Vusumuzi Dube
Judith Phiri , Business Reporter
EXPORTING businesses are set to reap several tax savings that represent a significant contribution to the businesses’ profitability.
Export incentives, which have been availed to businesses, improve the operating environment for exports, while also promoting economic growth through driving exports, diversification and competitiveness.
Speaking during a recent ZimTrade tax incentives webinar, tax consultant, Mr Peter Mgodi said businesses that export stand to earn their own foreign currency to finance imports of critical raw materials and equipment.
“The Income Tax Act has three options: to grant an incentive by exempting income from tax, granting a deduction such that the expenditure incurred reduces taxable income and tax rate reduction on a sale.
In order to encourage or discourage economic players, governments use tax incentives or disincentives to modify behaviour.
Increases in tax discourage economic players to participate in the targeted economic activity, while reductions in tax also encourage economic players to invest in the targeted activity,” said Mr Mgodi.
He said income could be exempted from tax and taxed at abnormal rates, while expenditure could be deductible to reduce taxable income and deductions could be prohibited to increase taxable income.
In terms of deduction, Mr Mgodi said it was the amount of any export-market development expenditure incurred by the taxpayer during the year of assessment, together with an amount equal to 100 percent of such expenditure.
He said this was a 200 percent deduction of expenditure incurred to develop export markets according to the Income Tax Act – Chapter 23:06 section 15 (2)(gg).
“Activities for obtaining markets outside Zimbabwe include research into or the obtaining of information relating to markets outside Zimbabwe.
There is also research into the packaging or presentation of goods for sale outside Zimbabwe, as well as advertising goods outside Zimbabwe or otherwise securing publicity outside Zimbabwe for goods among others.”
He said businesses intending to export could also bring prospective buyers to Zimbabwe from outside or provide samples of goods to persons outside Zimbabwe.
In a presentation on Zimbabwe Revenue Authority (Zimra)’s role in export facilitation, Zimra revenue supervisor, Mr Gedion Nleya said export tax incentives were tax programmes that are designed to encourage businesses to export certain types of goods or services.
“The taxable income from manufacturing by a company which exports more than 30 percent or more of its output but less than 41 percent is 20 percent.
A company which exports more than 41 percent or more of its output but less than 51 percent is 17,5 percent, while one which exports more than 51 percent or more of its output is 15 percent.”
ZimTrade client advisor, Mr Velile Dube said discussions on tax incentives and rebates were critical to exporters.
“As part of ZimTrade’s quest to capacitate companies for exports, we have identified some tax incentives that accrue especially to exporters undertaking export promotion initiatives which we feel are important to know as an exporter.
Many companies embark on these initiatives and are unaware of the tax rebates that accrue owing to those initiatives, hence this webinar,” he said.
Online Reporter