Harare GMT +2
EY Street address: Mail address: Angwa City P.O. Box 702 or 62 Cnr Julius Nyerere Way Harare Kwame Zimbabwe Nkrumah Avenue Harare Zimbabwe
Indirect tax contacts
Nigel Forsgate +263 (4) 750-905-14 +263 (4) 750-979 nigel.forsgate@zw.ey.com
Shelton Kusotera
+263 (4) 750-905-14 +263 (4) 750-979 shelton.kusotera@zw.ey.com
Ndakaitei Chimutashu +263 (4) 750-905-14 +263 (4) 750-979 ndakaitei.chimutashu@zw.ey.com
Sifelani Nhliziyo +263 (9) 76111 sifelani.nhliziyo@zw.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Value-added tax (VAT)
Date introduced 1 January 2004
Trading bloc membership African Continental Free Trade Area (AfCFTA)
Common Market for Eastern and Southern Africa Southern African Development Community
Administered by Commissioner General, Zimbabwe Revenue Authority (ZIMRA) (http://www.zimra.co.zw)
VAT rates
Standard 14.5%
Other Zero-rated and exempt
VAT number format 10001111 eight numeric characters beginning with a 1 VAT return periods Monthly or bimonthly Thresholds
Registration ZWL7.8 million
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and services in Zimbabwe by a “registered operator” (see Section C)
• The importation of goods into Zimbabwe by any person
• The supply of imported services by any person
• The supply of goods and services through an auctioneer
Withholding VAT. Value-added withholding tax on taxable supplies is at the rate of one-third of the VAT payable on an invoice. With effect from 1 January 2021, a VAT withholding tax agent can be appointed to withhold and pay VAT in the currency in which goods and services were purchased. VAT withholding tax is considered not paid if paid using a different currency than the currency specified.
C. Who is liable
A “registered operator” is required to account for output tax on all goods and services supplied unless the supply is exempt or zero-rated.
A “registered operator” is a person who is or is required to be registered under the VAT act. The person must be trading wholly or partly in Zimbabwe. A person includes a public authority, local authority, company or body of persons, whether corporate or unincorporated, the estate of a deceased or insolvent person and a trust fund.
The VAT registration threshold from 2012 to 2019 was USD60,000. With effect from 1 January 2020 to 31 December 2020 the threshold was Zimbabwean RTGS dollar 1 million. With effect from 1 January 2021 the threshold is ZWL7.8 million. A taxable person must notify ZIMRA of its obligation to register for VAT within 30 days of becoming obligated to register.
The auctioneer through whom a non-registrant supplies goods and services is responsible for the VAT on the supply of such goods and services.
Exemption from registration. Traders of exempt supplies and supplies by exempt bodies under the Geneva Convention are exempt from VAT registration in Zimbabwe.
Voluntary registration and small businesses. The law requires a trader to satisfy the Commissioner General that they are eligible to register for VAT before it is approved There are no special rules for small businesses. The approval is on a case-by-case basis. A company cannot apply for VAT registration for the sole purposes of recovering input tax.
Group registration. Group VAT registration is not allowed in Zimbabwe.
Non-established businesses. A “non-established business” is a business that does not have a fixed establishment in Zimbabwe. A non-established business that makes supplies of goods or services in Zimbabwe must appoint a representative to account for VAT on its behalf. The representative must be resident in Zimbabwe.
Tax representatives. Foreign companies or persons who do business in Zimbabwe but do not reside in Zimbabwe can appoint resident Zimbabweans to act as their representatives. The repre sentatives can be held responsible for tax purposes on behalf of their principals in their represen tative capacities only.
Reverse charge. The reverse charge is applicable with regard to imported services and where a price can be ascertained by the customer and not the supplier. For example, on the sale of farm produce where weighing or grading must be carried out before a price is set. This requires prior approval of the Commissioner.
An importer of goods is required to pay VAT. The recipient of “imported services” is required to self-assess and to declare the tax to ZIMRA. VAT on imported service is due on the 25th of the following month. Prior to this, VAT on imported services was due 30 days from date of invoice or date of payment, whichever is earlier.
