April 2015 MTU

April 2015 Edition
This Monthly Tax Update (MTU) summarises the
changes and announcements in the most recent
months in the following areas:
 Legislation
 Court Case decisions
 Authority Announcements

© Tax Matrix (Pvt) Ltd| Monthly Tax Update – April 2015 edition | Page 1
Contents Pg no.
Legislation
 Withholding tax on contracts threshold increased to US$1,000……………….………………… 3
 Marginal gain for employees …………………………………………………………………… 4
 Mining companies and trusts paying more to fiscus…..……………………………………………… 5
 Concessionary tax rates for manufacturing exporting companies…………………………………… 5
 Foreign Agents relieved of obligation to pay withholding tax on fees ……………………………… 6
 Deemed dividend exempt from withholding tax………………………………………………… 7
 Deduction of lump sum contributions to pension fund……………………………………………… 9
 New law on dormant companies…..……….……………………………………………………… 9
 Tobacco levy on seller of auction tobacco reinstated………………………………………………… 10
 Export tax on unbeneficiated hides……………………………………………………………… 11
 Export tax on un-beneficiated platinum ………………………………………………………… 13
 Export tax on rough diamonds deferred………………………………………………………… 13
 Deferment days increased for VAT on import capital goods…………………………………… 14
Court cases
 Fairdrop vs. Zimra ………………………………………………………………………………… 15
 BT vs. Zimra……………………………………………………………………………………… 19
Authority Announcement
 ZIMRA Commissioner General’s comment on tax amnesty …..………………………………… 23
 Deadline for submission of tax amnesty application extended…………………………………… 24
Appendices
 Appendix 1 – Deferment of 15% tax on unbeneficiated diamond…………………………… 26
 Appendix 2 – Tax Amnesty Extension for Acceptance of Applications……………………… 27

Introduction
Tax Matrix has the honour to introduce its first issue of Monthly Tax Updates (MTU). The monthly
update compliments our tax training programmes and Newsletters. They disseminate information about
tax developments happening locally and internationally. In the MTU, Tax Matrix (Pvt) Ltd analyses the
tax developments to ensure you, as our most valued client, is kept abreast of changes in the tax world.
This issue contains a review of some the tax changes brought about by Finance Act no. 3 of 2014 and
other ancillary regulations in the most recent months. It also includes two recently resolved cases
(Fairdrop v Zimra and BT v Zimra) and the ramifications of such decisions in relation to the tax world.
In this Monthly Tax Update, Tax Matrix also identifies and examines all relevant publications and Zimra
interpretations of these decisions as well as the institutional application of new legislation or rulings. The
updates are accompanied by an insightful commentary pointing out the key takeaway points from the
material.
Aside to what our regular Newsletters provide, MTUs are meant to help you to:
 Identify new tax planning opportunities.
 Keep you updated with all changes in the tax world.
 Keep aware of current Zimra interpretations.
 Recognise pitfalls many professionals miss.
 Minimise compliance errors and offer practical and effective tax solutions.

Legislation
Withholding tax on contracts threshold increased to US$1,000
Section 80 (1) of the Income Tax Act (Withholding of amounts payable under contracts with State or
statutory corporations) was amended by increasing the threshold for withholding tax on payments made
to a counterparty with no tax clearance (ITF263) from US$250 in a year of assessment to US$1,000 in a
year of assessment through the Finance Act no. 3 of 2014. An extract of the section reads as follows:
“contract ” means a contract in terms of which the State or a statutory body, quasi-Governmental institution or
registered taxpayer is obliged to pay 1 or more persons an amount or amounts totalling or aggregating
US$1,000 or more over the year of assessment”
Application date 1 January 2015
Example
This example is an illustration of payments made to a single payee under a contract in a situation where
future transactions had not been anticipated.
Transaction No. Withholding tax
(US$)
Amount received
(US$)
Cumulative Total
(US$)
1. - 390 390
2. - 605 995
3. 109 95 1,090
It is not clear whether a payment of US$390 would immediately be subjected to withholding tax when
the payer is not sure that subsequent orders would result in the aggregate of US$1000 being exceeded.
The question also is whether tax should be withheld on the US$390 or on the excess which caused the
aggregate of US$1,000 to be exceeded. At that point the payer should have withheld $109, but the order
that has caused the minimum threshold to be exceeded i.e. $95 is not sufficient to cover the aggregate
withholding tax of $109. We warn that taxpayers should withhold tax from the very first payment to
avoid having to pay tax on behalf of the payee, until this piece of legislation is straightened.
Meanwhile, the Finance Act no.2 of 2014 amended the term “payment” for purposes of withholding tax
was to read as follows:
Comment
 The increase in threshold provides a relief to suppliers of low valued transactions not to avail an ITF263 in
order to be paid and also simultaneously reduces compliance cost of payers on low valued transactions.
 The law is open ended regarding withholding the tax in respect of suppliers with repeat orders to the same
payers which when aggregated exceeds US$1,000 (see example below).
 The taxpayers must exercise caution regarding repeat orders and ensure always that every payment is
supported by ITF 263, without which 10% must be withheld.
 In our view, the increase on the threshold is ineffective in that if repeat orders are anticipated then 10% should
be withheld on any contract even if the amount is below US$1000.

“Payment by cash, barter, setoff, crediting a director’s loan accounts, intercompany debits and credits or by other
settlement of obligations whatsoever and in any form”
Marginal gain for employees
Section 14(2)(a) of the Finance Act was amended by increasing the minimum taxable income of an
employee from US$3,000 per annum to US$3,600, while the rate for top earners (persons whose
taxable income exceeds US$20,000 per month) remains at 50%.. The following are the new rates tax:
Band (Per Annum) Rate
3600 0%
3600 18000 20%
18000 36000 25%
36000 60000 30%
60000 120000 35%
120000 180000 40%
180000 240000 45%
240000 50%
plus 3% Aids Levy
Application date effective 1 January 2015
Comment
The change in tax bands results in a relief of US$10 for employees whose income is US$3,600 per annum
and US$474 for taxpayers whose income is US$20,000 per annum, compared to 2014, details as shown in
the table:
Income
(US$)
Applicable tax in 2014
(US$)
Applicable tax in 2015
(US$)
Gain
(US$)
300 10 - 10
2,000 412 376 36
5,000 1,339 1,251 88
10,000 3,270 3,054 216
20,000 7,905 7,431 474
Note that whether or not the amount is below the non-taxable threshold it still has to be declared on the
annual return (ITF16). In the end aggregate of salaries and wages declared in the financial statements must
agree with that on ITF16. When a difference occurs ZIMRA may deem this as an understatement of either
PAYE or income tax liability, warranting unnecessary investigation.
Comment
The widening of definition implies other forms of settlement other than actual cash outlay can triggers
withholding tax on payments to payees without ITF 263. Thus, merely passing a journal in an intercompany
account may trigger 10% withholding tax, despite the intercompany balances being settled at year end.

