. The full amount should have to be remitted by the 10th day after the end of the quarter. Interest is chargeable where the amounts due are not paid by the due date.
Presumptive Tax is charged to operators of commercial waterborne vessels used for the carriage of passengers for profit and fishing rigs. The full amount of presumptive tax shall be remitted by the 10th day after the end of each quarter, however operators can still remit on monthly basis. The rates are shown in the table below.
Presumptive tax is charged to operators of Taxi Cabs, Omnibus, and Goods carrying vehicles and driving schools. The rates were reduced in 2017 and the full amount of presumptive tax shall be remitted by the 10th day after the end of each quarter, however operators can still remit on monthly basis. The rates of each type of vehicles can be obtained on the ZIMRA website. Reminder for payment of tax Our valued clients are reminded that the Value Added Tax for the month of March 2018 is due on or before 25 April 2018 and that Tax Amnesty applications are open until 30 June 2018.
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Taxpayers are encouraged to check for the following, which may be a basis for outstanding taxes or duties:
Non- or under-declaration of sales or Capital Gains resulting in less taxes being paid.
Undervaluation of imported goods.
Non-payment of duty on imported goods.
Non-payment of Income Taxes, Presumptive Tax, VAT and Capital Gains Tax as well as failure to remit any taxes withheld.
Failure to adhere to conditions of the operation of a bonded warehouse or private siding
Non-submission of returns.
Incorrect declaration of customs or excise information which result in less duties being paid.
How and where do you apply for the tax amnesty?
Persons who wish to apply for the amnesty must:
Complete the application Form TA01 in full. The form is obtainable from the ZIMRA website www.zimra.co.zw .
Declare outstanding taxes or duties that are on returns or assessments captured on ZIMRA systems by 1 December 2017 or outstanding taxes and duties not declared to ZIMRA but unpaid by 1 December 2017.
Ensure the form is completed legibly in indelible ink.
Submit the application to their nearest ZIMRA office or send scanned copies using the following email addresses:
(a) LCO & MCO amnestylcomco@zimra.co.zw for clients in Large &
Medium Client Offices
(b) Region1 amnestyRegion1@zimra.co.zw for clients in Region 1
(c) Region2 amnestyRegion2@zimra.co.zw for clients in Region 2
(d) Region3 amnestyRegion3@zimra.co.zw for clients in Region 3
(e) Customs customsamnesty@zimra.co.zw for clients with applying
tax amnesty on customs issues.
Outstanding returns or bills of entry should be submitted on-line for VAT, Income Tax, Paye, Customs and Excise, and manually for Withholding Taxes and Capital Gains Tax
6. How does one pay the tax?
A payment plan should be proposed by the applicant at the time of application and the outstanding taxes or duties should be paid up by 30th June 2018. It is important to note that tax amnesty is granted on the amount of outstanding tax or duty actually paid.
Payments should be made while the applications are being submitted and processed meaning there is no need to wait for approval as tax amnesty shall be granted to the extent of outstanding taxes or duties actually paid by 30 June 2018.
7. Under which circumstances will tax amnesty applications not be considered?
An application for amnesty shall not be considered where:
The application is in respect of any seizure, forfeiture or detention of any property or goods.
The application is submitted after 30 June 2018;
The outstanding taxes or duties have not been paid by 30 June 2018;
DO NOT BE LEFT OUT. GRAB THE OPPORTUNITY AND BE DEBT FREE!
This article seeks to clarify this issue for the benefit of our valued clients. Some of the fringe benefits enjoyed by employees as part of remuneration are taxable under Employees Tax (PAYE) and Value Added Tax (VAT) legal provisions. The Income Tax Act (Chapter 23:06) states that every employer who pays or becomes liable to pay any amount by way of remuneration to any employee is required to withhold Employees Tax (PAYE). The term “remuneration” covers a number of aspects which may be paid by the employer to any employee and includes; any amount of income received by an employee by way of salary, leave pay, allowance, wage, overtime pay, benefits or advantages, whether in cash or otherwise. The foregoing cited examples are not therefore exhaustive. The definition of remuneration also includes amounts received as:
What are some of the common examples of fringe benefits paid or granted by employers to employees?
Are all taxable benefits payable to employees by employer deductible for Income Tax purposes? Not all amounts paid by an employer in respect of benefits or advantages can be claimed as deductions for income tax purposes. Section 16 of the Income Tax Act provides for certain expenses that are not deductible for income tax purposes. One such example is entertainment expenses or amounts expended in respect of hospitality in any form. Expenses incurred for staff meals or canteen meals are not allowable for income tax purposes. Such amounts are therefore taxable for PAYE purposes but not allowed as deductions for income tax purposes. What are the examples of fringe benefits and their treatment in terms of the VAT Act? Supplies on which output tax must be accounted include;
Supplies of fringe benefits, which are exempt in terms the VAT Act
The examples given above are not exhaustive and depend on the contracts of employment entered into by the employer and employee. Our valued clients are therefore urged to seek clarification or information on the correct tax treatment of peculiar benefits or advantages at their nearest ZIMRA offices or usage of the communication channels and means supplied below.
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