Domestic reverse charge. Applicable in limited situations. The Commissioner’s approval is required before it is applied. The domestic reverse charge applies to the following:
• Supplies of commodities
• Supplies made within the mining sector
• Supplies of returnable containers (upon agreement between the supplier and customer)
For such supplies, the customer is required to self-account for the VAT due. It is also allowed to self-bill for the supplies made, as it is only the purchaser who can exactly quantify what and how much has been supplied, due to the nature of the supplies and sectors in scope.
Digital economy. With effect from 1 January 2020, foreign suppliers of satellite broadcasting services and electronic commerce operators to residents of Zimbabwe with at least annual income of ZWL1 million must register and account for VAT. See the Online marketplaces and platforms subsection below. This applies to both business-to-business (B2B) and business-toconsumer (B2C) transactions.
The supply of radio and television services from outside Zimbabwe to an address in Zimbabwe or of electronic service by an electronic commerce operator domiciled outside Zimbabwe to a person resident in Zimbabwe shall be deemed to be a supply made in Zimbabwe. The VAT is chargeable at the standard rate of 14.5%. This means operators are supposed to charge VAT at the standard rate. The obligation to charge and account for tax shall be that of the supplier or their duly appointed representative in Zimbabwe. Operators are required to appoint a representative taxpayer who will be responsible to account for the tax.
There are no other specific e-commerce rules for imported goods in Zimbabwe.
Online marketplaces and platforms. From 1 January 2020, VAT is due on supplies made through online marketplaces and platforms in Zimbabwe. Electronic commerce suppliers are required to complete the Rev 1E application form to register with ZIMRA. It is mandatory to appoint a local representative who will be responsible to discharge the obligations of the nonresident supplier.
Registration procedures. Registration with ZIMRA must be made within 30 days of meeting the registration threshold. Registration can be done manually (i.e., by paper) or online. The regulator requires a minimum of five working days to process the VAT registration application form. In line with COVID-19 restrictions, with effect from March 2020, registrations are done online registration or emailing of registration forms.
Application for registration is made on form REV 1. The following documents should be attached to the REV 1:
• VAT 1
• Company registration documents or national identity document of public officer
• Bank statements (at least three previous months)
• Location of the company
• Invoices issued in the last three months prior to registration
• Appoint a public officer or local representative
Deregistration. A registered operator may apply to be deregistered if the taxable turnover of goods or services in a period of 12 months does not exceed RTGS7.8 million or is not expected to exceed RTGS7.8 million in the period of 12 months commencing at the beginning of any tax period.
Taxable person may object to the Commissioner’s decision to refuse to register or deregister for VAT.
Changes to VAT registration details. A taxable person must notify the Commissioner on form VAT4 of any changes to its VAT registration details within 21 days of the change taking place. Documentary proof should be attached to the notification.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 14.5%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods and services, unless a specific measure provides for the zero-rate or an exemption.
A special set amount is charged on exports of unbeneficiated hides and select minerals, as fol lows:
• Hides: the higher of USD0.75 or 14.5% of the gross value
• Lithium: 2% of export proceeds
• Platinum: currently suspended
Withholding VAT. Value-added withholding tax on taxable supplies is at the rate of one-third of the VAT payable on an invoice.