Mining companies and trusts paying more to fiscus
Mining companies and trusts were amongst the losers of the 2015 National Budget following the
amendment of section 14(2) (b) of the Finance Act to exclude them from the list of taxpayers not subject
to 3% AIDS Levy on their tax liability. The effect is that these taxpayers are now required to pay AIDS
Levy of 3% of tax liability.
Concessionary tax rates for manufacturing exporting companies
In order to boost exports, the 17th
Schedule was amended by The Finance Act number 3 of 2014 with the
introduction of multiple tax rates and export thresholds for companies engaged in manufacturing and
exporting of goods.
The change is summarized as follows:
New Law Old Law
Taxable income of a company that conducts
manufacturing operations and, in any year of
assessment exporting such manufactured goods shall
be taxable at concessionary rates based on the level
of exports as follows:
Export threshold (%
manufactured)
Corporate rate
30-40 20%
41-50 17.5%
Above 51 15%
A company that conducts manufacturing operations
and, in any year of assessment exporting from
Zimbabwe fifty per centum of its total manufacturing
output shall be taxable at 20% on its taxable income.
Comment
The mining industry continues to be on the receiving end as government continuously withdraws mining
incentives and introducing new taxes. In a space of one year there have been at least three new laws as follows:
1. Repealing of section 15(2)(f) (iii) of the Income Tax Act (Chapter 23:06) which allowed the deduction
in the computation of mining tax payable of royalties paid during the year of assessment in terms of
section 245 of the Mines and Minerals Act [Chapter 21:05]. Application date 1 January 2014.
 Export tax on unbeneficiated minerals (discussed below).
 AIDS Levy of 3% (as discussed above)
Despite the need to mobilise revenue, there appear to be mistrust between mining houses and the
government. Government believes mining houses are making more profits than what they are declaring.

Foreign Agents relieved of obligation to pay withholding tax on fees
The 17th
Schedule is amended in the definition of fees by adding subparagraph (i) whose purpose is to
exclude part of fees any payment for export market services rendered by a foreign agent of a company
that exports goods from Zimbabwe. The exempt fees are limited to 5% of the "free on board value" of
the exports of the company for the year of assessment concerned, as confirmed on acquittance by the
company of the export documentation relating to its exports in that year.
The Customs and Excise Act in section 2 defines the term free on board value”, in relation to—
“(a) exported goods, means the price of such goods to the purchaser, including all costs, charges and
expenses incidental to the sale thereof or to the placing thereof on board the means of transport by
which they will be removed from Zimbabwe but excluding any subsequent costs, charges or expenses
incurred in connection with the delivery of such goods to their destination;
(b) …..”
The term “export market services” is defined in paragraph 1 of the 17th
Schedule of the Income Tax Act
as follows:
“services rendered wholly or exclusively for the purpose of seeking and exploiting opportunities for the export
of goods from Zimbabwe or of creating, sustaining or increasing the demand for such exports and, without
derogation from the generality of the foregoing, includes any of the following services—
- research into, or the obtaining of information relating to, markets outside Zimbabwe;
- research into the packaging or presentation of goods for sale outside Zimbabwe;
- advertising goods outside Zimbabwe or otherwise securing publicity outside Zimbabwe for
goods;
- soliciting business outside Zimbabwe;
- investigating or preparing information, designs, estimates or other material for the purpose
of submitting tenders for the sale or supply of goods outside Zimbabwe;
- bringing prospective buyers to Zimbabwe from outside Zimbabwe;
- providing samples of goods to persons outside Zimbabwe”
Comment
 The manufacturing output must be calculated by reference to quantity or volume rather than value.
 The concessionary rates are ring fenced to manufacturing and exporting operations and not extended to
other operations carried on by the same company. Expenditure and income of other operations carried on
by the same person should not be mixed with these operations or vice versa.
 Section 14(1) of the Finance Act defines manufacturing operations as “any process of production which
substantially changes the original form of, or substantially adds value to, the thing or things constituting
the product”.

Deemed dividend exempt from withholding tax
Background
Section 28 of the Income Tax Act (Chapter 23:06) provides for the charging, levying and collection
throughout Zimbabwe of a resident shareholders’ tax on dividend distributed by a resident company
to a person or a partnership ordinarily resident. Whereas, dividend distributed to an ordinarily resident
statutory corporation, a company limited by shares, a private business corporation, a pension fund, a
benefit fund or a medical aid society is not subject resident shareholder’s tax.
The section also treats as dividend any interest or other charges paid inside Zimbabwe by a local
company or a subsidiary of a local company if such amounts are incurred on debt that exceeds debt to
equity ratio of 3:1.
The amount is also disallowed in the computation of the corporate tax liability in terms of section 16(1)
(q) of the Income Tax Act. Thus, if the ratio of 3:1 is exceeded, any interest or related expenditure
incurred on the excess debt is disallowed. This applies to interest on debt incurred in the production of
income of a local branch or subsidiary of a foreign company, a local company (whether local or foreign
borrowings) and a subsidiary of a local company, other than a partnership, local or like authority,
deceased or insolvent estate or a private trust. The disallowed expenditure (excessive interest and other
consideration) is computed as follows:
A x (B-C)
________
B
A = is the total interest or expenditure incurred during such year on debt
B = is the total financial assistance (debt)
C = is the equity capital multiplied by 3
The new paragraph 1(i) of the 15th
Schedule of the ITA
The 15th
Schedule of the Income Tax Act is amended in paragraph 1, “the definition of dividend”, to
exclude interest and other charges disallowed in terms of section 16(1)(q) of the Income Tax Act of a
company that advances loan for the benefit of the State.
The paragraph reads as follows:
Dividend” means any amount which is distributed by a company to its shareholders, but excluding—
(a) ……
(b) ……
(c) …..
(d) ……
(e) …..
(f) ….
(g) …
(h) …
(i) any amount deemed under this Act to be a dividend by virtue of the company in question
exceeding the prescribed debt to equity ratio, if the company is one that the Minister certifies
in writing has advanced loans for the benefit of the State;

