adminSection 19 of the Value Added Tax Act [Chapter 23:10] allows registered operators to claim input tax on goods or services acquired before incorporation.
What are the conditions for claiming the input tax?
VAT should have been charged in connection with pre-incorporation expenses of the company, or
VAT should have been charged to the purchaser at the acquisition of the goods or services on behalf of the company prior to its incorporation.
The company must have reimbursed the whole amount paid by the purchaser referred to above.
The goods or services should be for the purpose of trade and the company should not have been for any other purpose.
If all the conditions above are fulfilled, the goods or services are deemed to be acquired by the company and the company can claim input tax. In this instance, the time of payment is the deemed time of supply.
Illustration
Suppose a promoter X pays $115,000 being expenses for setting up company ABC P/L, which then reimburses X (the promoter) the whole amount, the input tax claim will be calculated as follows:- 15 /115*$115,000 = $15,000. Company ABC P/L will claim the input tax in full.
What are the exclusions to these provisions?
Input tax shall not be claimed in respect of any such goods or services where:
The supply of such goods or services by that person is a taxable supply. If it is a taxable supply, the person supplying the goods or services should be a registered operator who will be required to charge VAT and issue a tax invoice.
The goods or services were acquired more than six months prior to incorporation of the company receiving the goods or services.
There are no sufficient records or proof of entitlement to claim input tax, for instance, proof of reimbursement or proof that goods or services are related to the company’s trade.
Reminder
Our valued clients are hereby reminded that VAT for the month of September 2015 is due on or before 25 October 2015.
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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