Examples of goods and services taxable at 0%
• Exports of goods (other than unbeneficiated hides and unbeneficiated platinum) and services that would otherwise be standard rated. This includes exports of financial services other than short-term insurance
• Certain supplies of goods that are used exclusively in an export country
• International transport of goods and services
• Sales of businesses as going concerns to registered persons
• Gold sales to the central bank, Fidelity Printers and Refiners, and commercial banks
• Services supplied outside Zimbabwe to foreign head offices by Zimbabwean branches or to nonresident persons that are outside Zimbabwe when they are rendered
• Tourism-related services (other than accommodation) rendered by designated tourist facilities, such as hotels, tour operators and car-hire companies
• Intellectual property rights for use outside Zimbabwe
• Certain foodstuffs except rice, margarine, cereals, mahewu, pork, beef, fish, chicken and pota toes, which are now exempt
• Supply of domestic electricity
• Certain goods used for agricultural purposes, such as animal feed, fertilizers, seed, animal remedies, pesticides, plants, tractors and, when exported, specified agricultural implements
• Prescription medicines
• Building bricks
• Goods used by disabled persons
• Fixed charges on commercial and domestic electricity
• Supply of pipeline transportation services
• Livestock
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Accommodation provided to local tourists for period 1 July 2021 to 30 June 2022
• Food and beverages served at places of accommodation, shuttle and car rental services, sport fishing, safari operations, recreational services provided by companies registered with the Zimbabwe Tourism Authority, marine and ferry services, and touring and exploring national museum and monuments provided to local tourists for period 1 July 2021 to 31 July 2022
• Local supplies of financial services (as defined) including services supplied by banks, building societies and insurance companies, but excluding the supply of short-term insurance by insur ance agents or brokers
• Medical services
• Educational services by institutions registered under the ministry of education or higher education
• Transport of fare-paying passengers by railway or road
• Supplies of donated goods or services by nonprofit (charitable) bodies
• Supplies of immovable property located outside Zimbabwe
• Rental of residential accommodation
• Staff accommodation
• Water supplied through a pipe for domestic use
• Owners’ rates charged by a local authority (a levy charged by a local authority based on the value of property)
• Commission charges on tobacco sales on auction floors
• Tobacco supplied on auction floors
• Sale and import of leaf tobacco
• Petroleum oils
• Revenue arising from the operation of a temporary casino license in accordance with the terms of the lotteries and gaming act
• Protective farming clothing, including gumboots, raincoats and gloves used for agricultural purposes
• Eggs, vegetables, fruits, rice, margarine, lactose and mahewu (including cereals, pork, beef, fish, chicken and potatoes, as explained above)
Option to tax for exempt supplies. Option to tax for exempt supplies is not allowed in Zimbabwe.
E. Time of supply
The time of supply is the earlier of the following:
• The issuance of an invoice by the supplier or the recipient with respect to the supply
• The receipt of a payment of the consideration by the supplier with respect to the supply
• In the case of supply of an immovable goods, at the time the recipient takes possession of said goods
• In the case of a supply of a movable good, at the time of its removal from the place of sale
• In case of a supply of a service at the time the service is performed
Other time of supply rules apply to various situations, such as change of use, repossessions, bet ting transactions and lay-by sale agreements (the purchaser makes partial payments over time, and when a predetermined amount has been reached, the goods are released to the purchaser).
Deposits and prepayments. The time of supply for prepayments is the date when payment is received. If deposits form part of the consideration, the time of supply is when the deposit is paid or received. The time of supply for a deposit may be delayed if the supply of goods or service is conditional.
Continuous supplies of services. The time of supply for periodic supplies is the earlier of the date on which the payment is due, the date on which payment is received or the date on which an invoice relating only to that payment is received.
Goods sent on approval for sale or return. The time of supply is dependent on the “cooling off period” under the agreement of sale. If goods are returned during a cooling off period, there is no supply. The date of decision to buy during the cooling off period is the time of supply. If goods are not returned, the time of supply is on the day the cooling off period expires.
Reverse-charge services. These are permissible subject to the Commissioner’s approval. As the VAT due on imported services is accounted for by way of the reverse-charge mechanism (i.e., the customer self-accounts for the VAT), the tax point for imported services is the earlier of the receipt of the invoice or receipt of payment.
Leased assets. There are no special time of supply rules in Zimbabwe for supplies of leased assets. As such, the general time of supply rules apply (as outlined above).
Rental agreements. The time of supply for rental agreements is the earlier of the date on which the payment is due or the date on which payment is received.
Installment credit agreements. For installment credit agreements, the supply is deemed to take place at the earlier of when the goods are delivered or when a payment of the consideration is received.
Immovable property. The time of supply for the supply of fixed property is the earlier of the date on which the change of ownership is registered in the deeds office or the date of receipt of a payment of the consideration. If the sale is settled over a period of time, VAT is payable on each installment.
Imported goods. VAT is paid at the earlier of the time of importation or on removal of goods or bond.
