adminIT is a truism that businesses are not fans of the tax man. They would give anything to avoid their obligations.
But as it is often said, there is nothing certain in life – except death and taxes. Put simply, taxes are unavoidable.
Whenever there is a business transaction, a certain portion must necessarily be remitted to the tax authorities.
But many companies seem to grapple with paying Value Added Tax, often resulting in them incurring huge principles and penalties.
As long as a company levies 15 percent VAT on its goods, that amount has to be remitted to the Zimbabwe Revenue Authority – these are not the company’s funds!
Most businesses, especially SMEs, often erroneously treat this VAT margin as part of their margin on income.
This is wrong. Such earnings should be treated as Output VAT to Zimra.
Every company that generates more than US$5 000 in revenue per month is obliged to remit VAT.
There is, however, need to register for VAT purposes in such circumstances. Only operators registered for VAT may charge it on supply of goods and services.
Failure to register for VAT constitutes an offence in terms of the VAT Act (Chapter 23:12).
It is unquestionable that if an audit is to be conducted, it will reveal that some SMEs are actually meeting this threshold but are actually not registered for VAT.
VAT incurred by a registered operator is known as Input tax.
When the registered operator in turn supplies goods or services to other persons (or traders), VAT is included on the price and this is known as Output tax.
The difference between Output tax and the Input tax is what is payable to Zimra.
The system is woven in such a way that you can only cheat the tax authorities for a while – the Input tax from other companies will eventually expose you if you are not paying your obligations.
Some businesses actually create a separate account for VAT so that when it is time to remit it they don’t have challenges.
It is prudent to remember that VAT money belongs to the tax-man.
Equally, there is urgent need to ensure that VAT payments – either those that are made monthly or those that are made after every two months – are made timorously.
Always ensure that you are aware of the dates you are supposed to pay for your VAT as late payments can result in unnecessary penalties and interest.
Companies must also be familiar of the category they fall in, either A,B or C.
The concept of paying tax is simple: You only pay based on what you received; it should not be hard for companies to comply.
If it is nil, one simply submits nil returns.
Ignorance and lack of knowledge has resulted in many companies accruing very huge debts to Zimra.
Some accountants, who give the wrong tax advice to firms, are also to blame.
Zimra has a fairly interactive website and they are always ready to assist members of the public.
Do not be ignorant and make costly mistakes.
One of the most common mistakes that often put companies in trouble are delayed payments.
In such circumstances, companies have to inform Zimra in writing at least 10 days before the due date.
Again, some companies are not even sure of what is exempt from VAT and what qualifies as zero-rated goods.
A simple call or visit to Zimra wouldn’t hurt as ignorance can only lead one into deeper problems. Realising that you owe more to Zimra than you expected is dangerous.
Tax matters are serious; do not take them lightly.
It will be wiser to appoint an individual with adequate knowledge on tax issues to ensure that they prepare and submit your returns on a monthly basis, and ensure that your tax records are always up to date.
Using the Input tax, Zimra can be able to see that one is not remitting tax.
For example, if a firm supplies goods to a big retailer and charge VAT, at the end of the month when the retailer submits its input schedule to Zimra, authorities can be able to easily pick up that the firm owes Zimra.
And this can be regarded as a false declaration. Evading tax is a serious offence.
But it must be also considered that Zimra auditors can make mistakes, and if one feels that he or she hasn’t been treated fairly, then he or she has the right to appeal or object the findings.
You however should have solid facts and adequate information to support your claims.
In situations where your company no longer meets the required threshold, you can de-register VAT and stop charging VAT on your invoices.
It is not always about having a tax clearance certificate or having a VAT certificate that matters.
Zimra has to be commended for the new tax system that updates tax clearance after every six months as this pushes companies to comply.
Taurai Changwa is an articled accountant, ACCA finalist, and MD of SAFIC Consultancy. He writes in his personal capacity and can be contacted at [email protected], Facebook page SAFIC Consultancy, and WhatsApp number 0772374784.
Bongani Ndlovu
Online Reporter