Sie sind auf Seite 1von 51

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

B. COMPT HONOURS DEGREE 2010 VALUE ADDED TAX


`

ZIMBABWE

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

VALUE ADDED TAX COURSE OUTLINE 1 2 3 4 5 6 7 8 9 10 11 12 13 14. 15 16 17 18 19 20 21 22 Background to VAT Interpretation of Law Definitions/Interpretation-Section 2 General Operational Aspects of VAT - Section 6 Supplies VAT on Imported Goods and Services Accounting Basis section 14 Calculation of VAT payable section 15 Deductions Adjustments section 17 Acquisition of a going concern wholly or partly for purpose other than making taxable supplies s18 Pre-incorporation Expenses Tax Invoice section 20 Credit and Debit Notes: Section 21 Irrecoverable debts section 22 Registration for VAT- Section 23 Tax Periods Assessments Section 27 Sec 31 Section 32, 33, 34 Section 19

Objections and Appeals

Penalties and Interest Section 39 Refunds Section 44 Separate trades, branches and divisions- Section 51
Compiled by The Institute of Chartered Accountants of Zimbabwe 2

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

23 24 25 26 27 28 29

Separate persons carrying on same trade under certain circumstances deemed to be a single person- Section 52. Bodies of persons corporate or unincorporated- Section 53 Death or Insolvency of a Registered Operator: Section 55 Agents and auctioneers: Section 56 Records: Section 57 Powers of entry and search: Section 61. Offences and Penalties Section 62

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 INTRODUCTION


The VAT syllabus is fairly wide and any attempt to spot a particular area from which the questions will be set will have a very small probability of success. It is, therefore, in the candidate s interest to be familiar with virtually all areas of the syllabus. In any case the questions are normally integrated and the candidates who have prepared for all possible topics are the ones likely to be successful in their endeavors. The notes and examples in this study pack are designed to assist the student prepare for the examination by going through summaries of the relevant legislation and working through practical examples/questions. A number of the questions actually come from past examination papers. It is in the best interest of students to genuinely attempt the questions before referring to solutions provided. The professional accountant is involved in the interpretation and application of VAT law procedures and must be able to recognise potential VAT planning opportunities; and contribute to the evaluation of existing ones. The accountant s approach to VAT matters should be tempered with the recognition that the State is legally entitled to all taxes imposed upon taxpayers by the statutes, but taxpayers are under no obligation to pay more than the legal minimum of such taxes imposed upon them. This must be borne in mind at all times when working through questions, which touch on the aspects of advice to clients on planning their VAT affairs. It must be made clear from the outset that to become a VAT expert one requires further comprehensive study supported by sufficient practical experience. This package should set you well on your way. Please note that the summaries have been prepared under the presumption that you have already had an encounter with the study of Zimbabwean Tax Law and Practice at undergraduate level, and will be based on legislation in effect as at 31 January 2010. Good luck in your endeavours.

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 1. BACKGROUND TO VAT 1.1 WHAT IS VAT? Value Added Tax (more commonly known by its abbreviation VAT) is an indirect tax levied on the supply of goods or services. It is also levied on the importation of goods and, under some circumstances, on the importation of services. It is levied and accounted for at the prescribed rates and is borne by the final consumers of goods and services. For some goods and services a special rate of 0% is applied, while a limited range of goods and services are exempted from the tax. Because the tax is borne by the final consumer, it can be called a consumption tax as the amount of tax one pays is directly related to the purchases made. The Commissioner General of the Zimbabwe Revenue Authority is responsible for the administration of VAT. 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 legislature s intention, but where the intention is clear the courts will give effect to that intention, as is the case of all other Acts. 2.2 CONTRA FISCUM RULE Should a provision of a taxing statute be ambiguous, the contra fiscum principle must be applied. In other words, where a section of the act is reasonably capable of two constructions (interpretations), the court must allow the lesser imposition, or give the taxpayer charged the benefit of the doubt. This rule has often been applied by our courts. The judgment of Milner J in the Badnehorst case should also be noted in this respect: Where there is an ambiguity which is manifest without resorting to considerations of inequity, supposed or real, the court will, no doubt, interpret a taxing statute, as it did with others favorably to the subject and so, contra fiscum

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 2.3 DEFINITIONS OF WORDS Like most statutes, the VAT Act contains a general interpretation section (section 2), where the meaning that certain words and phrases are intended to bear for the purposes of the Act is found. The definitions contained are therefore of particular importance. As in all such interpretation sections, it is expressly provided that the meaning attributed to particular words and phrases must be those given in the definition section unless the context otherwise indicates. In determining whether or not the context otherwise indicates, the whole of the Act must be considered, since other parts thereof may shed light upon the intention of the legislature 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. 2.4 MEANS AND INCLUDES

The definition in the VAT Act often provides that a word or phrase means something. In other cases it is stated that a word or phrase includes something, and in other cases, it is stated that a word or phrase means and includes Generally, when a definition states that a word or phrase means something, such definition is exhaustive and the word or phrase can have no other meaning than that which appears in the definition. However, this is always subject to the proviso that a contrary intention may appear in the statute. On the other hand, the word includes is normally used to enlarge the meaning of words or phrases occurring in a statute, but in some cases it may also be exhaustive and be equivalent to means and includes 2.5 NOTWITHSTANDI NG ANYTHING

When the words notwithstanding anything contained in this Act appear in a section or subsection of a statute, the effect thereof is that such section or subsection must be interpreted as if the rest of the Act is excluded. In some cases the words may be in a subsection notwithstanding anything in this section contained , and in such case the effect is that the subsection must be considered as if the rest of the section were excluded. In addition, the word notwithstanding has been held to mean even if

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 2.6 SHALL AND MAY

The word shall is normally used as being equivalent to must . In other words it is imperative or peremptory, while the word may is usually used in a permissive sense. In general, in the more modern statutes, the word shall is used to create a duty. Where, however, the expression it shall be lawful appears in a statute, it usually confers a discretionary power. On the other hand the word may is sometimes construed as imperative, or in other words may can be equivalent to must . However, in the absence of proof that the legislature intended that the word may is to be interpreted as must , such word is given its natural meaning, that is a permissive and not an obligatory use. 2.7 AND AND OR It is important to take note of the words at the end of (and sometimes within the same) sentence, 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. 5 5.1 DEFINITIONS/ INTERPRETATION-Section 2 CONNECTED PERSON

There are six different relationships between different persons incorporated in the definition of connected person in the VAT Act. The term is important because if two persons are connected in terms of the definition, it may be necessary to apply a special value of supply rule which will force the supplier to charge VAT on the open market value of the supply, rather than on the amount of consideration received. Examples of connected persons: A company and its Directors Parents and their children A Trust and a beneficiary of that Trust Separately registered branches of a registered operator

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 3.2 CONSIDERAT ION

This term refers to that which is given to the supplier as payment for the supply and includes tax. 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 constitutes consideration. 3.3 ENTERTAINMENT

Means the provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a registered operator whether directly or indirectly to anyone in connection with a trade carried on by him. 3.4 FIXED PROPERTY

Means land, together with improvements affixed thereto, any share in a company, which confers a right to, or an interest in the use of immovable property. It does not include farmland. 3.5 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 (including timeshare)- get title deeds to a share of flats Shares in a share block company- no title deeds but you own shares Postage stamps It excludes: Money i.e. notes, coins, cheques, bills of exchange e.t.c. (Except when sold as 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.

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 3.6 IMPORTED SERVICE

Means a supply of services that is made by a supplier who is resident or carries on business outside Zimbabwe to a recipient who is a resident of Zimbabwe to the extent that such services are utilized or consumed in Zimbabwe for purposes other than of making taxable supplies. 3.7 INPUT TAX

This is the tax paid by the recipient of the supply of any goods or services to the supplier. Input tax may be deducted by the recipient where the supply of such goods and/or services is acquired by a registered operator for the purposes of making taxable supplies in the following circumstances: 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. 3.8 INSTALMENT CREDIT AGREEMENT

An agreement for the supply of goods under an installment sale or financial lease, which is normally subject to some suspensive condition as to the passing of ownership. These may be referred to as hire purchase agreements. The agreement will normally provide for the payment of the purchase price including finance charges at a fixed or determinable installment and the recipient accepts the risks attached to those goods insofar as loss or

Compiled by The Institute of Chartered Accountants of Zimbabwe

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 damage are concerned. In the case of a financial lease the term of the agreement must be at least 12 months. This type of agreement must be distinguished from a rental agreement where the recipient does not become the owner of the goods at any stage. 3.9 OPEN MARKET VALUE

Is the consideration in money which the supply of goods or services would generally fetch if supplied in similar circumstances at that date in Zimbabwe being a supply generally offered and made between persons who are not connected persons (Sec 3). 3.10 OUTPUT TAX

In relation to a registered operator means the tax charged under paragraph (a) of subsection (1) of section 6 in respect of supply of goods and services by the registered operator. 3.11 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 3.12 REGISTERED OPERATOR

A Registered operator is a person who is registered or is required to be registered for VAT.