Supplies between related persons. Two value of supply rules apply for supplies between related persons. Where both are VAT registered, the value of supply is any amount agreed to. Where the customer is not registered or not required to register, the value of supply is the open market value of the supply.
F. Recovery of VAT by taxable persons
A registered operator may claim input tax (that is, VAT charged on goods and services supplied to it for business purposes) by deducting it from output tax, which is VAT charged on supplies made. Input tax may be deducted if all the following conditions are satisfied:
• The expenses are incurred in the making of taxable supplies
• The claimant has a valid tax invoice or bill of entry (imports)
• The claiming of input tax deduction is not specifically prohibited by the VAT Act
• Only fiscalized tax invoices will be used for input tax claims with effect from 1 January 2022. The invoice must have the words “fiscal invoice” displayed in a prominent place on the face of the invoice. This is designed to force registered operators to fiscalize and interface fiscal devices with ZIMRA to facilitate real-time transmission of data. Tax clearance certificates will not be issued to registered operators whose fiscal devices are not interfaced with ZIMRA serv ers
• The time limit for a taxable person to reclaim input tax in Zimbabwe is 12 months. Invoices can be claimed within 12 months from the date of the invoice’s issue. As part of transitional mea sures, an invoice issued before 31 December 2021 may be used to claim input tax no later than 31 March 2022
• Input tax includes VAT charged on goods and services purchased in Zimbabwe and VAT paid on imports of goods and services
Withholding VAT. In addition, a registered operator claims a deduction of the 1/3% VAT withheld by designated value-added withholding tax agents upon payment by the agents to the registered operator for supplies of goods and services.
Nondeductible input tax. Input tax may not be deducted where the supplies were used for any purposes other than the making of taxable supplies.
Where exempt supplies are more than 10% of total supplies, input tax attributable to the exempt supplies is not deductible. Where exempt supplies are less than 10% of taxable supplies in a tax period, 100% input tax is deductible.
Examples of items for which input tax is nondeductible
• Input tax on the hire, purchase and importation of a passenger motor vehicle
• Fees or subscriptions paid by registered operators with respect to memberships in clubs, asso ciations or societies of a sporting, social or recreational nature
• Amounts with respect to goods or services acquired for the purposes of business or staff entertainment (subject to certain exceptions)
• VAT payable on exports of unbeneficiated hides and unbeneficiated platinum
Examples of items for which input tax is deductible (if related to a taxable business use)
• Maintenance and repair costs of passenger motor vehicles
• Purchase, hire and maintenance costs of non-passenger motor vehicles, such as vans and trucks
• Cost of inputs made in the supply of food and leisure for which VAT is chargeable
• Expenses incurred by registered operators in the making or importation of taxable supplies, such as trading stock, raw materials, administration expenses and marketing costs
Partial exemption. VAT directly related to purchases with respect to the making of exempt sup plies is not recoverable as input tax. A registered operator that makes both exempt and taxable supplies (mixed supplies) is required to apportion input tax claim pro rata.
In Zimbabwe, if VAT relates to the making of both exempt and taxable supplies, deductible input tax is determined using a two-stage calculation, which is described below.
Direct attribution. For direct expenses, the first stage is to identify expenses incurred in making taxable supplies and those incurred in making exempt supplies. VAT paid on expenses incurred in making taxable supplies is deductible as input tax while VAT paid on expenses incurred in making exempt supplies is not deductible.
Apportionment. For overheads, the turnover method or another apportionment method acceptable to the ZIMRA must be used to allocate the VAT between taxable supplies and exempt supplies. Input tax related to taxable supplies is deducted, while input tax related to exempt supplies is not deducted. If taxable supplies exceed 90% of the total supplies made by a registered operator, all the VAT incurred by the registered operator is deductible as input tax.
Approval from the tax authorities is not required to use the partial exemption standard method in Zimbabwe. Special methods are not allowed in Zimbabwe.
