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Zimbabwe - Indirect Tax Guide

Zimbabwe - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Zimbabwe.

Explore the requirements and rules that apply to indirect taxes in Zimbabwe.

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General

Types of indirect taxes (VAT/GST)

VAT.

What is standard VAT/GST rate?

15 percent.

Are there any reduced rates, zero rates or exemptions?

Zero-rated supplies include:

  • export of goods except unprocessed hides (animal skins) which are taxed at 15 percent
  • foodstuffs and goods used for farming services
  • international transport and related services
  • sale of business as going concern
  • goods to a branch in an export country/jurisdiction
  • services physically rendered outside Zimbabwe
  • services rendered to non-residents under certain circumstances
  • patents and intellectual property for use outside of Zimbabwe
  • prescription medications.

Exempt supplies include:

  • financial medical and educational services
  • donated goods or services supplied by a not-for-profit association
  • residential accommodation
  • leasehold land to be used for residential purposes
  • land situated outside Zimbabwe
  • transport of fare-paying passengers by road or rail
  • water and electricity for domestic use
  • membership contributions paid to an employee organization
  • diesel, petrol, paraffin and Jet A1.


What are the general and specific place of supply rules, if applicable?

There are no specific place of supply rules.

A supply provided in Zimbabwe has its place of supply in Zimbabwe. If a supply is provided outside of Zimbabwe, it will be zero-rated.

VAT/GST registration

Who is required to register for VAT/GST?

A person making taxable supplies of goods or services which exceed or are expected to exceed a turnover of 60,000 US dollars (USD) in a 12-month period.

Is voluntary VAT/GST registration possible for an overseas company?

Yes.

Does an overseas company need to appoint a fiscal representative?

Yes.

Is VAT/GST grouping* possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly, where annual taxable supplies exceed USD240,000, and for those below this threshold, every 2 months. This will be set at the time of registration.

Can returns be filed and payments be made electronically?

Yes.

What are the exchange rate rules?

The ZIMRA official rates of exchange are used. These are normally found on the ZIMRA website indicated below.

Zimbabwe Revenue Authority

The primary currency is the Real-time gross settlement (RTGS) dollar.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No. To obtain a VAT refund, a VAT return should be submitted by the registered operator.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Input VAT cannot be deducted on:

  • entertainment
  • sporting, social or recreational club membership fees or subscriptions
  • acquisition of a motor vehicle
  • medical costs paid by medical schemes
  • VAT payable on exports of unprocessed hides (animal skins)
  • expenditure incurred for the purposes of making exempt supplies
  • non availability of proper tax invoices.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

12 months, the period can be extended at the discretion of the Commissioner.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

Per legislation, a refund should be paid to the taxpayer, however, with liquidity issues being experienced in Zimbabwe, refunds are offset against future payments and, in some cases, against other types of tax liabilities. Refunds generally trigger audits. The portion of refunds paid is low.

Invoices

Is a business required to issue tax invoices?

Yes.

Is it possible/mandatory to issue invoices electronically?

Fiscal tax invoices should be issued by means of fiscal tax devices.

Is it possible to issue recipient-created tax invoices?

Yes (prior written approval required).

Audits

Do tax audits take place on a regular basis?

Generally, all refund claims are audited and regular compliance audits are also conducted at least on an annual basis.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No (computerized audits are in the planning phase).

What penalties can arise from non-compliance?

The following non-compliance penalties and interest are levied:

  • up to 100 percent of the tax for late payment of VAT
  • 100 percent additional tax for fraud
  • fines may also be levied for other offences (false statement, obstruction). Interest is charged on outstanding VAT payments at 10 percent per annum.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

No.

Does a reverse charge mechanism apply?

Yes.

VAT is levied on all imported services at 15 percent.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

Recent legislation changes have extended VAT on imported services to included registered operators who offer taxable supplies. There have been inquiries as to the deductibility of input tax to which no clarity has been received to date.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

No.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

VAT on imported goods can be deferred by up to 180 days depending on the value of goods imported.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes.

Are rulings and decisions issued by the tax authorities publically available?

No.

Other indirect taxes

Are there other indirect taxes not commented on above?

Yes, other indirect taxes include:

  • customs and excise duties
  • transfer duty
  • stamp duty.

For further information please contact

Steve Matoushaya
Director, Tax
KPMG in Zimbabwe
T: +263 4 302 600
E: scmatoushaya@kpmg.com

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Zimbabwe, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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