3.13

SECOND HAND GOODS

These are goods, which have been previously owned and used (excludes animals and certain gold coins)

Compiled by The Institute of Chartered Accountants of Zimbabwe

10

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

3.14

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 in terms of Section 7 of the Act It excludes A supply of goods Money Any stamp, form or card which falls into the definition of goods 3.15 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. 3.16 TAXABLE SUPPLY

A supply (including a zero rated supply), which is chargeable with tax under the VAT Act. 3.17 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 such as: manufacturers, traders, construction, etc

auctioneers,

lessors,

Compiled by The Institute of Chartered Accountants of Zimbabwe

11

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Trades and professions builders, electricians, plumbers, doctors, lawyers, accountants, etc Nonprofit 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 own 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. 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 GENERAL OPERATIONAL ASPECTS OF VAT - Section 6

Value Added Tax is levied under the Value Added Tax Act (Ch 23:12). The tax is levied at prescribed rates on the following: The supply of any goods and/or services in Zimbabwe on or after the commencement date by a registered operator in the course of furtherance of an enterprise (trade). Goods imported into Zimbabwe in certain circumstances, and Services imported into Zimbabwe in certain circumstances. Persons liable to pay VAT (section 6(2)) In terms of section 6(2) of the VAT Act the following are liable to pay the VAT: Persons registered in terms of section 23 of the Act. An importer of goods. In the case of imported goods VAT is levied on the value for duty purposes, i.e. initial cost plus freight, insurance,etc. Recipient of imported services.

Compiled by The Institute of Chartered Accountants of Zimbabwe

12

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 It is levied on excisable goods (section 6(3)). In the case of excisable goods, VAT is levied on value for excise purposes plus excise duty. 5 SUPPLIES

5.1 Zero Rated Supplies (section 10) Zero rated supplies are taxable supplies made by a registered operator, which are taxed at the rate of 0%. There is no output tax actually collected in respect of the supply. Since a zero-rated supply is a taxable supply, registered operators making zero rated supplies may claim full input tax in respect of goods or services acquired to make the zero rated supplies. Traders who supply exclusively zero rated supplies are required to register for VAT in terms of section 23 provided their aggregate annual turnover is $60 , 000 and above or is likely to be $60, 000 and above. Zero rating applies primarily to exports and to certain other types of transactions mainly for social and economic reasons. Section 10 (1) Goods a) Goods exported to an address in an export country b) Goods (including consumables) supplied to repair goods temporarily admitted into Zimbabwe. c) Goods supplied under a rental agreement if used exclusively in an export country. d) Goods supplied under a rental agreement if used in or paid for from an export country. Only applies to foreign registered businesses. e) Supply of business as a going concern. f) Gold supplied to the Reserve Bank or any other registered banks. g) Regular agricultural inputs supplied to farmers e.g. herbicides, fodder and insecticide. h) Goods for disabled persons. i) Goods supplied to an independent branch in an export country. j) Supply of gold coins issued by the Reserve Bank k) Drugs as defined in the Medicines & Allied Substances control Act. l) Building bricks m) Basic commodities, such as plain bread, plain buns, milk, cooking oil etc. Section 10 (2) Services (a) Transportation of PASSENGERS or GOODS to, from and outside Zimbabwe. (b) Transportation of PASSENGERS from one place to another place in Zimbabwe by aircraft to the extent that the travel constitutes international carriage (c) Transport and ancillary transport services supplied within Zimbabwe in respect of imports and exports of GOODS, if supplied by the same supplier responsible for the international transport of those goods. (e) Transportation services for the movement of goods through Zimbabwe from one export country to another, when provided to a non-resident (non-registered operator),
Compiled by The Institute of Chartered Accountants of Zimbabwe 13

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 who does not carry on a business in Zimbabwe (includes an ancillary transport services as defined). (f) Services rendered in connection with land or improvements OUTSIDE Zimbabwe (g) Services rendered in connection with movables situated in an export country: goods temporarily admitted into Zimbabwe which are exempted from import duties, and certain services relating to foreign going aircraft (h) Services comprising handling, pilotage salvage, towage and operation or management of any foreign going aircraft: where the services are supplied to a non-resident and a nonregistered operator. (i) Services of arranging the supply of goods, services or transport of goods for a person who is non-resident and a non registered operator. (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 in terms of section 7 (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

5.2 Exempt supplies (section 11) Exempt supplies are those supplies on which no VAT is chargeable. A trader of exempt supplies is not required to register for VAT even if he reaches the registration threshold. Types of Exempt Supplies a) Supply of Financial Services b) The supply by an association not for gain of any donated goods or services OR where the association manufactures goods, if at least 80% of the value of the materials used consist of donated goods. c) The supply of residential accommodation in a dwelling under a lease or hire

Compiled by The Institute of Chartered Accountants of Zimbabwe

14

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 agreement OR, where an employer permits his employee to occupy the accommodation as a fringe benefit for the duration of the employment. The supply of leasehold land used to erect dwellings and for existing dwellings Sale or letting of land outside Zimbabwe. Note that any SERVICES relating to such land is zero-rated. S10(2) (f) The supply of public road and railway transport to fare paying passengers and their luggage. Note that the transport of passengers to an export country is zero-rated and this will override the exemption. Any educational services for pre-school, primary, secondary, tertiary and technical education and the education or training of physically/ mentally handicapped persons at any institution, which meets the requirements of the Ministry responsible for education or higher education. Medical services supplied by any person. This includes incidental and subordinate services in respect thereof. The supply of goods and services by an employee organisation to any of its members to the extent that the consideration for the supply consists of membership contributions. The supply of piped water, rates charged by a local authority and domestic electricity Supply of fuel and fuel products.

d) e) f)

g)

h) i)

j) k)

5.3

Standard Rated Supplies

These are supplies of goods and/or services that attract a VAT rate of 15%. Goods/services that are not specifically exempt or zero rated are standard rated. 5.4 Deemed supplies, Time of supply, Value of supply, (sections 7, 8 and 9)

General Rules: Time of Supply: The earlier of an invoice being issued or any payment being made (section 8(1). Value of Supply: Where the consideration is in money, the amount of money less VAT. Where the consideration is not in money, the open market value (OMV) (section 9(2, 3). Deemed Supply Time of supply Value of Supply less

7(1) Sale in execution of a 8(1) The earlier of an 9(2) Consideration debt invoice issued or payment VAT. received 7(2) Cessation of trade by 8(5) Day the registered operator deregistration prior

to 9(5) Lesser of cost or open market value.

Compiled by The Institute of Chartered Accountants of Zimbabwe

15

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

7(3) Door to door credit 8(2)(b) Day after cooling 9(2) Consideration sale agreements off period. VAT 7(4)(a) Lay bye agreements 8(2) the time the goods 9(2) Consideration of a consideration not are delivered to the VAT exceeding $25 including purchaser. VAT. 7(4)(b) Cancelled lay bye 8(2) The time the agreement agreement is cancelled. 7(5)Subsidy paid by the 8(1) The earlier of an state or local authority invoice issued or payment received

less

less

9(2) Consideration less VAT 9(12) The amount of any payment made from time to time on behalf of the registered operator 9(2) Consideration VAT 9(2) Consideration VAT less

7(6) Disposal of a business 8(1) The earlier of an as a going concern invoice issued or payments received 7(7) Indemnity payments 8(1) The earlier of an received from an insurance invoice issued or payment company N.B this received provision is no longer applicable, but was not repealed.

less

7(8) Transfers to 8(2) (e) The time the goods 9(5) The lesser of cost or independent branches in an are delivered or the service open market value. export country. is provided. 7(9) Repossessions from 8(8) The debtors who are registered repossession operators. time of 9(13) The outstanding cash value on date of repossession. less

7(10) The granting of the 8(1) The earlier of an 9(2) Consideration right to use goods with or invoice issued or payment VAT without a driver, crew, pilot received etc. 7(11) Placing a bet

8(3)(f)The time the bet is 9(14) Amount received for placed the bet is the consideration less VAT

7(12) Prizes/winnings from 8(3) (g) The time the prize 9(15) Amount paid as prize a bet or winning is paid out. or winning is consideration less VAT.