Loan Interest
Interest
Loan
Meanwhile, there is an onerous administrative requirement of having to obtain a certificate from the
Minister. This appears to be the current trend. Paying taxes must not be administratively burdensome
(Adam Smith – Cannons of Taxes).
Editor’s comment on section 16(1)(q) of the Income Tax Act
There is no standard definition of debt or equity for tax purposes and reliance must be placed on the accounting
definitions. Generally, equity capital is comprised of paid up share capital, share premium; accumulated profits of
a capital and revenue nature (retained earnings); and permanent owners’ capital (excluding any financial
assistance). Unless shareholder’s loans bear interest they should be simply be classified as equity capital.
Debt is an amount owing by the company to its creditors, where interest is or may become payable. When no
interest payment is made, it can be argued that a country’s tax revenue cannot be lost and it is misleading to
include non-interest-bearing loans in the computation. The treatment of short-term-loans is quite inconsistent, but
creditors are excluded. However, due to changing corporate needs the simple differentiation between debt and
equity does not mirror the diversity of finance. Many financial instruments show elements of both categories or can
be converted from one type to the other.
The relevant equity and debt are the amounts at year-end. South Africa uses an average annual amount of debt, the
highest amount of debt in a given year being used.
Deduction of lump sum contributions to pension fund
The amount of a lump sum contribution made by an employer in the year of assessment towards
capitalizing a pension fund to which the employer contributes on behalf of its employees is deductible
in terms of section 15(2)(mm) of the Income Tax Act. The employer should furnish the actuarial
certificate to the Commissioner to support the deduction. Another certificate issued by the Minister in
consultation with the Insurance and Pensions Commission is required.
An "actuarial certificate" means a certificate issued by an actuary.
Company A
Co. B
(Taxpayer)
Statutory
Corporation
Comment
The amendment means that excess interest is no longer treated as dividend for purposes of section 28 of the
Income Tax Act (Chapter) as long as the interest was paid or incurred by a company which advanced loan. The
provision frees the interest from 15% (10% when paid by a listed company) shareholder’s tax. Practically, the
provision appears to be targeting back to back loans. Thus, B borrows from A then re-lends to a Statutory
Corporation, but the borrowing from A has caused it to exceed the limit of 3: 1 see section 16(1)(q) of the
Income Tax Act, illustrated as follows:

Dormant companies
The Commissioner General is required in terms of section 37 of the Income Tax Act to give a public
notice each year which requests all persons falling within a class prescribed in such a notice, whether
personally or in any representative capacity, to furnish returns within 30 days of the notice date or
such further time as allowed by him.
The Finance Act no. 3 of 2014 amended section 37 by not requiring dormant companies to submit
returns. Thus, a dormant company i.e. a company that has not carried on trade or business for the full
year of assessment shall not be required to submit the return. Instead its public officer, director or
major shareholder must submit a written or sworn declaration indicating that it has not carried on
trade for the full year. The written or sworn statement must be submitted within 30 days of the
commissioner’s public notice. Where the written or sworn declaration is not submitted, the company
shall still be liable to a civil penalty of US$30 a day up to a maximum of 181 days in terms of section
35(2) of the Revenue Authority Act.
Comment
This legislation is not new but it’s creating an onerous administrative burden in terms of certification.
Paragraph 6 of the 6th
schedule of the Income Tax Act, provides as follows:
“AMOUNTS ALLOWABLE AS DEDUCTIONS IN RESPECT OF LUMP SUM CONTRIBUTIONS
TO PENSION FUNDS BY EMPLOYERS
6. Any lump sum contribution to a pension fund by an employer shall be allowed as a deduction:
Provided that—
(i) the Commissioner may direct that the lump sum contribution shall be treated as an
expense to be spread over such period of years as the Commissioner may determine;
(ii) where the Commissioner has, in terms of any previous law, directed that a lump sum or
similar contribution shall be so treated, any balance of the contribution which has not been
allowed as a deduction shall be carried forward and allowed as a deduction in terms of this
paragraph”.
The major difference between the existing legislation and the new legislation lies on the powers of
the Commissioner under the existing law which are being curtailed as the expenditure must be
objectively be determined through the use of actuarial certificate. Also, paragraph 6 of the 6th
schedule caters for lump sum contributions to in-house and established pension funds, which the
Commissioner must authorise, whereas the new provision appears to be focused on in-house pension
fund.
.
The fact that the Income Tax Act includes double provisions s15 (2) (mm) and paragraph 6 of the 6th
Schedule with regards to the deduction of lump sum contributions to in-house pension funds may
give rise to conflicting legislation. Also, the insertion of s15 (2) (mm) gives rise to unnecessary
administrative delays in respect of obtaining the two certificates required in terms of that section.

Tobacco levy on seller of auction tobacco reinstated
It is contemplated to reduce deforestation caused by traditional tobacco curing methods by imposing
tobacco levy on sellers of auction tobacco calculated at the rate of 1.50c of each dollar of the price of
the tobacco. The levy had been scrapped by the Finance Act of 2005 with effect from 1st
March, 2005.
The Finance Act provides that the levy shall be ring-fenced to finance re-forestation activities.
Comment
 Nothing changes in terms of the civil penalty. The submission of sworn statement is as good as
submission of the return and failure to comply with the requirement the company is liable to the
said civil penalty.
 The submission of sworn statement does not guarantee that the taxpayer’s books will not be
subject to an audit by ZIMRA.
 The legislation is silent regarding submission of nil remittances advices (ITF12B) for QPDs for
dormant companies.
Comment
 Auction tobacco is defined in the Income Tax Act as “tobacco which is declared in terms
of the Tobacco Marketing and Levy Act (Chapter 18:20) to be auction tobacco”. The
Tobacco Industry and Marketing Act provides that the Minister, may on the
recommendation of the Board through statutory instrument, declare any type of tobacco
to be auction tobacco. It appears that sellers and buyers of contract tobacco are not
affected by the levy, unless the Minister has made a declaration.
 The timing of payment of tobacco levy to ZIMRA is in terms of Statutory Instrument 131
of 1996 which provides as follows:
An auctioneer who has withheld or recovered any amount of tobacco levy shall pay the amount to
the Commissioner within 48 hours after the date of the sale of the auction tobacco concerned or
relinquishing possession of the auction tobacco concerned.
 In terms of paragraph 24(4) of the 24th
Schedule of the Income Tax Act, payment of
tobacco levy by an auctioneer must be accompanied by a return (Rev5). The Finance bill
appeared to have extended the period to about a week but the Finance Act No. 3 of 2014
doesn’t seem to contain that. The period of 48 hours still applies. This appears to add a
compliance burden on the buyers of auction tobacco considering the voluminous of the
transaction at the peak of the season.

