adminDid you know that, in terms of Section 36C of the Income Tax Act as read with The 26th Schedule to the same Act, every person who is renting out residential or business premises (lessor) to an informal trader (lessee) is required to recover and remit presumptive tax to ZIMRA?
Who is an informal trader?
“Informal trader” means an individual who:
Carries on a trade for his own account from which he derives gross income of less than $6 000 (six thousand United States dollars) per annum or any other amount prescribed by the minister.
Has not submitted a return for assessment in the most recent year of assessment.
It also includes a hawker, street vendor, person who sells articles at a peoples’ market or flea market and a person who manufactures or processes any articles in or from residential premises.
The informal trader is also referred to as “the lessee” in the above-mentioned Schedule.
Who is a lessor?
A lessor may be:
Any local authority to whom an informal trader pays rent for residential accommodation (e.g. where an informal trader pays rent to an urban or rural council).
Any person or local authority to whom an informal trader pays rent for premises or a place for the purposes of carrying on trade. (e.g. where an informal trader pays rent to Mr X who stays in Borrowdale, or where an informal trader pays rent to the owner of flea market premises)
What a are the obligations of the informal trader?
The informal trader must notify the lessor of his status as an informal trader to enable the lessor to recover the presumptive tax from him or her on payment of rent.
Where required, the informal trader should produce the certificate issued by the lessor as proof of payment of presumptive tax.
What are the obligations of the lessor?
Once notified by informal trader of his or her status as an informal trader, the lessor must record such notification together with the informal trader’s name, address and other relevant information and must forthwith submit this information to the Commissioner General of ZIMRA.
Whenever the informal trader pays the lessor rent, the lessor must recover an additional amount as presumptive tax over and above the rent paid unless the trader produces a valid tax clearance certificate. This presumptive tax is currently set at 10 percent of the rent that is chargeable.
The lessor should then issue a certificate to the informal trader for:
The amount of rent paid by the informal trader, and
The amount of presumptive tax recovered from him.
The lessor should remit the presumptive tax recovered to the Commissioner General of ZIMRA within 30 days of receiving the rent accompanied by Rev5 form.
It should be noted that the lessor must himself account for income tax on the rent received from the informal trader under his own obligations as a taxpayer.
Penalties
A lessor who fails to recover presumptive tax from an informal trader, or fails to pay to the Commissioner General of ZIMRA, the presumptive tax recovered, will be held personally liable for the payment of the presumptive tax due and in addition, an amount equivalent to that presumptive tax as penalty.
Our valued clients are reminded that value added tax (VAT) for the month of May 2014 is due on the 25th of June 2014.
- Disclaimer: This article was compiled by the Zimbabwe Revenue Authority for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.
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