Compiled by The Institute of Chartered Accountants of Zimbabwe

16

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

7(13) single supply which 8(1) The earlier of an 9(2) Consideration attracts two rates of tax. invoice issued or payment VAT received 7(14) Supply of goods by a 8(1) The earlier of an 9(2) Consideration registered operator invoice issued or payments VAT received 7(15) Transfer of a loan 8(1) The earlier of an 9(2) Consideration obligation invoice issued or payments VAT received 7(16) Supplies of shares to 8(1) The earlier of an 9(2) Consideration a developer invoice issued or payments VAT received 7(17) Importations by 8(9)The time the tax 9(22) Value agents acting on behalf of payable on the importation purposes. principals of goods is paid by the agent for

less

less

less

less

Duty

Coin operated machines (juke boxes, mini soccer machines fruit machines section 8(2) (d): For the recipient, the time of supply is deemed to be the time the coin is inserted in the machine and for the supplier, the time of supply is the time when the coins are removed from the machine. Rental agreement section 8 (3) (a): Where goods are supplied under any rental agreement or where services are supplied under any agreement which provides for periodic payment, the supply shall be deemed to be made for successive parts of the period of the agreement and each of the successive supply shall be deemed to take place when a payment becomes due or is received whichever is earlier. Installment credit agreements section 8(3) (c): Time of supply is deemed to take place when the goods are delivered or when the supplier receives any payment. Value of supply is the cash value of the supply. Undetermined contract price section 8(4): The supply is deemed to take place when any payment is due or received or an invoice is issued whichever is the earliest .e.g. the cases of GMB, COTTCO Vouchers /Tokens section 9(16): Where a voucher or a token is issued in consideration of money, the supply of such token at the time at which it is issued is ignored for VAT purposes to the extent that it does not exceed the monetary value stated on such a voucher. Where the consideration exceeds such value, the registered operator account for

Compiled by The Institute of Chartered Accountants of Zimbabwe

17

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 VAT on the excess at the time of issue while on the face value of the voucher, VAT will be accounted for when the voucher is redeemed as it now operates as a cash payment for goods or services. Where a dealer issues tokens or vouchers that may be exchanged for specific goods and such vouchers are issued for a consideration in money, the issue of such a token is a taxable supply. The surrender of such a token is disregarded for VAT purposes. Section 9(17) 6.0 6.1 VAT on Imported Goods and Services Importation of goods section 12

VAT is levied and paid on the importation of any goods into Zimbabwe by any person. The importer of goods is liable to pay the VAT levied on importation. All goods imported into Zimbabwe will be levied VAT except: Those that are exempt as prescribed and Those that are destined for consignees in countries other than Zimbabwe. Goods are deemed to be imported on the date the goods are entered for home consumption, (cleared through customs). This date is reflected on the customs bill of entry. The VAT on importation must be paid at the same time as the customs duty. The value to be placed on the importation is the value of the goods for Customs Duty purposes (VDP), i.e. cost plus freight, insurance etc. This is calculated as follows: -

1. The value of the imported goods 2. Freight, insurance and other costs = Total value for VAT purposes Total VAT payable = $15 000 X 15% = $2 250

10 000 5 000 15 000

6.2

Deferment of payment of VAT on imported capital goods, section 12A

The Commissioner may allow a registered operator who imports capital goods for use in the production of taxable supplies to spread payment of import VAT over a period of ninety (90) days. The plant, equipment or machinery should be exclusively used for manufacturing, mining on a registered mining location, agricultural purposes or for the aviation industry. However this is subject to the importer having proved to the

Compiled by The Institute of Chartered Accountants of Zimbabwe

18

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 satisfaction of the Commissioner that the imported goods are of a capital nature and upon having fulfilled conditions that may be set by the Commissioner. Where the importer disposes of the imported goods during the period of deferment, the whole VAT becomes due and the Commissioner may impose 100% penalty plus interest (section 12A (2). However, if the importer proves to the satisfaction of the Commissioner that the sale was not motivated by the desire to evade payment of VAT, the Commissioner may waive in full or in part the penalty but interest remains payable. 6.3 Imported services section 13

Definition: means a supply of services that is made by a supplier who is a non resident of Zimbabwe or a resident of Zimbabwe who carries on business outside Zimbabwe to a recipient who is a resident of Zimbabwe to the extent that such services are utilised or consumed in Zimbabwe for making exempt supplies. Time of supply is the general rule of time of supply. Value of supply is the consideration of such supply or the open market value whichever is greater.

EXAMPLE 1: The National University of Science and Technology was sued by its lecturers that they had fired following an illegal industrial action. The university hired Advocate De Beers from South Africa to represent it. He charged them R14 500 for the service. The open market value of the services rendered was R16 000. He raised his invoice for the service on 1 August 2009 but payment was made on 31 December 2009. Required: (a) Calculate VAT due if any. (b) When is the VAT due? (c) Who will account for the VAT? Solution: (a) VAT payable =15/115*R16 000 (greater of open market value or consideration). = R2 086.96 (b) The VAT was due on 1 August 2009, the general time of supply rule applies, i.e. the earlier of an invoice being issued or any payment being made. (c) The university is required to account for the VAT. EXAMPLE 2: Mambo Life Assurance Company hires an IT consultant from South Africa to work on new software. The software is used mainly in the Life Assurance business of the company. He issued an invoice of R8, 200 on 31 October 2009. If similar services were sourced locally, the company could have paid R7, 500.

Compiled by The Institute of Chartered Accountants of Zimbabwe

19

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Required: What are the VAT implications of the transaction? Solution: Mambo Life Assurance deals in services that are exempt from VAT, see definition of financial services hence it should account for VAT on the imported service. The VAT will be R1, 069.57 (15/115 * 8, 200). N/B: The use to which the services are going to be put is very important in qualifying a service to be an imported service. The service in other words should be used for exempt purposes. 7 7.1 Accounting Basis section 14 Invoice Basis

VAT is generally accounted for on the invoice basis. The invoice (or accrual) basis of accounting is that registered operators account for both cash and credit sales and cash and credit purchases in the month in which transactions are made. This means that VAT has to be accounted for when due irrespective of whether payment has been made or received. The general time of supply rule is that registered operators will account for VAT at the earlier of: The time an invoice is issued, or The time any payment is received by the supplier Example: Kumusha (Pvt) ltd purchased a fridge for resale on 20 October 2009 and received a tax invoice for $3450 (incl. VAT @15%). It paid the supplier $2300 on 31 October 2009 and the balance on 30 November 2009. It then sold the fridge for $ 5750 (incl. VAT @ 15%) on 31 October 2009 and issued a tax invoice for the whole amount the same day. It received 70% deposit on the date of invoice. The balance was paid on 15 December 2009. What is the VAT treatment of the transaction? Solution Kumusha (Pvt) ltd is entitled to an input tax claim of (15/115 * $3450) $450 and should account for output tax of (15/115 * $5750) $750 in the tax period ending 31 October 2009.

Compiled by The Institute of Chartered Accountants of Zimbabwe

20

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

7.2

Payment/cash basis

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 in respect of taxable supplies made during the period. The payments/cash basis is currently available to local authorities, public authorities and associations not for gain. Note: these will only use this basis upon being authorized by the Commissioner to do so. Example: In the example above if Kumusha (Pvt) Ltd was authorized by the Commissioner to be on cash basis will claim input tax of (15/115 * $2300) $300 and account for output tax of (15/115 * $4025) $525 in the tax period ending 31 October 2009. However this will only be applied if Kumusha (Pvt) ltd is authorized by the Commissioner to use the payment basis. 8 Calculation of VAT payable section 15

The tax payable shall, in terms of section 15(1), be in respect of each tax period during which the registered operator has carried on a trade. 15(2) Documents required for claiming input tax: Tax invoice, Debit note or credit note, sufficient records in the case of second hand goods or repossessions, Bill of entry for imported goods. 15(3) Calculation of tax payable or refundable: The amount of tax payable by the registered operator in respect of a tax period shall be calculated by deducting from the total amount of output tax any sum of input tax incurred during the tax period. This is often referred to as the mechanics of VAT. i.e. Out Put Tax Less Input Tax VAT Payable / Refundable *** (***) ***

15(3)(f) where a registered operator has previously been denied to claim input tax as a result of not having a valid tax invoice and the Registered Operator has obtained it during any tax period, he is entitled to claim input tax during that period in which he has obtained it.