Export tax on unbeneficiated hides
The Minister of Finance and Economic Development through the Government Gazette of Friday 30th
January 2015 published export relief rules on “stockpile” of unbeneficiated hides. Stockpile means
quantities of unbeneficiated hides in excess of domestic demand evidenced by proof of supply to the
local industry.
Background
The Finance Act 2 of 2014, clause 10 amended section 12 of the VAT Act to suspend the levying of
unbeneficiated export tax on hides and to be re-introduced 1 January 2015. The Minister of Finance
and Economic Development through the same section was tasked to present before the National
Assembly a Statutory Instrument to prescribe maximum quota of unbeneficiated hides by weight on
which export tax would not apply. The clause defines unbeneficiated hides as raw or untanned animal
hide but does not include crocodile skin, goat or sheep skin or any hide, skin or hair that is or forms
part of a trophy as defined by or under the Parks and Wild Life Act (Chapter 20.14).
Interpretation of the SI
SI 16 of 2015 re-introduces unbeneficiated tax on exported of hides and at the same time defines
maximum quotas each merchant can export without being subject to unbeneficiated export tax on
hides.
Application
 An unbeneficiated hides merchant who wish to benefit under this Instrument shall, upon
confirmation of the evidence of a stockpile of unbeneficiated hides by a recognised Council
or Association responsible for the leather industry, apply for a permit to the Minister
responsible for Agriculture.
 The Council or Association shall confirm in writing stating that the applicant has a stockpile
of unbeneficiated hides.
 “Stockpile” means quantities of unbeneficiated hides in excess of domestic demand as
evidenced by proof of supply to the local industry.
 In order to be eligible for registration thereunder the applicant must be registered with Zimra
and have a valid tax clearance certificate (ITF 263).
Conditions for Granting Export Tax Relief
 The Minister responsible for Agriculture shall issue the merchant with an export permit which
would be approved by the Minister responsible for Industry and Commerce.
 The relief granted shall not exceed the maximum quantities prescribed for each individual
exporter in the Schedule on this Instrument. I.e. the Merchant can only export the excess of
local demand, but with the maximum as prescribed for each individual merchant in this
instrument.
 To benefit under the relief of export tax the unbeneficiated hides shall be exported through the
port of entry nearest to the premises where the unbeneficiated hides stockpile is held.
 Only the unbeneficiated hides merchant issued with a permit that states the quantities of
unbeneficiated hides to be exported shall be eligible for export tax relief.

Cancellation of Permit
The Minister responsible for Agriculture may cancel or suspend the validity of the permit once the
merchant ceases to hold a stockpile of unbeneficiated hides or fails to comply with or contravenes any
of the provisions of these regulations or upon request by the merchant.
Once permit is cancelled as aforesaid, any relief granted in terms of these regulations shall
immediately become due and payable.
List of unbeneficiated hides exporters
This schedule provides a list of unbeneficiated hides merchants approved to benefit under the export
tax relief. The list may be amended to include merchants that would have been issued with export
permits or to delete merchants whose export permit would have been cancelled.
NAME OF MERCHANT WEIGHT OF EXPORT
QUOTA (Kilograms)
Bulawayo Abbatoirs 344,500
Montana Meats 241,200
Triscastol Enterprises (Private) Limited 290,000
Cold Storage Company Limited 155,000
Meggertop Enterprises 325,600
Lushaba Trading 206,750
Carswell Meats 206,750
Univision (Private) Limited 68,900
Honga Trading 227,400
Comment
 Possession of the permit entitles your business or practice to an exemption of 75 cents/kg VAT
on export of unbeneficiated hides. Unregistered merchants will be unable to export without
incurring 75 cents/kg export tax on unbeneficiated hides.
 Administratively, taxpayers must be up-to-date with all their taxes and submission of returns to
obtain a permit.
 Our understanding of proof of supply to the local industry would be in the form of supply
agreements or reference letters from customers or supply invoices that would be to the
satisfactory of the Council or Association.
 Although the effective date is 1 January 2015 our view is that the effective date for each
individual merchant would be the date of obtaining the permit from the responsible Ministry.

Export tax on un-beneficiated platinum
An export tax (VAT) on un-beneficiated platinum was enacted through Finance Act (No.1) of 2014,
with effective date of 1 January 2015. The export tax is levied on the value of the unbeneficiated
platinum at the rate of 15%. It had been proposed through the Finance Bill of 2015 to suspend the tax
until 1 January 2017, but the Finance Act (No3) of 2014 when eventually published omitted this
proposal. As it stands, platinum producers are required to pay on all unbeneficiated platinum.
The unbeneficiated platinum is platinum ore which has not been subjected to crushing, milling and
washing to remove waste material; and the smelting of the resulting platinum concentrate into pellet
or ingot form.
The value on which the export tax is charged shall be deemed to be the higher of the market value on
the date of exportation as determined by reference to a reputable metals exchange and the value as
reflected on the bill of entry or other document required in terms of the Customs and Excise Act.
Goods are deemed exported when the bill of entry or other document is delivered to an officer or the
time when goods cross the borders of Zimbabwe, whichever is the earlier (section 60 of the Customs
and Excise Act)
Export tax on rough diamonds deferred
The Finance Act (No1) of 2014 amended section 12 of the VAT Act (Chapter 23:12) by including
section 12D thereby introducing export tax on the value of rough diamonds exported from Zimbabwe.
The tax was meant to take effect from 1 January 2015 and levied at 15% of the value of export.
Meanwhile, a directive from the Minister of Finance and Economic Development defers the export
tax on unbeneficiated diamond until further notice as detailed in the correspondence attached in
Appendix 1. As contained in the letter, the legislation to suspend the tax will be amended at the
earliest opportunity in retrospective and appears will take effect from 1 January 2015. Taxpayers who
had paid the export tax on diamond may for a refund, but it’s most likely that the money will be
applied towards future tax liabilities of taxpayers as the government is facing liquidity challenges.
Meanwhile, 15% royalty tax on diamonds remains payable.
Comment
 Altogether, a platinum mining is required to pay 15% export and royalty tax of 10%. This makes
unbeneficiated platinum the most taxed mineral in Zimbabwe following the suspension of 15%
export tax on unbeneficiated diamonds.
 Meanwhile section 244 of the Mines and Minerals Act (Chapter 21:05) provides for a rebate of
royalty on minerals or mineral-bearing products disposed of in any 1 month which does not
exceed US$200. If the value exceeds US$200 but not exceeding US$300, the royalty payable
shall be 3 times the amount by which the assessed royalty exceeds US$200.
 A full rebate is granted on minerals or mineral-bearing products used wholly within Zimbabwe
and on those disposed of or received for treatment by an approved beneficiation plant.
 Section 249 of the Mines and Minerals Act (Chapter 21:05) provides for an exemption of royalty
on ore extracted for experimental purposes

