Zimra to introduce 10% withholding Vat

The Zimbabwe Revenue Authority (Zimra) will, with effect from October 1, 2016, introduce a 10 percent withholding Value Added Tax (Vat) on output tax charged by suppliers of goods and services, it has emerged.

Finance minister Patrick Chinamasa last week announced the development in his mid-term fiscal review statement saying it was aimed at minimising the loss of revenue arising from failure to fully declare and remit Vat.

"In order to minimise loss of revenue arising from failure to fully declare and remit Vat, I propose to introduce a 10 percent withholding Vat on output tax, with effect from October 1, 2016.

"Zimra will be responsible for designating agents to withhold the output Vat," Chinamasa said.

In his presentation, Chinamasa pointed out that inaccurate Vat declaration had cost the country $40,7 million in tax during the last quarter of 2015 alone.

"An audit recently undertaken by Zimra in the fourth quarter of 2015 revealed that of the 3 311 suppliers to mining companies, state-owned enterprises and some local authorities, 2 239 did not make correct declarations of the sales made or output tax charged, thereby prejudicing the fiscus of about $40,7 million in tax," he said.

Vat is a multi-stage consumption tax that is collected at every stage of the production and distribution chain, based on an input-out tax mechanism, whereby, a Vat-registered operator is required to charge and account for output tax on supplies of standard or zero-rated goods and services.

The operator can also claim or account for input tax on purchases made to provide taxable supplies.

At the end of each tax accounting period, a registered operator making taxable supplies is expected to remit to or claim as a refund from Zimra. Here, a refund is payable when the input tax claim is higher than the output tax charged.

"It has, however, been observed that some registered operators are under-declaring the extent and value of their supplies to large corporates, thereby suppressing the output tax charged and potential Vat remittances to Zimra," Chinamasa added.

The Treasury chief said the remittance mechanism was being affected due to dishonest practices by local businesses, resulting in leakages.