How to calculate VAT on imported services

Value Added Tax is levied on taxable supplies which include goods and services traded locally, imports and exports. This week's edition looks at the treatment of imported services for VAT purposes.

What is an imported service?

An imported service is:

(i) A service made by a supplier who is resident outside Zimbabwe or carries on business outside Zimbabwe to a resident of Zimbabwe.

(ii) The service should be utilised or consumed in Zimbabwe by an operator in making non- taxable supplies (exempt supplies).

Examples of imported services

VAT on imported services normally arises when a local business operator imports foreign services.
Common examples are consultancy, information technology and other various services supplied to financial institutions (such as banks and insurance companies), universities and Government ministries. The latter companies supply VAT exempt services.
Calculation of VAT

    The value of the imported service is generally the invoice value. In this case the VAT is calculated by charging 15 percent on the invoiced amount.

    For example, the invoice value in respect of consultancy services rendered and  charged by a foreign supplier  to a local commercial bank is US$10 000.

    The VAT on this imported service is calculated as follows:

15/100 x 10 000 =US$1 500
Who accounts for VAT?

    The recipient of an imported service is required to calculate VAT on imported services and remit it to the Zimbabwe Revenue Authority as prescribed in the VAT Act.


Due date for payment of VAT

    VAT charged should be remitted to Zimra within 30 days from the date an invoice is issued or from the date that a payment in respect of the imported service is made to the supplier, whichever is the earlier.

Penalty and Interest charged

    Our valued clients are hereby informed that penalties and interest is chargeable on late remittances of VAT.

Zimra also carries out periodic audits in order to check whether taxes are paid in full and on time.
Clients are hereby encouraged to be compliant in order to avoid unnecessary inconveniences.
VAT for Income Tax purposes

    The total value (invoice value plus the VAT paid) of the imported services paid by the local operator is allowable as a deduction for income tax purposes i.e. if the expenditure qualifies for such a deduction in terms of the Income Tax Act.

Reminder for the second QPD

Our valued clients are hereby reminded that:

    The second Quarterly Payment Date for provisional income tax payment is June 25, 2013.

    Value Added Tax for the month of May is due on June 25, 2013.


Disclaimer: This article was compiled by the Zimbabwe Revenue Authority for information purposes only. Zimra shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.

Please contact us as follows: Visit our website: www. zimra.co.zw, follow us on Twitter: @Zimra 11, like us on Facebook, www.facebook.com/Zimra.11, send us an e-mail: pr@zimra.co.zw, call us (Head Office): 04-758891/5; 790813; 790814; 781345; 751624; 752731; call us toll-free (to report corruption): 0800 4174 or                      08004185.