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Godknows Hofisi
Many readers have asked me to write about how a conveyancer makes an application for a Capital Gains Tax (CGT) clearance certificate to ZIMRA when a seller and purchaser have completed a sale and purchase of an immovable property such as a house.
In this article, I give some insights.
Key requirements for Capital Gains Tax application
It is standard procedure that when a seller and purchaser conclude a transaction involving the sale and purchase of an immovable property such as a house they appoint a conveyancer to attend to the processes required to pass the transfer of the property from the seller to the purchaser.
There are two processes involved. One being making an application to ZIMRA and attending interviews to obtain the CGT clearance certificate.
Another is lodging the transfer papers in the Deeds Office where the current Deed of Transfer (title deed) is replaced with one which is in the name of the purchaser.
In other words, ownership is transferred from the seller to the purchaser through the new title deed.
The following documents constitute an application to ZIMRA for CGT clearance with variations depending on who is selling or the circumstances of the sale. In a standard sale, the following documents make up the application submitted by a conveyancer to ZIMRA:
CGT 1 Form (Return for Remittance of Capital Gains Tax). This is a standard form issued by ZIMRA and requests important information, most of which is found in the agreement of sale.
Rev 1 Form (Application for new registration). This is completed in the case of new registration.
Original agreement of sale for the property. This gives important information to ZIMRA on the seller, purchaser, description of the property, price and other terms and conditions.
Certified copies of the current deed of transfer.
Certified copies of identity documents of the seller and purchaser. For natural persons or individuals identity documents such as national identity card or passport are normally used. For juristic persons such as companies the conveyancer provides constitutive documents such as certificate of incorporation, CR5 (registered address), CR6, formerly CR14 (register of directors). In the case of a trust the trust deed is provided.
Identity documents of representatives of juristic persons such as companies or trusts are provided.
In the case of juristic persons, copies of resolutions passed by the directors or trustees to sell or purchase are provided.
Where a natural person ie an individual is being represented by another person he or she has appointed, the conveyancer should submit the Special Power of Attorney issued in favour of the representative.
Proof of residence of the seller and purchaser usually in the form of utility bills.
Bank statement for the seller.
Proof of payment of the purchase price. This could be evidence of bank transfers, receipts, etc.
In the case of a sale out of a deceased estate there are important documents issued by the Master of the High Court of Zimbabwe such as Letters of
Administration appointing the Executor Dative or Executrix Dative, Authority to sell the immovable property and Consent to transfer the immovable property.
ZIMRA interviews
After the conveyancer has filed the application ZIMRA then interviews the seller and the purchaser or their authorised representatives. The tax authority then comes up with a documented assessment of the CGT to be paid, if any. When the seller pays the assessed CGT ZIMRA then issues a CGT clearance certificate.
Conclusion
The above gives a quick overview of the key documents making up an application CGT clearance certificate a conveyancer submits to ZIMRA on behalf of clients. This helps clients to appreciate the process and prepare the necessary documents.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. /He has extensive experience in industry and commerce and is a former World Bank staffer in the Resource Management Unit. He writes in his personal capacity./He can be contacted on +263 772 246 900 or [email protected]
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