Capital goods. The sale of capital goods is subject to VAT. Equally input tax incurred on capital goods that are used in the producing taxable supplies is deductible. Where capital goods are used to produce exempt supplies and taxable supplies, input tax claimed proportionately. The input tax amount shall bear the ratio of intended use of the goods. If goods are used for more than 90% to produce taxable supplies, they are regarded as having been acquired or used wholly for the pur pose of making taxable supplies. In the event of change of use of the capital goods, an adjustment must be made to reflect the usage change.
Refunds. If the amount of input tax recoverable in a tax period exceeds the amount of output tax payable in that period, the excess is refunded by the Commissioner. Amounts below ZWL1,000 may be claimed as a credit on subsequent VAT return. The Commissioner does not refund amount below ZWL1,000.
Any VAT refund can be utilized to settle other tax liabilities.
Pre-registration costs. VAT incurred on capital goods prior to VAT registration is claimed as input tax deduction on the first VAT return upon registration. The goods should have been used for making taxable supplies. There is no time limit for such an input tax claim. However, input tax on consumables stocks, can only be claimed for prior periods not exceeding six months.
Input tax cannot be recovered on services prior to VAT registration.
Furthermore, costs incurred six months prior to incorporation of a company or in connection with the in-corporation of a company qualify for input deduction provided the goods and ser vices were acquired solely for the purpose of a trade to be carried on by the company, and the purchaser is reimbursed by the company for the whole amount of the consideration for the goods and services.
Bad debts. A taxable person is permitted to claim relief for the VAT on bad debts written off. The taxable person is required to satisfy the Commissioner that they have taken all reasonable steps to collect the bad debt without success. The amount should be included in the prior period VAT returns and should still be due to the taxable person.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Zimbabwe is not recoverable.
H. Invoicing
VAT invoices. A registered operator must provide a VAT invoice to the recipient for all taxable supplies made within 30 days after the date of supply. In certain circumstances, subject to ZIMRA approval, the recipient of goods and services issues the VAT invoice to the supplier. The VAT Act requires invoices to be issued through fiscal devices linked to the Revenue Authority online.
All invoices should have the words “fiscal tax invoice” displayed in a prominent place to qualify for an input tax deduction, with effect from 1 January 2022.
All VAT-registered taxable persons are required to install (at the time of registering for VAT) electronic registers or electronic signature device, with prescribed specifications to record tax able transactions. They must have real-time interface with ZIMRA. Fifty percent of the cost of acquiring these prescribed, “fiscalized” electronic registers is deductible from VAT payable.
Credit notes. The issuance of a credit or debit note is permitted. It is issued by the supplier and the customer where permission was received from the Commissioner.
A credit or debit note must contain the words “credit note” or “debit note,” as well as the full VAT invoicing requirements. It must also be refenced to an invoice it is correcting, as well as the reasons for its issuance.
Electronic invoicing. Electronic invoicing is allowed in Zimbabwe, but not mandatory. However, there is no provision for electronic invoicing in the VAT law. If an invoice is issued electroni cally the recipient should print and file a printed copy.
Simplified VAT invoices. A simplified VAT invoicing system is used in exceptional circumstances. This is subject to the Commissioner’s approval, and then an agreement may be used as an invoice, even though it does not have all features of a full VAT invoice.
Self-billing. Self-invoicing is allowed in Zimbabwe, subject to approval by Commissioner. Selfbilling may apply to the following:
• Supplies of commodities
• Supplies made within the mining sector
• On agreement between supplier and customer
Proof of exports. Exports can be classified as direct or indirect exports.
Direct exports arise if the registered operator is responsible for consigning or delivering the goods to an address in an export country. These exports can be zero-rated if the documentary require ments are met.
Indirect exports arise if the registered operator does not consign the goods to an address in an export country but instead delivers them to the purchaser that is responsible for taking them out of the country. The registered operator must satisfy ZIMRA that it will comply with all exchangecontrol regulations relating to the export of goods. If ZIMRA is satisfied that the goods were not taken out of Zimbabwe, the seller of such goods is liable to VAT at a rate of 15%.