Deferment days increased for VAT on import capital goods
The Minister through Finance Act (No3) of 2014 extended the period of deferment of collection of tax
on imported high valued capital goods to 180 days by amending section 12A of the Value Added Tax
Act. The effect is that upon importation of these goods for own use an operator may apply to the
Commissioner General to defer the payment of VAT on the imported goods for a period not
exceeding 180 days from the date the goods were imported. The section also provides that the
Minister may prescribe different periods for different classes or values of goods of a capital nature for
deferment. The following values were proposed in the Finance Bill but are missing in the Finance Act
(No3) of 2014 and we still await the Minister to prescribe the values:
Value of Equipment (US$) Deferment Period (Days)
100 000 – 1 000 000 90
1 000 001 - 10 000 000 120
Above 10 000 000 180
Meanwhile, a taxpayer who sells, re-export or otherwise dispose of such goods before the expiry of
the period of the deferment, without having used them in the manner that qualified them for deferment
of payment of tax, is immediately liable to the deferred tax plus additional tax equal to the deferred
tax due and interest at the rate of 10% p.a. Similar consequences apply to a taxpayer who fails to pay
the deferred tax when it becomes due.
Meanwhile, capital goods qualifying for deferment of VAT are plant, equipment or machinery:
 Used exclusively for mining purposes on a registered mining location as defined in the Mines
and Minerals Act [Chapter 21:05].
 Used exclusively for manufacturing or industrial purposes in or in connection with a factory
(including spare parts required for the purpose of maintaining or refurbishing such plant,
equipment or machinery).
 Used exclusively for agricultural purposes (including spare parts required for the purpose of
maintaining of refurbishing such plant, equipment or machinery)
 Used exclusively for the aviation industry (including spare parts required for the purpose of
maintaining or refurbishing aircraft and such plant, equipment or machinery).
 Medical equipment
A letter of approval must be obtained from the relevant Ministry. The deferment does not cover motor
vehicles intended or adapted for use on the roads.

Court cases
Fairdrop vs Zimra
The Issues
 Respondent was accused of including in applicant’s income terminal benefits and severance
package from Dr Kereke’s former employer, the Reserve Bank of Zimbabwe.
 Other sources of income for the hospital project were said to have included proceeds from Dr
Kereke’s farming operations, including sale of tobacco and goats.
 Also, alleged as forming part of the hospital income was bride price (lobola proceeds) of
sister’s getting married.
 Respondent rejected certain shareholder assets that had been injected as start-up capital for
the hospital project. This included Dr Kereke’s immovable property on which the hospital
was to operate.
 Cost of renovations and extensions to the immovable property were disallowed as not being
genuine tax deductible expenditure. Respondent argued that the premises remained in the
name of Dr Kereke and would not constitute applicant’s assets in the event of liquidation.
 Respondent refused to acknowledge payments for specialist consultants such as doctors and
auditors whose fees would ordinarily not be subject to P.A.Y.E but to a 10% withholding tax.
 Related party borrowings. Respondent was said to have discarded tax deductions for interest
charges on certain loans by the applicant from certain commercial banks that the applicants
accessed through a surrogate entity called Pedaball Investments (Pvt) Ltd. Dr Kereke said he
controlled Pedaball indirectly.
The facts
 The applicant, a hospital sought to have an exorbitant assessment of Income Tax made by
respondent in respect of the period 2010 to 2013 set aside.
 Records show that the taxpayer had not been paying taxes since 2010 and had not provided
ZIMRA with useful information to enable the latter to make useful assessment of the tax
payable.
 After the hospital had failed to submit certain information useful on the financial aspects of
the hospital, Zimra made an estimated assessment of the hospital’s income tax liability in
accordance with section 45 of the Income Tax Act for the years of assessment 2010, 2011,
2012 and 2013.
 Together with penalties raised in terms of section 46 of the Income tax Act, the assessment
amounted to US$3,253,646.42, but subsequently revised down as alleged by the respondent
following additional information received by it.
Case Name Fairdrop Trading (Pvt) Ltd v ZIMRA, 2014
Summary The applicant (Fairdrop Trading ) sought to force response to its objection and
suspension of the garnishee orders pending its appeal against respondent’s
(Zimra) assessment
Jurisdiction High Court of Zimbabwe
Date 19 February 2014
Decision Applicant’s hardship cannot exempt it from abiding by the provisions of section
69- payment of tax pending an appeal

 To enforce collection, the respondent at one point appointed medical aid societies as
representative taxpayers in respect of the applicant and imposed garnishees for the attachment
of moneys due to the applicant.
 Although dialogue was taking place between the applicant and ZIMRA to find a workable
plan, there was continued mutual mistrust between the parties which resulted in some of the
garnishee orders being reinstated and a subsequent objection to the tax assessment by the
applicant by November 2013.
 Before the Commissioner General could decide on the objection, the respondent appointed the
applicant’s bank Stanbic Bank Zimbabwe as the applicant’s agent in terms of section 58 of
the Income Tax Act.
 On 4 February 2014 the applicant made an urgent application to the court to have the case
heard, arguing that the determination be made in 7 days and that the garnishee be lifted.
 Despite lodging an objection, the hospital did not pay its outstanding taxes.
Competing arguments
The taxpayer
 That unless the garnishee order was removed it was facing eminent closure which could
threaten the lives of its patients, some of whom were cancer patients.
 That the assessments were grossly incorrect and unreasonable, citing example of shareholders
‘funds injected in the project which appeared to have been included in income by ZIMRA.
 That there was commercial urgency in the sense contemplated in the Silver’s Trucks’ case. In
that case the urgent chamber application had been brought some four months after the
applicant’s goods had been embargoed by customs. It was held that the court has power to
hear an application as a matter of urgency not only when there is a serious threat to life or
liberty but also where the urgency arises out of the need to protect commercial interests.
 That ZIMRA’s decision to disallow in the assessment of the hospital’s tax payable of certain
renovations made on immovable property registered in Dr Kereke’s name was incorrect.
The Commissioner General
 That the application was not urgent and that the urgency contemplated by the rules of court is
not only gauged by the imminence of the day of reckoning. It is also gauged by the day the
need to act arose. In Kuvarega v Registrar-General & Anor1998 (1) ZLR 188 (H),
CHATIKOBO J said, at p 193 F -G:-“What constitutes urgency is not only the imminent
arrival of the day of reckoning; a matter is urgent, if at the time the need to act arises, the
matter cannot wait. Urgency which stems from a deliberate or careless abstention from
action until the dead-line draws near is not the type of urgency contemplated by the rules. It
necessarily follows that the certificate of urgency or the supporting affidavit must always
contain an explanation of the non-timeous action if there has been any delay.”
 That the Dr Kereke was uncooperative and had failed or refused to supply proper information
on applicant’s tax liability, hence reason for invoking s 45 and s 46 of the Income Tax Act.
 That applicant evaded paying taxes from its inception and that there simply had been no paper
trail or verifiable information on all transactions.
Legislative considered
 Income Tax Act [Chapter 23: 06], s45, s46, s58, s62, s69,
 Revenue Authority Act [Chapter 23:11], s 3
 Section 69 of the Income Tax Act:

