Zimra moves to curb upsurge in tax refund pay outs

THE Zimbabwe Revenue Authority (Zimra) has appointed Value Added Withholding Tax agents to curb the upsurge in tax refund pay outs that impact negatively on the country's net revenue collections.

Of late, the tax collector noted with concern the upsurge in tax refunds it was paying out to businesses.

In a statement showing revenue performance for the year ended December 31, 2016, Zimra chairperson Mrs Willia Bonyongwe expressed concern over the seven percent decline in tax refund pay outs made in the second half of the year under review to $3.248 billion compared to the previous year.

Due to the above concerns, Mrs Bonyongwe said the tax collector was investigating the upsurge in tax refund pay outs.

Responding to questions from Business Chronicle last week, Zimra head of corporate communications Mr Canisio Mudzimu said:

"The major source of tax refunds is Value Added Tax (VAT) under which registered operators can claim refunds from Zimra where Input Tax (the VAT the registered operator is charged on his/her purchases) outweighs Output Tax (the VAT that the registered operator charges).

"Management of the refund bill, therefore, entails curbing refund fraud by ensuring that all claims are genuine and accurate. Section 50A of the Value Added Tax Act [Chapter 23:12] empowers Zimra commissioner general to appoint any registered operator who purchases goods from other registered operators to be a Value Added Withholding Tax agent.

"To this end and with effect from 1st April 2017, Zimra appointed 20 registered operators, mainly in the mining sector, as Value Added Withholding Tax agents."

Value Added Withholding Tax is a tax withheld by appointed agents when they pay their suppliers for the acquisition of taxable goods or services.

The tax should not be withheld on transactions regarding payments for licences, levies, rates, electricity, telephone, cell phone, internet or data services; payments by cash or debit cards for over the counter purchases as well as invoice amounts not exceeding $1 000 in aggregate per annum.

Mr Mudzimu said Zimra has also put in place several measures including the implementation of the of the fiscalisation programme to monitor sales transactions real-time, and intensive compliance checks and audits.

The rate of Value Added Withholding Tax is two thirds of the Output Tax.

"In cases where payment of the supply is made in instalments, the tax shall be withheld on the Output Tax on each instalment," said Mr Mudzimu.

The appointed Value Added Withholding Tax agents have obligations that include issuing VAT Withholding Tax certificates to suppliers in respect of the amount withheld, submitting returns (Rev 5 Form) and remitting amounts withheld to the tax collector on or before the 15th of the following month.