Compiled by The Institute of Chartered Accountants of Zimbabwe

21

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 15(3)(g) In the case of change of use from wholly or partly taxable to wholly exempt, the operator is required to account for output tax on the open market value of the goods in the tax period in which the change occurs. Example: An asset was used 75% for making taxable supplies. It was purchased for $15, 000.00 and input tax was claimed accordingly. The asset was later used 100% for making non taxable supplies. Its current open market value was $17,000.00. The operator will thus be required to account for output tax of $1,663.04 ($17, 000 * 75% * 15/115). 15(4) Input tax can be claimed in any later tax period provided that it had not been claimed before. 15(6) Where the refund due to the registered operator is less than $60.00, it will be credited to the account. 9 9.1 Deductions Permissible Deductions section 16

16(1) allows for apportionment of input tax where goods are acquired and used for both taxable and non taxable purposes. Input tax is allowed to the extent to which the goods or services are used for purposes of making taxable supplies. Provisos: Where the intended use of goods or services in the course of making taxable supplies is equal to not less than ninety per centum (90%) of the total intended use of such goods or services, the goods or services shall be deemed to have been acquired wholly for the purpose of making taxable supplies. (Deminimus rule). This therefore means that full input tax is allowed. Where goods or services are successively supplied and the calculation of input tax cannot be made accurately until the completion of the supply of the goods and/or services, such input tax may be estimated subject to an adjustment on completion of the supply. N/B: The apportionment in this case shall be based on turnover. Any other basis shall be subject to approval by the Commissioner. 9.2 Section 16(2) prohibited deductions

16(2) (a) registered operators are not allowed to claim input tax in respect of goods or services acquired for the purpose of entertainment. This section shall not apply where: The goods or services are acquired by such registered operator to the extent that such goods or services are acquired for the purposes of entertainment which is continuously or regularly supplied to clients or customers for a consideration to the extent that such taxable supplies of entertainment are made for a charge which

Compiled by The Institute of Chartered Accountants of Zimbabwe

22

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 covers all the direct and indirect costs of such entertainment or is equal to the open market value. Bona fide promotional activities not charged by the registered operator in respect of the supply to recipients who are clients or customers in the ordinary course of trade of entertainment continuously or regularly supplied to clients or customers for a consideration. Food left over which had initially been acquired for making taxable supplies of entertainment and is subsequently given to any employee of the registered operator or to any private voluntary organization. Entertainment supplied to any employee or office holder of the registered operator or any connected person, to the extent that such taxable supplies of entertainment are made for a charge which covers all direct and indirect costs of such entertainment. Expenditure in respect of personal subsistence incurred by a registered operator in respect of any night that such person or member is by reason of the registered operator s trade or in the case of such employee or office holder, he is by reason of the duties of his employment or office, obliged to spend away from his usual place of residence. N/B: This shall not however extend to expenditure for amusement or recreation. Goods or services consist of a meal or refreshments supplied by a registered operator to a passenger during a journey, if such meal or refreshment is supplied as part of or in conjunction with the transport service supplied by the registered operator and the supply of such service is a taxable supply. Goods or services consist of a meal or refreshment supplied by the registered operator as organizer of a seminar to participants to that seminar and a charge which covers the cost of such meal or refreshments is made by the registered operator to the recipient. Goods or services are acquired by a local authority for the purposes of providing sporting or recreational facilities or public amenities through the payment of a subsidy. Goods or services are acquired by a private voluntary organization for the purposes of making supplies in fulfillment of its object. 16(2) (b) Fees or subscriptions paid by the Registered Operator in respect of membership of any club, association or society of a sporting or recreational nature.

Compiled by The Institute of Chartered Accountants of Zimbabwe

23

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 16(2) Goods or services acquired by a Superannuation scheme for the purposes of the supply by such scheme of any medical or dental services. 16(2) (d) Passenger motor vehicle supplied to or imported by the registered operator. 11 Adjustments section 17 10.1 In terms of section 17(1) an adjustment will arise where goods or services have been supplied to or acquired, manufactured, imported or produced by a registered operator for the purpose of making taxable supplies and such goods are subsequently applied or used wholly or partly for making non taxable supplies. Conversion of use: In this case goods would have been bought for the purpose of making a taxable supply and are subsequently used for making non taxable supplies. The conversion of use is deemed to be a supply in the ordinary course of trade and output tax should be accounted for, e.g. donation of goods by a registered operator or in the case of manufacturers such as Delta beverages, the monthly allocations of beverages to employees. Such change of application is deemed to be a supply of goods and therefore a registered operator should account for VAT. However where input tax had been previously denied, the goods are not deemed to have been supplied in the course of furtherance of a trade and as such the operator is not required to account for output tax. The time of supply is deemed to be the time that the goods are applied for non taxable use or the change of use has been made in terms of section 8(6). The value of supply shall be deemed to be the consideration in money which is equal to the open market value of such supply in terms of section 9(7) (see formula in 17(2) below). 10.2 Granting of benefits by an employer who is registered for VAT section 17(3)

Any registered operator who grants a benefit or advantage to an employee or office holder which is taxable in terms of section 8(1)(f) of the Income Tax Act and such benefit or advantage consists of a supply of goods or services, shall be deemed to have supplied goods or services in the course of his trade and should therefore account for output tax. This subsection shall not apply in respect of any supply of goods or services which are exempt in terms of section 11.eg housing Value of supply is deemed to be the consideration in money which is equivalent to the cash benefit in terms of the Income Tax Act. Time of supply: Where the benefit is considered on a monthly basis in terms of the income tax act, then the time of supply is at the end of every month.

Compiled by The Institute of Chartered Accountants of Zimbabwe

24

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

Example of benefits and VAT treatment thereof Benefit/ Advantage Occupation of quarters Use of furniture Use of Motor Vehicle Loan Cell phone Entertainment Taxable Not Taxable

The benefits that therefore remain taxable in respect of the above example are the motoring benefit and the cell phone benefit. 10.3 Section 17(2) Reduction in the taxable use of capital goods:

Where the registered operator acquired, manufactured, assembled, constructed or imported capital goods for the making of taxable supplies, and their application for taxable purposes is reduced in relation to their total application or use, then an adjustment is required. A deemed supply of the amount of the increased non taxable use arises. An adjustment is necessary if registered operator at the time of acquisition of such goods or services had been entitled to input tax deduction. No such adjustment is necessary where the cost of such goods excluding VAT is less than $60.00 The value of adjustment is determined using the formula, A*(B-C) in terms of section 9(8), Where: A: represents the lesser of cost or open market value, B: represents the percentage taxable usage before reduction, C: represents the current percentage taxable usage of the goods. Thus (B-C) is the extent of reduction. Question: Tidy P/L is a registered operator. In January 2009 it purchased a computer valued at $700 including VAT. It calculated that the computer would be used 60%

Compiled by The Institute of Chartered Accountants of Zimbabwe

25

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 taxable supplies and 40% non taxable supplies and claimed input tax. By the end of December revenue in respect of taxable supplies went down by 40% and the computer was used 80% for non taxable purposes. The open market value of the computer was now $900. Required: Calculate the adjustment that needs to be done. Solution: A = 700 B = 60% C = 20% The adjustment to the made will be 700 * (60% 20%) =$280.00 Output tax thereon will be 36.52 ($280 * 15/115) 10.4 Section 17(4) (a) Goods acquired prior to the fixed date:

Where goods or services had been acquired before the fixed date wholly for the purposes of producing non taxable supplies , or goods which had been acquired in the course of an activity which was not a trade but is now a trade in terms of the VAT Act, and no input tax deduction in respect of such goods or services would have been denied in terms of section 16(2) , the person shall be allowed to make an input tax deduction in terms of section 15(3), provided the goods or services are used in the course of making taxable supplies after the fixed date. The input tax deduction is determined by applying the formula, A*B*C. Where: A is the tax fraction, B is the lesser of cost including tax and the open market value C represents the ratio of intended use of goods in the making of taxable supplies expressed as a percentage of the total supply. Question: Prior to the fixed date, O and I Construction limited had sand worth $3, 000.00. The open market value of the sand was $5, 000.00. It uses $1, 000.00 worth of sand to build the director's house and the remainder to continue with its projects. Is there any adjustment that O and I Construction need to make? Solution: Yes, O and I Construction Limited will claim input tax as follows: A = 15/115 B = $3, 000.00 (the lesser of cost or open market value C = (3,000 1,000)/3, 000 * 100% = 66.67%

Compiled by The Institute of Chartered Accountants of Zimbabwe

26

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Input tax claimable will thus be 15/115 * 3, 000 * 66.67% = $260.87 10.5 Section 17(4) (b) Goods acquired after the fixed date:

Where a registered operator has acquired goods or services and tax has been charged or goods have been manufactured, assembled, constructed or produced and tax has been incurred or goods have been deemed by section 7(2) (cessation of trade) to have been supplied by him and no input tax deduction has been made, the person shall be allowed to make an input tax deduction in terms of 15(3), provided the goods are used to make taxable supplies after the fixed date. The adjustment is made in the tax period during which the goods or services are applied using the formula A*B*C (see formula above for what A,B and C stand for) Question: Amazing P/L purchased a wheel balancing machine for $15,000 in April 2009 and no input tax was claimed as the company was not registered for VAT. The company registered for VAT in August 2009 and the machine was applied wholly for the purpose of making taxable supplies. The open market value of the machine was now $14,000. Required; Calculate any adjustment if any. Solution: A = 15/115 B = $14, 000 (lesser of cost or open market value) C = 100% Input tax claimable will thus be 14, 000 * 15/115 * 100% = $1, 826.09 10.6 Section 17(4) Second hand goods acquired on or after the fixed date:

A registered operator is allowed under this provision to claim input tax on second hand goods. In the case of fixed property, it should be situated in Zimbabwe. The second hand goods should be used wholly or partly for the purpose of making taxable supplies. The goods shall be deemed to be supplied in the tax period during which they are used to make taxable supplies. This adjustment shall be made using the formula A*B*C*D Where: A: represents the tax fraction. B: represents the lesser of cost or open market value, C: represent the percentage usage of the goods in the process of making taxable supplies, D: represents the percentage of the payment made to the total consideration in the case of second hand goods which are fixed property.

Compiled by The Institute of Chartered Accountants of Zimbabwe

27

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

Question; Destiny Investments acquired a commercial building in August 2009 for $200, 000 and registered for VAT in September 2009. The building was used 70% for making taxable supplies while the balance was used as a college registered with the Ministry of education. It made a down payment in September of $100, 000. The market value of the property was now $250, 000 Required: Calculate the adjustment if any Solution: A = 15/115 B = $200,000 C = 70% D = 100, 000/ 200, 000 = 50% Input tax claimable will thus be 15/115 * 200,000 * 70% * 50% = $9, 130.43 10.7 Section 17(5) Increase in the taxable usage of capital goods:

Section 17(5) is the opposite of 17(2). Where a registered operator acquired capital goods in order to make taxable supplies and the actual taxable use of the goods tends to be greater than the initial expected usage, an adjustment to grant additional input tax must be made in the tax period during which such increase is deemed to take place in terms of subsection 6 (i.e. at the end of the financial year). The input tax is determined by applying the formula A*B*(C-D) Where: A: represents the tax fraction, B: represents the lesser of cost and open market value, C: represents the current taxable usage of the goods D: represents the taxable percentage prior to increase. Question: Muto (Pvt) Ltd purchased a computer on 20 May 2009 for use in its business. It operates a life assurance business and owns commercial buildings around town which it lets out. The computer is used 30% in the letting business and the rest in the life assurance business. During the period ended 31 November 2009, its letting business grew resulting in it using the computer 65% for the letting business. The computer was purchased for $1, 500 and its market value at the time of change of use was $1,100. Calculate input tax claimable in the November tax period.

Compiled by The Institute of Chartered Accountants of Zimbabwe

28

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Solution: A = 15/115 B = $1, 100 (the lesser of cost or open market value) C = 65% D = 30% Input tax claimable will thus be 15/115 * 1, 100 * (0.65 0.30) = $50, 22.

10.8 Section 17(6) Time of supply in respect of adjustments on the taxable use of capital goods: The time of supply is deemed to be the last day of the year of assessment and where the registered operator is not an income tax payer, the last day of December or where such person draws financial statements before the last day of December, on the day he draws his financial statement. Section 17(7) the twelve month period in respect of reduction or increase in the taxable use of capital goods shall be determined during the twelve month period ending on the day any reduction or increase in application takes place and where the period is less than 12 months, it shall be deemed to be twelve months. 17(8) where a deduction had been claimed for second hand goods and subsequently the sale is cancelled, the sale is altered, the previous consideration has been reduced, the second hand goods have been returned to the supplier, the excess amount of input tax as a result of one of the above happening is deemed to be tax charged and therefore the registered operator should account for output tax. 11 Acquisition of a going concern wholly or partly for purpose other than making taxable supplies s18 The sale of a business or part thereof which is capable of separate operation as a going concern by any registered operator to another registered operator is zero rated in terms of sec 10(1)(e). If any goods or services which have been acquired by such registered operator are used wholly or partly for a purpose other than making taxable supplies , such goods or services shall be deemed to have been supplied by him , therefore the registered operator should account for output tax. Where the goods are used for not less than 90% for making taxable supplies, the business shall be deemed to have been acquired wholly for the purpose of consumption.

Compiled by The Institute of Chartered Accountants of Zimbabwe

29

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Criteria for identifying a going concern: There must be an agreement in writing and it should be stated that the business is being sold as a going concern. It must be stated or be apparent from the documentation that the business is going to operate as an income earning activity at the date of transfer or transaction. The business or part thereof must be capable of independent, continuous operations without further action on the part of the purchaser. N/B: Although not all assets need to be transferred, the essentials must be transferred together with the business. 18(2) where a registered operator acquires a trade as a going concern and the transaction is zero rated, the registered operator must account for VAT if the going concern is going to be used partly for making taxable supplies and partly for non taxable supplies. The purchaser must account for VAT on the full cost of the purchase price by reducing it with assets which do not qualify for input tax deduction and then further by the portion which represents taxable supplies and then apply the rate prevailing. Where the two parties are connected persons and no charge was made for the supply or the price charged was below the open market value, the open market value shall be used as the purchase price. The time of supply in respect of a going concern is deemed to be the tax period in which the supply of the going concern is made in terms of section 18(3). The value of supply shall be deemed to be an amount equal to the aggregate of the fair amount which represents the full cost to the registered operator of that trade or part of that trade in respect of those goods which are deemed to have been supplied by him and apply the rate of tax applicable at the time of supply section 18(4) Question: Desire (Pvt) Ltd acquired a business in the central business district of Harare for $200, 000. The two parties agreed that the business would continue to be an income earning activity. All the assets for the business were transferred to the recipient as well as the employees of the supplier. The purchase price was allocated as follows: $150, 000 for stocks of material. $ 10, 000 for the buildings. $20, 000 related to equipment on which no input tax deduction had been allowed. $20, 000 relating to equipment in the canteen. The canteen provides food to employees.

Compiled by The Institute of Chartered Accountants of Zimbabwe

30

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Due to the economic hardships envisaged and the desire to register and operate a college registered with the Ministry, the business was used 55% to make taxable supplies on acquisition. Required: Outline the VAT provisions governing such a transaction. Calculate the adjustment, if any that may need to be done by Desire (Pvt) Ltd. Solution: Desire (Pvt) ltd is required in terms of section 18(2) to account for output tax on the supply. The output tax will be determined by applying tax on the full purchase price, reduced by value of assets that did not qualify for input tax deduction and further by the percentage of taxable use which will be: $200, 000 less $20, 000 (equipment that did not qualify for input tax deduction) less $20,000 (canteen equipment) less 55% (taxable use). = 200,000 (20,000 + 20, 000) (200,000*55%)

= 160, 000 - 110, 000 = $50,000 Output tax will thus be: $50,000 * 15% = 7,500 12 PRE-INCORPORATION EXPENSES Section 19

A company is allowed to claim input tax on goods purchased by another person before its incorporation. The company is deemed to be the recipient of the goods or services and to have paid for the supplies. However this may be done if the person: Was reimbursed by the company for the whole amount paid, and Acquired the goods or services for the purpose of trade to be carried on by the company. The company may claim such input tax in the tax period during which the reimbursement is made. It may not, however, claim the deduction under section 19 of the Act where: The supply of the goods or services by the person to the company is a taxable supply, or is a supply of second-hand goods not being a taxable supply The goods or services were acquired more than six months before the date of incorporation, or The company does not hold sufficient records (in this case no input tax can be claimed at all under any section of the VAT Act)

Compiled by The Institute of Chartered Accountants of Zimbabwe

31

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 13 13.1 Tax Invoice section 20 Definitions