The registered operator must provide proof of export to zero-rate the supply. The required documents are as follows:
• Tax invoice
• Debit and credit notes
• Sales agreement
• Lease agreement
• Contract document
• Export documents bearing a ZIMRA stamp at the point of exit or placement of goods on rail, airline or post office
• Acquitted Customs Declaration Form No 1 (CD1) showing receipt of export proceeds
• Other receipts if applicable
• Other documents acceptable to ZIMRA
Foreign currency invoices. Zimbabwe uses multiple currencies. With effect from 1 January 2019, VAT is paid using the currency received from the customer. Zimbabwe’s functional currency is the Zimbabwe dollar (ZWL). In cases where another currency other than the USD is used, the international cross rate is used to determine the USD equivalent. Invoices may be issued in any currency. However, payments to the Revenue Authority in cases of other foreign currencies other than USD should be converted to USD at the international cross rate.
As part of measure to enforce payment of VAT in the currency of receipt, the following measures were introduced with effect from 1 December 2020:
• Registered operators to configure fiscal devices to capture all transactions in the currency of trade
• Interface systems with the ZIMRA server with effect from 1 December 2020
• Registered operators required to issue invoice in currency of trade
• Failure to comply – the registered operator faces exclusion from buying foreign currency from weekly foreign currency auctions conducted by the Reserve Bank of Zimbabwe. The registered operator may be blacklisted from participating in the weekly foreign currency auctions for noncompliance with payment of tax in foreign currency where goods and services are sold in foreign currency
Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons in Zimbabwe. As such, full VAT invoices are required. However, all VAT-registered tax able persons are required to install fiscal devices at all points of sale.
Records. The following records should be maintained:
• Sales and purchases records
• A record of all goods and services supplied by or to the registered operator showing suppliers or agents in sufficient detail
• A record of all importations of goods and documents relating thereto
• The charts and codes of account, the accounting instruction manuals and the system and pro gram documentation
• Any documentary proof required to be obtained and retained
In Zimbabwe, VAT books and records must be held within the country at the local registered office.
Record retention period. VAT records must be held for a period of six years. In cases of fraud or misrepresentation, the Revenue Authority may open the record retention period beyond six years. The Companies Act provides that records should be retained for eight years.
Electronic archiving. Electronic archiving is allowed in Zimbabwe, but not mandatory. However, there is no provision for electronic archiving in the VAT law. Taxable persons are required to maintain physical archiving (i.e., paper, computer print outs). Where records are electronically archived, the system should have capacity to produce printed copies on request.
I. Returns and payment
Periodic returns. VAT returns can be filed monthly or bimonthly in Zimbabwe. The filing fre quency is split into three categories, depending on levels of annual taxable supplies.
For monthly returns there is one category – C. All registered operators with annual taxable sup plies greater than RTGS19.2 million have a monthly tax period.
For bimonthly returns, there are two categories – A and B. Category A is the two months starting with an even number and ending with an odd one, e.g., December/January. Category B is the two months starting with an odd number and ending with an even one, e.g., January/February. The threshold for category A and B is RTGS7.8 million to 19.2 million.
Additionaly, category D is allocated to traders whose income is discretely received, such as income form pastoral activities.
In terms of the filing deadline, VAT returns must be filed by the 25th day of the month following the tax period. If the due date falls on a Saturday, Sunday or public holiday, the due date is the last business day before the 25th.
Periodic payments. The payment of VAT and submission of the returns are done concurrently, by no later than the 25th day of the month following end of tax period. Payment of VAT is done through bank transfer or bank deposits or other online platforms. The Commissioner of Taxes does not accept cash payments.
VAT deferment is allowed on imported capital equipment. Deferment ranges from 90, 120 or 180 days from the date of importation. To qualify for this deferment, the value of such imported plant, equipment and machinery must be USD100,000 to USD1 million (90 days), USD1 million to 10 million (120 days) or more than USD10 million (180 days).
Electronic filing. Electronic filing is mandatory in Zimbabwe for all taxable persons. VAT returns must be submitted through the Zimbabwe Revenue Authority web portal. The exception is where the return has failed to go through the revenue authority e-services portal (for example, due to a technical issue). In this case the return must be scanned and emailed instead.
Payments on account. The law does not specifically provide for payments on account. However registered operators may apply to the Commissioner for specific payment terms. Interest at 25% is charged for payments received after due date.