“Payment of tax pending decision on objection and appeal
(1) The obligation to pay and the right to receive any tax chargeable under this Act shall not, unless
the Commissioner otherwise directs and subject to such terms and conditions as he may impose, be
suspended pending a decision on any objection or appeal which may be lodged in terms of this Act.
(2) If any assessment or decision is altered on appeal, a due adjustment shall be made, for which
purpose amounts paid in excess shall be refunded and amounts short paid shall be recoverable”
 Section 45 of the Act, the power to make tax assessments and even to make estimates of taxes
due from the available information.
 Section 46 of the Act, the power to levy penalties on taxes due but unpaid.
 Section 58 of the Income Tax Act (Chapter 23:06):
“Power to appoint agent
(1) The Commissioner may, if he thinks it necessary, declare any person to be the agent of any other
person, and the person so declared an agent shall be the agent of such other person for the
purposes of this Act, and, notwithstanding anything to the contrary contained in any other law,
may be required to pay any tax due from any moneys in any current account, deposit account,
fixed deposit account or savings account or from any other moneys, including pensions, salary,
wages or any other remuneration, which may be held by him for, or due by him to, the person
whose agent he has been declared to be.
(2) ….”
Court’s decision
 That the matter was urgent. The last garnishee by the respondent was on 16 January 2014
against the applicant’s bank. It was a very serious iron grip on the applicant’s major revenue.
There was no excessive delay when the urgent chamber application had eventually been filed
on 4 February 2014. The application was quite voluminous - 199 pages, therefore it must have
required lots of time to put it all together. On the merits, for one to succeed for an interim
interdict one must show at least four elements. These are:
- that one has a prima facie right that one wishes to protect even though the right be open to
some doubt;
- that one has a well-grounded apprehension of an irreparable harm such as would not be
cured by damages;
- that the balance of convenience favours the granting of an interim interdict; and
- that there is no other alternative remedy that is effective.
It must be assumed that parliament was alive to the hardships or unfairness of the application of s 69
of the Income Tax Act. The law says in spite of any objection or any appeal, the tax as charged is
payable. Any overcharge is refunded should the objection or the appeal succeed. The applicant was
offered the chance to avert the garnishees by offering an acceptable payment plan. Before it filed the
urgent chamber application none had been submitted. The one submitted after the launch of the
application was rejected by the respondent. The respondent made a counter offer. The applicant said
the counter offer was way beyond its means. Furthermore, the applicant had defaulted on a previous
payment plan. Admittedly there would have been reasons for such default.
 It was held that the fact that the hospital was in financial hardships could not be taken as a
passport of being exempted from application of s69 (Payment of Tax pending objection). The
applicant was dismissed with costs.

Conclusion
 Where you have not done an assessment or you have made default in furnishing any return or
information, ZIMRA can invoke s45 of Income Tax Act 23:06. The Commissioner General’s
assessment will be an estimated and sometimes based on the industrial average turnover.
 It is of paramount importance to keep proper records and provide ZIMRA with any
information as requested to avoid estimated assessments in terms of s45 of the Income Tax
Act.
 A fine may be charged under section 82 of the Income Tax Act for failing to keep proper
records may be charged.
 Taxpayers should complete their returns in full and should not omit or provide wrong
information as this will result in 100% additional tax on tax due being levied through
invoking s46 of the Income Tax Act.
 No taxpayer is exempt from the provisions of s69 of the Income Tax Act; therefore, it is
advisable to pay the tax charged while waiting for the decision of your objection or appeal.
 Taxpayers should pay their taxes in full and if for a valid reason they can’t pay in full they
should communicate with ZIMRA and make the necessary payment arrangements. This will
ensure that the taxpayer will not be charged additional taxes in penalties. However, interest is
compensation to the fiscus for the opportunity cost and it remains payable.
 Zimra is given the powers to garnish bank accounts and to intercept payments from debtors in
terms of section 58 of the Income Tax Act (section 48 of the VAT Act). Nothing overrides the
Commissioner General’s garnish order.
 Cooperating with ZIMRA is very important and can act to the taxpayer’s advantage when
negotiation for penalties and even serve the taxpayer the garnishing of his/her accounts.
 When operating more than one business it is necessary to ring fence income and expenses of
those businesses. It is because businesses with separate legal status assessed differently under
the Income Tax Act.
 Taxpayers must maintain all relevant business records. The burden of proof is placed upon
them in terms of section 63 of the Income Tax Act. Failure to prove the loss falls on the
taxpayer.
 Repairs are deductible in terms section 15(2) (b) of the Income Tax Act. Repairs imply
restoration of property to its original state. On the other hand, improvements are disallowed
and can only qualify for capital allowances.

BT vs Zimra
Case Name BT (Pvt) Ltd v Zimra, 2014
Summary Appeal case against Commissioner General’s decision to disallow claims BT for
the deduction of doubtful debts and bad debts
Jurisdiction High Court of Zimbabwe
Date 22 July and 12 November 2014
Decision Bonds issued by the Central Bank invalid because the bank had no power to
issue such bonds therefore they could not be used to settle the debts. The debt
had been long overdue and the bank unable to pay due to insufficient assets.
The bad debts and provision for bad debts met the perquisite for deductibility.
The issues
 Whether central bank empowered to issue valid bonds under s 7 Reserve Bank of Zimbabwe
Act [Chapter 22:15]
 Whether public authorities can invoke the doctrine of invalidity of their own actions for their
own benefit to the detriment of private citizens.
 Reserve Bank – duties and powers under January 2009 monetary policy statement –whether a
statement of intent and not a decree of an accomplished deed – issuance of gold bonds merely
constitutes a unilateral rescheduling of the debt – brutum fulmen if proceedings instituted
Reserve Bank of Zimbabwe Act [Chapter 22:15] s 63B
 Whether the provision of bad debts and the bad debts in respect of irredeemable bonds
claimed by BT were tax deductibility in terms section 15(2) (g) of the Income Tax Act. Note
Section 15(2) (g) (ii) covering doubtful debts was repealed by s 14 (a) of the Finance Act (No
3) (Act 10 of 2009) with effect from 1 January 2010.
The facts
 BT produced gold bullion strictly controlled by and regulated under the Gold Trade Act
[Chapter 21:03] whereby the central bank pays it for all the gold bullion delivered to its
subsidiary Fidelity Printers and Refiners (Pvt) Ltd under the two tier system before the onset
of the multi-currency monetary regime . One component of the payment was in local currency
while the other was in United States dollars.
 BT was not paid the foreign currency component for all the deliveries it made in 2008 and as
at 31 January 2009 the central bank owed it US$2 945 388.
 In settlement of its debt it was issued with highly illiquid gold bonds, which the central bank
did not redeem on due date but unilaterally rolled them over ostensibly for six months.
 The central bank would without fail always analyses the gold sector in its bi-annual monetary
policy statements. In one such statement in January 2009 the governor of the central bank
unilaterally converted all outstanding amounts to the gold sector into "Special Goldbacked
Foreign Exchange Bonds" with a tenor of 12 months.
 The other terms attaching to the bonds were interest of 8 % per annum on maturity applied in
retrospect from the date each amount fell due.
 The central bank unequivocally undertook to honour the full principal plus interest on
maturity to the holders of the bonds.
 In a letter to the respondent's case, dated 23 February 2009, the central bank sought written
confirmation of the total debt inclusive of interest, owing to the appellant in the sum of US$ 2
945 388.32. BT confirmed the amount inclusive of interest owed and indicated its preferred
denominations for the gold bonds.

