Online Reporter
Vusumuzi Dube, Deputy Radar Editor
BULAWAYO councillors and senior council officials could face additional tax liabilities on benefits ranging from council vehicles and school fees to discounted residential stands, accommodation and gym facilities, with a council report warning that some perks attract both income tax and Value Added Tax (VAT).
A financial services report contained in the latest council minutes outlines the tax implications of benefits en-joyed by councillors and employees, detailing how seemingly attractive employment perks could translate into additional tax obligations.
The report explains that the assessment was undertaken to clarify the application of tax laws to payments made to community groups and benefits enjoyed by council employees and councillors.
It draws on the Income Tax Act, Value Added Tax Act, Finance Act and relevant regulations, with the local authority also consulting the Zimbabwe Revenue Authority (Zimra) for guidance on certain tax issues.
According to the report, benefits provided by an employer may constitute taxable remuneration, depending on their nature and the circumstances under which they are granted.
“Advantages or benefits were defined under Section 8(1) (f) of the Income Tax Act (Chapter 23:06). These included a number things (corporeal or incorporeal) that could be offered by an employer (or on his behalf) to an employee in lieu of or in the nature of ‘remuneration’.”
Among the benefits identified are the use of council vehicles, internet data and airtime, subsidised loans, mobile phones and electronic gadgets, discounted land, school fees, accommodation, furniture, staff meals, security services, water and electricity bills, DSTV subscriptions, golf club memberships and gym facilities.
The report makes it clear that the tax treatment depends on the particular benefit, with some arrangements exempt under specified conditions.
For instance, where council procures a cellphone, tablet or laptop for official business and retains ownership of the device, the benefit is not taxable.
However, the report states that where a gadget is purchased for personal use and ownership is transferred to the employee or councillor, a taxable benefit arises, based on the cost paid by council.
The report also touches on council employees or councillors buying residential stands at prices below market value.
“The difference between the market value and the discounted price was subject to income tax. The income tax was due and payable in the month the stand was offered to the staff member or councillor.
“For example if council was selling stands to the public at a price of US$20,000 and offered a 40 percent dis-count (US$8,000) to councillors or staff who would pay US$12,000 for the stand, a taxable benefit of US$8,000 was added to the taxable income in the month of purchase,” reads the report.
Council vehicles are also covered by the assessment, with the report stating that the taxable motoring benefit is calculated according to the vehicle’s engine capacity.
On internet data and airtime provided to councillors and employees, the report places the deemed benefit at 30 percent of the cost to the employer.
The report states that where an employer provides a US dollar-denominated loan at an interest rate below five percent plus the London Interbank Offered Rate (LIBOR), the difference may become taxable income if the loan exceeds US$100.
“The loan benefit did not apply to loans for education, technical training and medical treatment of taxpayer for spouse or child. If loan was written off then the portion written off becomes taxable in hands of employee. The deemed benefit for data and airtime given to employees was pegged at 30 percent of the cost to the employ-er,” reads the report.
Other benefits covered include accommodation, furniture, staff meals and entertainment, security services, payment of water and electricity bills, DSTV subscriptions, golf club memberships and gym facilities.
Beyond employee perks, the report also addresses the deduction of 30 percent withholding tax from payments to community groups that do not possess valid tax clearance certificates.
It states that Section 80(2) of the Income Tax Act requires taxpayers to have a valid tax clearance certificate, commonly known as an ITF263, and places an obligation on council and its paying officer to deduct withholding tax where the required certificate is not produced.
