adminDid you know that in terms of Section 80 of the Income Tax Act (Chapter 23:06), a 10 percent withholding tax is deductible from all amounts payable to all persons who enter into contracts with the State or a statutory body, a quasi-Government institution and taxpayers who are registered with the Zimbabwe Revenue Authority (ZIMRA)?
Our valued clients are hereby informed that unless a payee furnishes the paying officer with a tax clearance certificate, any person who enters into a contract (whether for goods or services) of US$250 and more involving a single transaction or multiple transactions should comply with this legal requirement.
Exceptions to the requirement to withhold the 10 percent;
The following are few exceptions to the above stated legal requirement:
Amount paid in terms of an employment contract;
A sale effected in any shop in the ordinary course of the business of such shop, or any other consumer contract for the sale or supply of goods or services or both in which the seller or supplier is dealing in the course of business and the purchaser is the final user or consumer. This does not include a contract for the sale, letting or hire of immovable property;
An agreement for the settlement of a claim against the State or a statutory corporation;
Payments for the supply of farm produce and livestock by farmers;
Payments, to the State, to utility providing organisationssuch as Local Authorities, electricity suppliers, water suppliers’ (for utility bills only).
NB: It should be clearly stated that utility providing organisations such as Local Authorities, electricity suppliers and water suppliers are also required to produce or supply tax clearance certificates to their paying officers before other payments (excluding utility bills) are effected to them. In addition, these organisations are also required to deduct the 10 percent withholding tax where appropriateand in cases where they make payments to other operators.
When and how should the withholding tax be remitted toZIMRA?
The amount withheld should be remitted to the Commissioner General of ZIMRA on or before the 10th day of the month following that in which the payment was made. The payment should be accompanied by a schedule showing all names of the persons from whom the 10 percent was deducted and this should be attached to the prescribed form (Rev 5 form).
What are the other additional statutory obligations to be observed?
Any paying officer, who has withheld any amount, should furnish the payee concerned with a certificate, in a form approved by the Commissioner General of ZIMRA and should clearly show the amount withheld.
The Commissioner General is supposed to retain any amount remitted to him until the income tax payable by the payee, for that year of assessment has been assessed.
The amount is normally allowed as a credit against the income tax payable by the payee. Where the amount exceeds the income tax so payable by the payee, the Commissioner General will refund the excess to the payee or may be set off against other tax liabilities.
Is a penalty charged for failure to remit withholding tax on time?
Any person who fails to deduct the 10 percent withholding tax is liable for the payment of the amount due. In addition, a 100 percent penalty is also chargeable on the amount due.
What is normally required before a Tax Clearance Certificate is issued?
The following are the main requirements to be met before a tax clearance certificate is issued:
The client should submit the return(s) (if applicable) in terms of section 37 of the Income Tax Act [Chapter 23:06] or should have made arrangements satisfactory to the Commissioner-General for the furnishing of such return.
Where applicable, payment of the appropriate presumptive tax in terms of the Twenty-Sixth Schedule to the Income Tax Act. [Chapter 23:06]
In the case of new or proposed company or private business corporation, the client should appoint a public officer in terms of Section 61 of the Income Tax Act. [Chapter 23:06]
Furnishing any return required to be furnished under any of the Acts administered by ZIMRA or making arrangements satisfactory to the Commissioner General for the furnishing of such returns.
Payment of the appropriate tax in terms of any of the Acts administered by the Zimbabwe Revenue Authority.
Is there any fee charged before the issuance of a tax clearance certificate?
No fee is charged for the issuance of a tax clearance certificate and you are encouraged to report to the police any incidents of people purporting to be ZIMRA officers and charging any such fees.
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 (ZIMRA).
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