 BT made a decision that it was not in its the best interest to trade the gold bonds at such huge
discounts besides there no buyers for them in the local, regional and international markets.
 BT wrote off the bad debt amounting to US$ 341 922 because the amount was potentially
uncollectable based on s 63B of the Reserve Bank Act [Chapter 22:15], which precluded the
attachment and execution of the central bank's assets to satisfy such judgment.
 The decision to write off was based on the evidence of failure by the central bank to redeem
the debt over a period of up to two years and the likelihood of payment ever eventuating.
 The bank was in financial dire straits. It was enmeshed in staff retrenchments. There was
gloomy outcome of discussions with Treasury (central government) to obtain sufficient
financial support and the bank was failing to honour the gold bonds to other gold miners
them despite lobbying through the Zimbabwe Chamber of Mines
 BT claimed a deduction of a provision for bad debts for the year ending 31 December 2009
and wrote off the balance as a bad debt for the year ending 31 December 2010. .
 Zimra disallowed the amounts and also raised penalties and interest in terms of section 46.
 BT noted its objection in full against assessments, the Commissioner disallowed but the
additional tax was reduced from 40% to 10%.
 BT appealed to the court against the respondent's decision on 21 December 2012.
Legislation Considered
 Banking Act [Chapter 24:20]Bill of Exchange Act [Chapter 14:02] s 3(1), s 72, s 89(1)
 Finance Act [Chapter 23:04] s 14 (a)
 General Laws Amendment Act [Chapter 8:07] s 14
 Gold Trade Act [Chapter 21:03]Income Tax Act [Chapter 23:06] s 15 (2), s 65(1)
 Presidential Powers (Temporary Measures) (Amendment of the Reserve Bank of Zimbabwe
Act) Regulations 2010
 Public Finance Management Act [Chapter 22: 19] s 93
 Reserve Bank of Zimbabwe Act [Chapter 22:15] s 6, s 7, s13, s 63B
 Revenue Authority Act [Chapter 23:11] s 3
 State Loans and Guarantees Act [Chapter 22:13] s 4 (2)-[now repealed]
 Commissioner's Provisional General Ruling Conversion of Closing Balances for Tax
Purposes GN 274/2010
 Income Tax Act section 15(2) (g) (i) and (ii). Section 15(2)(g) provides as follows:
"The deductions allowed shall be:-
(g) The amount of any debts due to the taxpayer to the extent to which they are proved to the
satisfaction of the Commissioner to be bad, if such amount is included in the current year of
assessment or was included in any previous year of assessment in the taxpayer's income either in
terms of this Act or a previous law".
Competing arguments
The taxpayer
 That the bonds were security for payment and not an investment. .
 That the central bank lacked the legal authority to issue bonds and those bonds had no legal
standing and were unlawful and void.
 That the bonds did not preclude it from claiming the debt as a doubtful debt or bad debt.
 That it did not see value in pursuing litigation because it was not possible to sue the central
bank and get satisfactory judgment. In any case, any judgment obtained would be a brutum
fulmen in the face of s 63B of the Reserve Bank Act [Chapter 22:15], which precluded the
attachment and execution of the central bank's assets to satisfy such judgment.

 That when the monetary policy statement was announced in January 2009, s 4 (2) (a) of the
State Loans and Guarantees Act [Chapter 22:13] reposed the power to issue bonds in the
State acting through the Minister of Finance.
 That Act was repealed on 2 April 2010 by s 93 of the Public Finance Management Act
[Chapter 22: 19]. In terms of s 54(3) of the new Act, the power to issue bonds remained with
the Minister of Finance. The two Acts did not clothe the central bank with power to issue
bonds.
 That the issuance of bills, notes and other obligations by the central bank are subordinated to
the provisions of s 13 of the Act and limited to the discounting of bills of exchange and
promissory notes for banking institutions that hold an account with the central bank. While s
13 (1) (b) of the Reserve Bank Act allows the central bank to discount bills, notes and other
debt securities issued by it, these must again be in respect of a banking institution that holds
an account with it.
 That the bonds issued in this matter by the central bank were little different from a bill of
exchange or a promissory note or even a post-dated cheque to pay an outstanding debt.
 That lack of authority invalidated the bonds ab initio and every transaction founded on them
was incurably bad.
 That the claims for the deductions for both doubtful and bad debts in the two respective years
were correctly made.
The Commissioner
 That the outstanding amount in each of the years thereafter changed its character by
conversion from being a debt to an investment
 That the debt was capital debt as opposed to revenue debt against the opposing view by the
taxpayer that the gold sales were income even though payment had not yet been received.
 That the debt was converted into an investment by the Special Tradable Gold-backed Foreign
Exchange Bonds and that the acceptance of the conversion constituted a full repayment of the
debt, which precluded the appellant from invoking the provisions of s 15 (2) (g) of the Act.
 That although the conversion of debt into bonds was null and void, an unlawful act had valid
legal consequences until set aside by a court of competent jurisdiction.
Court’s Decision
 That the creation of the bonds merely constituted a unilateral rescheduling of the debt and that
the debt was due for payment on the delivery of the gold bullion to which it related in 2008.
 That the appellant established on a balance of probabilities that there was a likelihood that the
debt would not be paid by the central bank in the course of 2009.
 That the taxpayer established on a balance of probabilities all the three elements necessary to
qualify the claim for deduction as a provisional bad debt.
 That the debt was due and payable during that year and the purported gold bonds were null
and void. They were found on a law which did not exist and could not constitute a payment
for the debt.
 That a debt does not become an investment merely because it also records terms of payment
and that writing it off as a bad debt does not extinguish it.
 That requisite elements for a bad debt found in s 15 (2) (g) were satisfied by the appellant.
 That the interest and penalties imposed by the Commissioner be set aside.
 That BT be entitled to deduct appeal costs in terms of s 15 (2) (aa) of the Income Tax Act.
 That on balance of probabilities public authorities cannot invoke the doctrine of invalidity of
their own actions for their own benefit; to the detriment of private citizens and are deemed to
have discharged their duty once the decision made is communicated to the private citizen.
 That in the absence of statutory authority to issue bonds; the bonds were not lawful tender and
cannot discharge a debt. They remain at best acknowledgments of debt.
It was ordered that:-