Special schemes. No special schemes are available.
Annual returns. Annual returns are not required in Zimbabwe.
Supplementary filings. Supplementary filings are only required at the instance of the Commis sioner, where revenue was understated.
Correcting errors in previous returns. VAT returns can be amended within a six-year prescription period. Registered operators (i.e., those who are registered or are required to be registered under the VAT Act) are encouraged to use voluntary disclosure provisions to reduce or eliminated penalty. A manual (i.e., paper) amended return is required to correct to correct errors. In case of additional tax payable interest at 25% is charged.
Digital tax administration. Real-time transactional reporting. All VAT-registered taxable persons are required to install (at the time of registering for VAT), electronic registers or electronic sig nature device, with prescribed specifications to record taxable transactions. Fifty percent of the cost of acquiring these prescribed, “fiscalized” electronic registers is deductible from VAT pay able. The law requires transmission of sales data online to ZIMRA through a server-to-server connection. Therefore, all transactions are transmitted to the ZIMRA on a real-time basis.
J. Penalties
Penalties for late registration. A person becomes liable to pay tax from the time that person first becomes liable to be registered. A penalty of up to 100% of the amount of VAT and 25% interest thereon is assessed for the period interval when the person first became liable to be registered and the late-registration date.
Penalties for late payment and filings. A penalty is imposed for late payment of VAT at a rate of up to 100% of the outstanding tax for each month. Additional tax equal to 100% of the relevant tax may be levied in cases of fraud.
With effect from 1 January 2019, the VAT Act is amended to allow payment of the principal amount first before payment of penalty and interest. Interest is charged on outstanding tax at a rate of 10% per year.
For late submission of VAT returns, a civil penalty of USD30 per day per tax return is imposed. Those daily penalties continue during the first 91 days that each return is in default. If the person continues to be in default after the 91 days, he or she shall be guilty of an offense and liable, on conviction, to a fine not exceeding level 14 (USD5,000) or imprisonment for a period not exceeding five years or to both the fine and imprisonment.
Where a taxable person received income in foreign currency but pays the tax in local currency or does not pay the tax at all, they are eligible to a primary civil penalty of twice the USD tax payable.
Penalties for errors. A civil penalty of up to USD25 per point of sale per day is charged for fail ure to use prescribed “fiscalized” electronic registers. A similar penalty is imposed on approved suppliers of electronic signature devices and fiscalized or non-fiscalized electronic registers who fail to supply them within six weeks of an order with payment in full.
Fines, imprisonment or both may also apply to various other offenses, including making false statements and obstructing a revenue officer.
Failure to pay in the prescribed currency will result in a penalty double the amount payable. Failure to pay the penalty will result in a civil penalty of USD30 per day that the penalty remains unpaid up to 181 days.
Failure to notify or late notification to the tax authorities of changes to a taxable person’s VAT registration details may result in a penalty of USD30 for each day the taxable person remains in default, not exceeding a period of 181 days. For further details, see the subsection above, Changes to VAT registration details.
Penalties for fraud. Any person or agent who with intent to evade the payment of tax or obtain a refund that they are not entitled to is liable for any of the following actions:
• Makes or causes or allows to be made any false statement or entry in any return
• Prepares or maintains or authorizes the preparation or maintenance of any false books of accounts or authorizes the falsification of records
• Gives any false answer to any request of information
• Make use of any fraud or false statement
• Issue erroneous or incomplete invoice, credit and debit note
They shall be guilty of an offense and liable to a fine of level 12 (USD3,000) or imprisonment not exceeding two years.
Personal liability for company officers. Company officers can be held personally liable for errors and omissions in VAT declarations and reporting in Zimbabwe only for fraudulent activities. See the Penalties for fraud subsection above for more details on what penalties can apply.
Statute of limitations. The statute of limitations in Zimbabwe is six years. If fraud and misrepresentation is not suspected, the prescription period is six years. Recent court rulings indicate that submission of a return with errors is considered misrepresentation. This interpretation creates a potential risk that assessments can be reopened beyond six years.