Invoice: a document notifying an obligation to make payment. Tax invoice: a document provided as required by the Act to enable the registered operator to claim input tax 13.2 Requirements for Tax Invoice In practice, a registered operator is normally required to issue a tax invoice which satisfies the requirements of the Commissioner and the requirements of the contracting parties. A registered operator is required to issue a tax invoice within 30 days from the date of supply, but it may not be necessary to issue a tax invoice where the consideration in money does not exceed $10. However, in such cases, some type of source document is required in order to claim input tax e.g. till slip, petty cash slip. e.t.c. A tax invoice is a special tax document and certain details about the taxable supply to which it relates must be stated on the tax invoice. (See below for details). Requirements: tax invoice {Section 20 (4)} The words TAX INVOICE in a prominent place Name, address and VAT registration number of the supplier Name, address and VAT registration number of recipient Individual serialised number and date of issue Description of goods and /or services Quantity or volume of goods or services supplied Price & VAT ** ** There are 3 methods allowed for reflecting the price & VAT as follows: Method 1 The amount excluding VAT, plus the VAT charged and the amount including VAT Method 2 Where VAT is included in the final price, the consideration, together with a statement that VAT is included and the rate of tax. Method 3 Where VAT is included in the final price, the amount charged including VAT and the amount of VAT charged

13.3 Tax Invoices Prepared by the Recipient In some instances the Commissioner may allow the recipient of a supply to issue tax invoices for the supplies received. The invoice issued by the recipient will be deemed to be a tax invoice for VAT purposes. These invoices are normally issued in situations

Compiled by The Institute of Chartered Accountants of Zimbabwe

32

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 where the contract price can only be determined by the recipient after fulfillment of some conditions, e.g. supplies to GMB where price of the goods supplied can only be determined after the goods have been graded. The Commissioner may allow the issuance of such invoices upon the parties having fulfilled the following conditions which are set out in section 20(2) of the Act: Both the recipient and supplier must be registered operators The Commissioner must have granted prior approval for the issue of the tax invoice by the recipient The supplier and the recipient must agree that the supplier will not also issue a tax invoice; and The tax invoice must be provided to the supplier and a copy retained by the recipient In the case of goods being repossessed from a registered operator as contemplated in terms of Section 7 (9) and section 20(3), the person repossessing the goods (a registered operator) is required to create and furnish the defaulting debtor with a tax invoice. 13.4 Special Cases Although the general rule is that a registered operator must have a tax invoice before he is allowed to claim any input tax in relation to the supply, there are a few exceptions to the rule which are: 13.4(i) Second hand goods as defined (section 20(7)) A registered operator that purchases second hand goods from a non-registered operator is required to record the following in order for him to support his input tax claim: Name address and I.D. no. of the supplier (I.D. no. of the representative person if it is a company) Date of acquisition Quantity or volume of goods Consideration for the supply Recipient must verify the person s I.D. no. or passport number Where the amount of the supply is $10.00 or more, the recipient must obtain and retain a copy of the person s I.D., and, in the case of a company, a business letterhead or similar document is also required which shows the name and registration number allocated by the relevant authority. 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.

Compiled by The Institute of Chartered Accountants of Zimbabwe

33

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 13.4(ii) Other cases Where the purchase price is less than $10.00 and the total consideration is in money, no tax invoice is required. Where the Commissioner is satisfied that there will be sufficient records and that it will be impractical for a tax invoice to be issued, he may grant permission for tax invoices not to be issued. No tax invoice need be issued where a supply is exempted from VAT. Where a tax invoice is issued which includes zero rated, exempt and standard rated supplies, the document must clearly distinguish between the various supplies. The relevant values of each supply must be indicated separately. 13.5 Copies of Tax Invoices A registered operator is not allowed to issue more than one tax invoice for a single supply. If the need arises for him to issue another tax invoice for same supply, he is only allowed to issue a copy invoice clearly marked copy . A facsimile of a tax invoice or a copy sent by e-mail is not acceptable as a basis for claiming input tax. . 14. Credit and Debit Notes: Section 21 Credit notes are often issued by a supplier when the consideration for a supply is reduced. Debit notes are also issued by the supplier when the consideration is subsequently increased. The issue of a debit note or credit note when a tax invoice has previously been issued is generally used to show the increase or decrease in tax (as the case may be) on the supply. This is done whether or not the supplier accounts for tax on an invoice or payments basis. The issue of a credit note is not required when a prompt payment (settlement) discount is the reason for the reduction in the consideration, provided the terms of that discount are clearly shown on the tax invoice. 14.1 Requirements for Credit and Debit Notes Credit and debit notes are required to be issued in one or more of the following circumstances: The cancellation of a supply of goods or services The nature of that supply of goods or services has been fundamentally varied or altered The previously agreed consideration for the supply of the goods or services has been altered by agreement with the recipient (including a discount)

Compiled by The Institute of Chartered Accountants of Zimbabwe

34

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Part of or all the goods or services are returned to the supplier. This does not apply on returnable containers, unless such containers form part of the goods supplied on which a 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) 14.2 Details to be reflected on Debit/Credit Notes The details are almost exactly the same as the details for a tax invoice, however the amount of the adjustment (consideration and VAT) must also be reflected and it must refer to the original tax invoice which is going to be affected by the adjustment i.e. invoice date and number. 14.3 Adjustments in respect of Debit/Credit Notes The VAT Act makes provision for debit and credit notes to be issued in respect of a single supply. It must be remembered that the consideration for a supply can only be altered by means of a debit or credit note. It is not correct practice to merely issue another tax invoice in the same way that it is an offence to issue more than one tax invoice for a supply. The rule for reflecting the VAT in respect of debit and credit notes is as follows: Credit notes issued and debit notes received are to be reflected as input tax on the VAT return Debit notes issued and credit notes received are to be reflected as output tax on the VAT return 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. 15 Irrecoverable debts section 22

Where a registered operator makes a credit supply and the amount becomes irrecoverable, the registered operator can claim input tax on the irrecoverable debt provided that all of the following conditions are met: The supply was a taxable supply.

Compiled by The Institute of Chartered Accountants of Zimbabwe

35

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 A return was furnished or submitted and VAT was properly accounted for in respect of such supply. The debt has been written off from the books of accounts.

In the case of an installment credit agreement, the deduction is restricted to the VAT the cash value that has become irrecoverable. The tax fraction is applied to the outstanding balance of the cash value after removing the finance charges and interest. Where a registered operator transfers an account receivable on a non recourse basis to another person, no deduction is allowable. The factoring of debt by a registered operator discounting his debts on a non recourse basis does not give rise to an input tax deduction. On the other hand, where account receivables are transferred at face value on a recourse basis, an input tax deduction may be made but only when the account receivable is transferred back to the owner. Where the registered operator has repossessed the goods, or accounts for VAT on payment basis, no input tax deduction will be allowed. Section 22(3), If the registered operator subsequently recovers some or the entire amount previously written off, output tax should be accounted for. Section 22(4), Where a registered operator who is on an invoice basis has claimed input tax but at the expiry of 12 months has not paid the full consideration in respect of that supply, output tax should be accounted for, but contracts in respect of payment terms should be respected. 17 Registration for VAT- Section 23

17.1 Introduction Any person who on or after the fixed date (effective date of the VAT Act) carries on or intends to carry on any trade (s) and whose taxable value of supplies exceed or is likely to exceed 60,000.00 or the prescribed amount is required to register for VAT in terms of section 23 of the Act. 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 (branch registration repealed w.e.f. 1.1.10).

Compiled by The Institute of Chartered Accountants of Zimbabwe

36

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 16.2 Liability for Registration A person is liable to register if: At the end of any month, the total value of supplies of goods or services (turnover) has exceeded $60,000.00 or the prescribed amount in the preceding period of 12 months, or There are reasonable grounds for believing that the total value of supplies of goods and services, which will be made in the following 12 months, will exceed the prescribed amount. Unless it can be shown that the prescribed amount was exceeded as a consequence of: The sale of stock or other assets due to any 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 Abnormal circumstances of a temporary nature 16.3 Calculation of the Value of Taxable Supplies 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. The value of Taxable Supplies for Registration Purposes: Includes Excludes Goods and services supplied in The sale of stock or assets in respect of Zimbabwe. cessation of or substantial and Goods exported to any country. permanent reduction in the size or scale Services rendered outside Zimbabwe of any trade. Deemed supplies 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 organisations VAT 16.4 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.

Compiled by The Institute of Chartered Accountants of Zimbabwe

37

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 16.5 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 no later than 30 days from the date on which the registration threshold has been reached or the date it is established that the threshold is likely to be reached. 16.6 Refusal to Register a Person Voluntarily The Commissioner may refuse to register a person for voluntary registration if any of the following criteria is not met: The person has no fixed place of abode or business The person does not keep proper accounting records The person has not opened a banking account The person has previously been registered as a registered operator under VAT or in terms of the repealed Act (Sales Tax) and failed to perform his duties under either Act.