1. The amended assessment be set aside and respondent is directed to issue to the
appellant an Amended Assessment for year ending 31 December 2009 allowing the
claim for an allowance in respect of the doubtful debt due to appellant by the Reserve
Bank of Zimbabwe in the sum of US$ 2 391 147 resulting in the taxable income of
the appellant being US$2 303 262 and discharging the penalty imposed on the
appellant;
2. The amended assessment for year ending 31 December 2010 be set aside and
respondent is directed to issue to the appellant an Amended Assessment for year
ending 31 December 2010 allowing the claim for a deduction in respect of the bad
debt due to the appellant by the Reserve Bank of Zimbabwe in the sum of US$1 032
382.00 and discharging the penalty imposed on the appellant.
3. The respondent shall forthwith reimburse the appellant the additional principal
amount and interest of the amended assessments of income tax in the sum of US$ 687
106.
4. The costs incurred by the appellant in respect of the objection and this appeal, as
taxed by the Registrar, shall be allowed as a deduction in terms of section 15 (2)(aa)
of the Income Tax Act [Chapter 23:06]
Conclusion
 The three conditions for deductibility of bad debts were met namely
- The amount claimed must be due and payable
- The commissioner considers (is satisfied that) the amount is unlikely to have been
recovered at the end of the financial year
- The amount must have been included in the taxable income of the taxpayer in the
current or any previous year of assessment
 The debts were irrecoverable because the bank was in a serious financial trouble. Thus, the
bank could not get financial support from Treasury and owed a number of suppliers.
 The appellant’s claim had been outstanding for more than 26 months and the purported gold
bonds had been issued and rolled forward so many times. Thus, the fact that a debtor
involuntarily postpones paying its debt may be a clear indication that the debt is irrecoverable.
 Also, when a creditor is not permitted to attach or execute judgment against a debtor or when
it is financially unproductive to sue for a long outstanding debt is a proof that the debt is
irrecoverable.
 However, the current practice of the Commissioner is that he needs to be satisfied that the
taxpayer has exhausted all recovery measures and has even sued for the debt. Thus, the taxpayer
must take steps that include written summons, legal proceeding, and recovery actions following
acquiring a judgement or civil imprisonment.
 Evidence often required by the Commissioner General includes the debtor being declared
insolvent, died without leaving sufficient assets, or in the case of a company is under judicial
management or in liquidation with no sufficient assets from which to pay debts

Authority Announcement
ZIMRA Commissioner General’s comment on tax amnesty
The Commissioner General in his 27th
February 2015 press conference indicated that the local
economy has been facing challenges for the past decade due to a number of factors such as liquidity
constraints, power outages and low industrial capacity utilization and these challenges are affecting
the industry’s ability to settle its tax obligations. Accumulated tax arears are over US$1 billion.
On revenue performance, the following are the summary statistics as highlighted by the
Commissioner General:
Collection (US$Billion) Target (US$Billion) Variance
2014 Full year 3.6 3.82 6%
2015 Jan- Feb 15 0.47 0.54 14%
The 2015 tax revenue budget is US$3.76 billion.
He further alluded that the current revenue performance requires extra-ordinary measures. He stressed
that the tax amnesty was one such measure which aims at giving relief to taxpayers and while at the
same time cultivating a culture of voluntary compliance. Tax amnesty is also meant to spread the tax
burden amongst a wider base and facilitating the provision of more accurate data on every level of
economic activity.
The Commissioner General reported that as at 27 February 2015 only 1,471 applications had been
received and of these 159 were rejected mainly because of incomplete information and making
declarations on amounts that would have already been assessed
Comment
The government is desperate for cash and tax amnesty is one such instrument that it is trying to use
to mobilise cash resources at the same time giving relief to offending taxpayers. It’s a genuine
measure for a desperate economy. Taxpayers are encouraged to freely participate and take this as
an opportunity to put their houses in order. Indications are that the Commissioner General would
not be sympathetic to those found on the wrong side after expiry of tax amnesty period. Further, the
fact that the Commissioner General is aware of the over $1billion tax arrears means that he is even
aware of the taxpayers who makes up this amount, although in our view part of the arrear could be
for those companies under liquidation or who have closed shop.
We foresee stern measures being taken against directors of troubled companies in the event that the
Commissioner General fails to collect the taxes in arrears. For example section 56 of the Income
Tax Act (Chapter 23:06) imposes a personal liability on a director or a shareholder if it is found that
the director or shareholder alienated or disposed property or money whilst tax remained
outstanding.

Tax amnesty- deadline extended
The Minister of Finance and Economic Development has extended the period for application of tax
amnesty to the 30th
of June 2015. See Appendix 2 for the details.
Background to tax amnesty
The tax amnesty was enacted through the Finance Act (No 2) of 2014 as read with the Regulations
published through SI 163 of 2014 and SI 17 of 2015. The reform is meant to make taxpayers pay or settle
their tax offences committed by them during the period from 1 February 2009 to 30 September 2014. Tax
offences cover non-payment of any tax or duty which is administered by the Zimra in terms of the
Revenue Authority Act (RAA), including non-submission of returns. The initial period for application
was from 1 October 2014 to 31 March 2015 and now extended to the 30th
of June 2015. Taxpayers can
settle their taxes from 1 October 2014 to 31 December 2015.
A discount of 5% is offered to taxpayers who settle their taxes early (see to SI 17 of 2015). The discount
is credited against the taxpayer’s future liabilities with Zimra. It is calculated on a simple interest basis as
follows:
PV = FV .
(1+r) n
Where:-
PV= the discounted value of the assessed tax.
FV= is the assessed liability
r = is the monthly interest rate derived by dividing the prescribed rate of 5% by 12 months in a
calendar year.
n = number of months between the date of payment of assessed tax and expiry of the amnesty period”
Tax amnesty allows taxpayers to settle transgressed taxes without being charged penalties and interest.
The person shall also not be prosecuted by the National Prosecuting Authority, to the extent of the
amnestied conduct. The civil penalty of $30 a day applicable on late submission of returns is also waived
completely.
Application for tax amnesty should be made by completing Form No. TAO1 and this is obtainable on
ZIMRA’s website (www.zimra.co.zw).
The amnesty is not available in cases where tax audit or investigation had commenced before 1
October 2014, with exceptions to cases:
 Where investigations commenced prior to 1 October 2014 and completed before that date. If
the investigations had not yielded any tax due, the investigated person may benefit under the
amnesty in respect of irregularities not uncovered by the investigations or audit.
 In respect of detention seizure, or forfeiture commenced before 1 October 2014.
 In respect of any other tax irregularities which had both been identified and the taxpayer
notified of them on or before 1 October 2014

The amnesty can be withdrawn and thereby nullified if a taxpayer makes a false declaration to the
Authority in his/her application o r fails to pay the covered tax liabilities in full and by the due
dates set out in the payment schedule form.
Comment
Tax amnesty is a genuine instrument for mobilising revenue in depressed economy. This is an opportunity
also for taxpayers to make disclosures of their tax and duty irregularities to Zimra while taking advantage
of a complete waiver of penalties and interest. Taxpayers may seek guidance of tax advisors to avoid
sending defective applications which might prove costly.
Note that there is a drafting error on the discount formulae with respect to the factor ‘n’. This has since
been communicated to the relevant authority.

April 2015 MTU

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