adminIncome Tax Legislation?
The value of an advantage or benefit in respect of employment, service, office or other gainful occupation is included into gross income and subjected to tax.
Loan for the purposes of the Income Tax Act means any form of credit whatsoever granted directly or indirectly to an employee, his spouse or child by or on behalf of his employer or a person associated with his employer, but does not include any such loan or credit which is provided to the satisfaction of the Commissioner to have been granted for the purposes of the education or technical training or medical treatment of such employee.
The benefit shall arise where the rate of interest payable on the loan by the employee is less than the LIBOR rate plus five per cent per annum and where the amount of the loan exceeds one hundred United States dollars. The benefit may also arise where the employer advanced a loan to an employee and writes off all or a portion of that loan. Where the interest rate on the loan is more than the prescribed rate of interest, there is no taxable benefit.
The value of the benefit, which is the taxable amount, shall be the difference between the rate charged by the employer and the prescribed rate of interest.
Where all or a portion of the loan is written off by the employer, the amount so written off is to be included in the taxable income and subjected to tax.
Below is a list of the prescribed rates to be used for the current tax year.
MonthRate as a%
December 20105,26
January 20115,26
February 20115,26
March 20115,25
April 20115,22
May 20115,20
June 20115,19
July 20115,19
August 20115,21
September 20115,23
Example 1: A loan of $10 000 is extended to an employee by an employer at an interest rate of 5 percent per annum on 2nd August 2011.
The benefit to be included in the taxable amount for the month would be calculated as follows: (5,19-5,00) x US$10 000 x 30/365 = US$156,16
In this example the prescribed rate for the month of July 2011 will be used to calculate the benefit received during the month of August 2011.
Example 2: A loan of US$10 000 is extended to an employee by an employer at an interest rate of 6 percent per annum on 2nd August 2011. The employee repays only US$7 000 and the employer advises that he has cancelled the outstanding debt.
The balance of US$3 000 written off by the employer is added to the gross income of the employee and appropriate tax rates applied for PAYE purposes. This also applies where the whole amount is written off by the employer.
For further information, please contact your nearest Zimra office.
Article submitted by Zimra’s Legal and Corporate Services Division.
Their contact details are as follows:
Zimbabwe Revenue Authority
Legal and Corporate Services Division
6th Floor, ZB Centre
Cnr First Street/Kwame Nkrumah Avenue
P O Box 4360
Harare
Tel: 04 – 798878/775332/751624/781345
Fax: 04 – 774087
E-Mail: [email protected]
Website:www.zimra.co.zw.
Online Reporter