Such refusal must be communicated to the applicant in writing. 16.7 Separate Registration (repealed with effect from 1 January 2010) 16.8 Cancellation of Registration- Section 24 A registered operator may be deregistered if: If the value of his taxable supplies falls below the registration 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. (See paragraph 16.6 above) Cancellation of registration, with the approval of the Commissioner 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. A registered operator s separately registered trades/division/branches may be cancelled if:

Compiled by The Institute of Chartered Accountants of Zimbabwe

38

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

The registered operator being the parent body applies in writing to the Commissioner. 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) 17 Tax Periods Section 27

17.1 Submission of Returns and Payments All registered operators are required to submit returns and account for VAT to the Commissioner at regular intervals. These intervals are called tax periods. A registered operator`s first tax period will commence on: The commencement date of VAT, or The date on which he becomes a registered operator, if he was not liable or carrying on any trade at the commencement date of VAT. The month in which a registered operator`s tax period ends will be determined by the Commissioner. 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. 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. A special return for sales in execution (in terms of Section 7 (1)) to be made within 10 days from date of sale. Such sales to be excluded from ordinary Return. 17.2 Two month Tax Period (Category A or B)

Most registered operators will be allocated a standard tax period of 2 months unless otherwise requested, but such persons can elect to be on Category C (monthly).

Compiled by The Institute of Chartered Accountants of Zimbabwe

39

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Registered operators may choose between the 2 categories, but if no choice is made the Commissioner will allocate them either category A or B automatically. The tax periods end as follows: Category A: The last day of: - January, March, May, July, September and November Category B: The last day of: - February, April, June, August, October and December 17.3 One Month Tax Period (Category C)

Larger enterprises whose taxable supplies exceed $240, 000.00 or the amount prescribed will be required to submit returns on a monthly basis. N.B with the advent of inflation in the year 2008, all registered operators automatically exceeded the then Category C threshold and were subsequent ly placed in category C. This has not changed even though the majority of them are now trading below the Category C threshold. Other trades such as those who expect regular refunds of VAT (e.g. exporters and charitable organisations) may also, on application, be allowed to adopt a one-month tax period. Where a person operates more than one trade or a trade in branches or divisions, it is necessary that all the taxable supplies be aggregated to ascertain the total turnover. This applies whether or not the separate trades/divisions/branches are registered as separate registered operators. The Commissioner may allocate a one-month tax period to a registered operator who repeatedly defaults in performing his duties as a registered operator. Any other registered operator may on application in writing also be allocated Category C. The one-month period will be effective from a date determined by the Commissioner. 17.4 Any Other Tax Period (Category D) Registered operators will qualify for any other tax period if: The registered operator s trade consists solely of farming activities; or The registered operator whose separately registered trade, branch or division consists sorely of farming activities, provided any other trades, branches or division carried on by that registered operator do not consist of farming activities; and The total turnover from all farming activities must not exceed $120, 000.00 or the prescribed amount. This tax period is not available to any registered operator who has been allocated a Category C tax period

*Note

Compiled by The Institute of Chartered Accountants of Zimbabwe

40

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

Pay attention to the bolded words and and or and the interpretation thereof. See Chapter 2 of this document for more details

17.5 Change of Tax Periods The Commissioner may, on application by the registered operator, approve a change of tax period from either one of the two-month tax period to the other (that is from Category A to B, or vice versa) or from Category D to Category A, B, or C. The first return after the change should not include any period for which a return has previously been made. The effect of this is that an irregular period for the return is made for the change over period. NOTE: Under certain circumstances registered operator does not cease to qualify for tax period merely because the value of taxable supplies has temporarily increased beyond a threshold point. Refer to paragraph 16.2 under Registration for more details. 17.6 Submission of Returns

With effect from 1 February 2009, all registered operators were required to pay VAT for a tax period twice a month. The first payment (mid-term tax) was paid on the 15th of the month and the final was payable on the 5th of the month following the end of the tax period. The payment for the 5th of the month following the end of the tax period was to be accompanied by a VAT return (VAT 7). The mid-term tax was however scrapped with effect from 1 September 2009. This meant that VAT was due for payment by the 5th of the month following the end of the tax period. Administration sections 18 Assessments Sec 31

Registered operators are required to calculate and pay VAT on a self-assessment basis. However, in certain circumstances it will be necessary to raise an assessment, for example when: Any person fails to submit any return The Commissioner is not satisfied with any return or declaration furnished

Compiled by The Institute of Chartered Accountants of Zimbabwe

41

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 The Commissioner believes that a person has become liable for the payment of tax and has not paid such amount A non registered person charges VAT on supplies and has not paid the tax over to the Commissioner (issue a temporary number) A registered operator charges VAT on a supply, where the supply is zero rated or exempt and has not paid the tax to the Commissioner. The assessment must be a written notice and must state the following: Amount upon which tax is payable Amount of tax payable Amount of additional tax payable The tax period to which the assessment relates Date by which the tax must be paid 21 Objections and Appeals 21.1 Section 32, 33, 34

When Can Objections be Made

When a person is not satisfied with an assessment. Such person may object to all or part of the assessment. Objections may be lodged against decisions made by the Commissioner. Such objections may be on the liability for registration, the cancellation of a registration, the refusal by the Commissioner to authorize a refund or a ruling which the registered operator may have good reason for disagreeing with. 21.2 Lodging an Objection Section 32

A person wishing to make an objection to the Commissioner s assessment or decision must: Put the objection in writing Specify in detail the grounds of the objection Be made within 30 days after the date of the decision or assessment. In the event of a dispute, the date of the assessment or decision will be the date the registered mail was posted to the person raising the objection. If the objection is received by the Commissioner within the stipulated time period, the Commissioner will either: Alter the decision Alter or reduce the assessment, or Disallow the objection A written notice must be sent to the person objecting to the Commissioner s ruling/assessment etc informing him of his decision.

Compiled by The Institute of Chartered Accountants of Zimbabwe

42

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 21.3 Grounds of Objection The grounds of objection should be stated clearly and it is important to raise all the grounds at the time of objection. The Commissioner may, on good cause shown, give leave to the objector to amend or add to the grounds. 21.4 Late Objections If there is a delay in lodging a written objection, the Commissioner may accept it provided good reasons are given for the delay. If an objection is not lodged, the assessment/decision becomes final after 30 days. 21.5 Appeals Section 33 An appeal is only lodged if and when a person s objection was disallowed. A registered operator must appeal against the disallowance of the objection within 30 days of the date of the notice. An appeal can be made to the Fiscal Appeal Court or to the Supreme Court depending on the nature of the dispute. The appeal must be: made in writing lodged with the Commissioner within 30 days after the date of the notice of disallowance of the objection. If there is a delay in the lodging of a written appeal, the Commissioner may condone the delay, depending on the reasons. The appellant is limited to the grounds of objection stated in his original objection unless, on good cause shown, leave is given to amend the grounds. The appellant or the Commissioner may appeal to the Supreme Court against any decision of the Fiscal Appeal Court: 22 Penalties and Interest Section 39 22.1 Types of Penalties There are two different ways of penalising a registered operator, namely: Penalty and interest for failure to pay tax when due: and Additional tax in the case of evasion or causing a refund in excess of that properly refundable

Compiled by The Institute of Chartered Accountants of Zimbabwe

43

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

20.1(i) Ordinary Penalty Payments in terms of Section 28 (Normal VAT return) 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 5 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. 20.1(ii) Additional Tax Additional tax is an amount not exceeding 100% of the tax evaded, refunded in excess, or chargeable. This amount is usually 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. Additional tax may be charged where the Commissioner 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, 22.2 Interest

For any month(s) while it remains unpaid an additional percentage interest at the prescribed rate (LIBOR plus 5% with effect from 1.09.09) 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 levied 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 may not be imposed for the same reason. Note: month refers to calendar month

Compiled by The Institute of Chartered Accountants of Zimbabwe

44

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 22.3 Payment of Penalty and Interest

Where a registered operator defaults in paying VAT or has paid VAT late and has paid an amount equal the VAT due, the amount paid is applied to penalty then interest and finally the VAT due (section 40(7)). N.B interest will continue to accrue as long as the principal amount remains unpaid. 21. Refunds Section 44 21.1 When is VAT Refundable? The following are the circumstances under which VAT may be refunded: Routine refunds A registered operator will be entitled to a refund of VAT when the aggregate of input tax and adjustments, in a particular tax period to input tax exceeds the aggregate of his output tax and adjustments to output tax. The following requirements must, however, be met before such refund will be made: The claim must be made within 6 years after the end of the relevant tax period (the claim will usually be made by submitting a VAT return for that tax period) and The amount of the refund must exceed $60. If the amount refundable is less than $60, it will be carried forward to the immediately following tax period where it will be set off against any VAT arising in that tax period. NB the operator is only allowed to offset such amounts upon receipt of confirmation of such refund from the Commissioner. Special circumstances A registered operator may also claim a VAT refund when: Any amount of VAT, additional tax, penalty or interest previously paid by him to the Commissioner was in excess of the amount which should have been properly paid by him: or Any amount of a routine refund to him was less than the amount, which should have been properly refunded to him. Refunds of this nature will normally arise as a result of errors made by a registered operator on previous VAT returns. A registered operator must apply in writing to the Commissioner for refunds of this nature. The following requirements must be met before such a refund will be made:

Compiled by The Institute of Chartered Accountants of Zimbabwe

45

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 The claim must be made within 6 years after the date upon which payment of the account claimed to be refundable was made In those circumstances where payment of the amount claimed was made in accordance with the practice generally prevailing at the date of payment, the claim must be made within 6 months of the date of payment The amount to be refunded is more than $60 Where any amount of output tax claimed to be refundable to a registered operator has been borne by any other person, the Commissioner must be satisfied that such amount will be refunded to that other person. As with routine refunds, if the amount refundable is $60 or less, the amount will not be refunded but will be carried forward to the immediately succeeding tax period. 21.2 Refunds Offset against Other Unpaid Tax Any refund may be set off against other taxes, penalties and interest where a registered operator: Has failed to pay any tax, additional tax, penalty or interest under the VAT Act within the period prescribed; or Owes any amount of tax, interest or penalty levied under any Act of Parliament administered by the Commissioner. 21.3 Refunds Withheld or Denied Refunds may be withheld if the registered operator has failed to furnish a VAT return for any tax period until such time as the return has been submitted. Any decision by the Commissioner to deny any refund must be communicated, in writing, to the registered operator. This may also be applied where the Commissioner is unable to gain access to the required records or the records are incomplete (or if the return itself is incomplete or incorrect to a material extent). 21.4 Interest on Delayed Refunds Section 45

A routine refund must be paid to the registered operator within the prescribed period (set by Regulation by the Minister) after the date on which the VAT return is received by the Commissioner. Where the refund is not paid out within this period, interest is paid to the registered operator at a rate fixed by the Minister from time to time (LIBOR plus 5%). NOTE: Interest will not be paid if: The relevant VAT return is incomplete or is defective in any material respect: or The registered operator is in default with any of his obligations to submit a VAT return: or

Compiled by The Institute of Chartered Accountants of Zimbabwe

46

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 During any period during which the Commissioner is unable to gain access to the records of the operator for audit purposes: or If the registered operator is a non-resident and has not furnished the Commissioner with the details of his appointed agent and bank account details in Zimbabwe. 22 Separate trades, branches and divisions- Section 51 (repealed w.e.f. 1.1.10). 23 Separate persons carrying on same trade under certain circumstances deemed to be a single person- Section 52. The Commissioner may deem separate persons to be a single person and in such a case there are certain requirements and liabilities to be met before a directive can be issued. Before such a directive can be issued, the Commissioner must be satisfied that: The named person is making taxable supplies. The supplies should be made in the course of an activity which should be properly regarded as activities of the trade of the single person named in the directive. The single person carrying on the trade described in the directive would be liable for registration at the time of the issue of such directive. One of the main reasons for the named person carrying on his activities in the way he does is the avoidance of the liability to register for VAT. The effect of this directive is in terms of Section 52(4), that such a single person will have to register as a registered operator in terms of section 23 from the date of that directive or any other date prescribed by the Commissioner. The directive must be served to each of the other persons named in the directive. If it later appears to the Commissioner that another person should also be named in a directive, a supplementary directive may be served to that other person adding his name to the names of other persons. Liabilities of persons named in a directive are, The persons who are named in a directive are the members and shall be registered in the name they would have used when they applied. If they do not register within 30 days, the commissioner may register such a single person based on information available to him and raise estimated assessments. Any supplies by or to a member will be deemed to be a supply by or to the single person. The single person will therefore have to account for output tax and claim input tax on any supply by any member. Each member will be jointly and severally liable for VAT.

Compiled by The Institute of Chartered Accountants of Zimbabwe

47

VALUE ADDED TAX MODULE BCompt Honours Degree 2010

Failure by the single person to meet any obligation will be treated as failure by the members. 24 Bodies of persons corporate or unincorporated- Section 53

A body of persons corporate or unincorporated is treated as an entity separate from its owners and is given a form of perpetual succession that has continuous existence even though its members may change. Implications of bodies or persons carrying on a trade The body is deemed to be a person separate from its members, the body is registered as a registered operator in respect of a trade independently of its members, the liability for tax in respect of the supplies by that body shall be determined as a trade carried on independently of its members 25 Death or Insolvency of a Registered Operator: Section 55

55(1): Where after the death of any registered operator or the sequestration of his estate or the taking on of land by a mortgagee, where the mortgagor was a registered operator any trade previously carried on by the executor, the trustee/ mortgagor in relation to that trade as the case may be shall for the purpose of this act be deemed to be carried on by the registered operator as was before. Thus the trade continues in the name of the estate until such time all assets of the trade have been disposed off or final liquidation and distribution done. 26 Agents and auctioneers: Section 56

In cases where an agent makes a supply of goods or services on behalf of another person who is his principal, that supply shall be deemed to have been made by the principal, section 56(1). Where the agent is a registered operator, the agent may issue and receive tax invoices, debit notes or credit notes. This though does not relieve the principal of the obligation to account for output tax, deduct input tax and submit returns, section 56(2). Where goods are imported into Zimbabwe by an agent who is acting on behalf of another person (a resident of Zimbabwe), the importation shall be deemed to have been made by the principal regardless of the fact that the documents are held by the agent, section 56(3) Where goods are imported by an agent on behalf of a foreign principal who is not a registered operator and the agent has paid tax on importation and there is an agreement in writing that the principal will not reimburse such agent, then that importation shall be

Compiled by The Institute of Chartered Accountants of Zimbabwe

48

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 deemed to have been made by the agent and not the principal. The agent will claim input tax, section 56(4). Where agents issue or receive tax invoices, credit notes and debit notes, they are required to maintain sufficient records, section 56(5). Special provisions have been made in respect of auction sales where transactions will not ordinarily be a taxable supply. In such situations, the auctioneer is deemed to have supplied the goods in the course of furtherance of his trade, section 56(7). 27 Records: Section 57

Every registered operator must keep records and documents such as sales and purchase records, invoices, bank statements, deposit slips, stock lists, bill of entries. Such records must always be made available for inspection and must be maintained in their original form or any other form prescribed by the Commissioner.

28

Powers of entry and search: Section 61.

On reasonable grounds the Commissioner or any officer may enter into any place of business of a trader at any reasonable time and may ask any person to produce any records or documents for inspection. 30 Offences and Penalties Section 62

There are two broad categories of offences. The first category relates to offences against the VAT Act generally, while the second relates to offences in regard to tax evasion specifically. 30.1 Offences against the VAT Act

Any person found guilty of an offence mentioned below will be liable, on conviction, to a fine of up to level seven, or to imprisonment for a period not exceeding 12 months, or both. Holding yourself out as an officer engaged in carrying out the provisions of the VAT Act Holding yourself out as an officer authorised by the Commissioner for the purposes of entry and search of premises. Failing to apply for registration when required Failing to furnish required returns or declarations

Compiled by The Institute of Chartered Accountants of Zimbabwe

49

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 Failing to advertise or quote prices inclusive of VAT Failing to keep proper record for a minimum period of 6 years Failing to comply with a written notice by the Commissioner 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 Commissioner 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. Offences in regard to Tax Evasion Section 63

30.2

Any person found guilty of an offence mentioned below will be liable, on conviction, to a fine of up to level twelve, or to imprisonment for a period not exceeding 24 months, or both. The offences are: Making, causing or allowing any false statement or entry in a return to be made, or signing such a statement or return, without reasonable grounds for believing that statement or entry to be true Giving false answers (verbally or in writing) to any request for information by the Commissioner or any persons duly authorised by him to request such information Preparing, maintaining or authorising the preparation or maintenance of any false books of accounts or other records or authorising the falsifying of any books of account or other records. Making use of, or authorising the use of any fraud, art or contrivance whatsoever Making a false statement for the purpose of obtaining a refund or exemption Receiving or dealing with any goods or accepting a supply of services knowing or having reason to believe that VAT on the supply of the goods or services has been, or will be, evaded Knowingly issuing any materially erroneous or incomplete tax invoice, credit note or debit note

Compiled by The Institute of Chartered Accountants of Zimbabwe

50

VALUE ADDED TAX MODULE BCompt Honours Degree 2010 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.

Compiled by The Institute of Chartered Accountants of Zimbabwe

51

Das könnte Ihnen auch gefallen