This Bill will amend the Finance Act [Chapter 23:04], the Income Tax Act [Chapter 23:06], the Capital Gains Tax Act [Chapter 23:06], the Value Added Tax Act [Chapter 23:12] and the Customs and Excise Act [Chapter 23:02] and , the Mines and Minerals Act [Chapter 21:05].  In more detail, the individual clauses of the Bill provide as follows:

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Clause 1

This clause sets out the Bill’s short title.

Clause 2

The Finance (No. 3) Act, 2009, repealed the 29th Schedule to the Income Tax Act, which contained a definition of a “small or medium enterprise”.  Such a definition is required for various purposes under our revenue laws.  Accordingly, this clause proposes to provide a comprehensive definition of what constitutes a small or medium enterprises or business in accordance with a formula to be inserted in the Finance Act.

Clause 3

This clause defines the term “licensed investor” so as to make it clear that licensed investors are those persons that were licensed under the Export Processing Zone Act [Chapter 14:07] before it was repealed.  Only these licensed investors may benefit from the favourable tax treatment extended to them under section 14(2)(e) of the Finance Act.  Similarly, only those Industrial Park Developers and operators of a Designated Tourist Development Facility who commenced their operations before the 1st January, 2010, may benefit from the favourable tax treatment extended to them under section 14(2)(i) and (j) of the Finance Act. 

Clause 4

This clause has the effect of raising the monthly tax-free threshold from $160 a month to $175 a month with effect from the 1st September, 2010.

Clause 5

This clause provides for the reduction in non residence tax on remittance from 20% to 15% to be in line with other withholding taxes like those on technical fees, royalties, interest and dividends.

Clause 6

This clause provides for the review on tax exemptions.  Currently interest earned on foreign currency account is exempt from tax.  However since every account is denominated in foreign currency there is no need to retain paragraph 10(j) of the Third Schedule that exempts tax on foreign currency accounts.  The clause also makes certain other changes to the Schedule of a minor or consequential nature.

Clause 7

This clause deals with the review of tax deductions allowed in respect of buildings, improvements, machinery and equipment used for commercial, industrial and farming purposes.  Currently the special initial allowance for small to medium enterprises are pegged at 150%.  This clause seeks to reduce this allowance to 100%.  Another amendment restricts the special initial allowance in respect of the cost of fiscalised electronic registers purchased by a taxpayer.  The purchase of these machines qualifies for relief in terms of the new paragraph (k) of section 15(3) of the Value Added Tax as inserted by this Bill.

Clause 8

This clause provides for the increase in the period within which the Commissioner may at his or her discretion allow employers to withhold employees tax, from 3 to 10 days.

Clause 9

This clause will repeal the Fourteenth Schedule to the Income Tax Act, which provided for tax benefits in favour of “growth point areas”.  These areas no longer exist as a legal category under the Income Tax Act.

Clause 10

This clause improves the provision for the export tax on unprocessed chrome inserted in the Value Added Tax Act by the Finance (No.3) Act of 2009.  The new section 12B defines the term “unbeneficiated chrome” so as to include semi-processed chrome concentrates in order to encourage meaningful value addition of chrome ore.  The clause further raises the export tax on unbeneficiated chrome ore and fines from 15% to 20%.

Clause 11

This clause allows registered operators to deduct 50% of the cost of acquisition of fiscalised electronic registers from the sum of output tax payable under section 15of the Value Added Tax Act.

Clause 12

This clause amends section 28 of the Value Added Tax Act, by changing the day upon which returns and payments of tax are to be submitted and paid from the tenth day to the fifteenth day.

Clause 13

This clause provides for the reduction on capital gains tax on unlisted securities from the current 10% to 5%. This has been necessitated by the reduction of capital gains tax on listed securities from 5% to 1% with effect from 1 January 2010.

Clause 14

This clause will amend section 136 of the Customs and Excise Act (which requires applicants for an excise licence to enter into bond) by empowering the Commissioner to waive the bond requirement if the licensee meets certain conditions.

Clause 15

This clause will increase the penalty for any person who avails their vehicle for the purpose of smuggling goods from level 7 to level 14 on the standard scale of fines.

Clause 17

In order to minimise fraud in the transit of motor vehicles through Zimbabwe (where such vehicles are entered for transit but in fact are used or sold within Zimbabwe), this clause seeks to ensure that no motor vehicle in transit shall be driven on any road in Zimbabwe, but must be transported on a long-haul motor vehicle carrier.

Clause 18

This clause provides for the increase of the royalty payable on precious metals from 3,5% to 4%.

arrangement of sections

part i

Preliminary

Section

    1.   Title.

part ii

Income Tax

Amendments to Chapter I of Finance Act [Chapter 23:04]

    2.   New section inserted in Cap. 23:94.

    3.   Amendment of section 14 of Cap. 23:04.

    4.   Amendment of Schedule to Chapter I of Cap. 23:04.

    5.   Amendment of section 20 of Cap. 23:04.

Amendments to Income Tax Act [Chapter 23:06]

    6.   Amendment of Third Schedule to Cap. 23:06.

    7.   Amendment of Fourth Schedule to Cap. 23:06.

    8.   Amendment of Thirteenth Schedule to Cap. 23:06.

    9.   Repeal of Fourteenth Schedule to Cap. 23:06.

part iII

Value Added Tax

  10.   New section substituted for section 12B of Cap. 23:12.

  11.   Amendment of section 15 of Cap. 23:12.

  12.   Amendment of section 28 of Cap. 23:12.

part IV

Capital Gains Tax

  13.   Amendment of section 39 of Cap. 23:04.

part V

Customs and Excise

  14.   Amendment of section 136 Cap. 23:02.

  15.   Amendment of section 188 Cap. 23:02.

  16.   Repeal of section 206 Cap. 23:02.

  17.   Amendment of section 234 Cap. 23:02.

part VI

Mines and Minerals

  18.   Amendment of Schedule to Chapter VII of Cap. 23:04.

   

BILL

To make further provision for the revenues and public funds of Zimbabwe and to provide for matters connected therewith or incidental thereto.


       ENACTED by the President and Parliament of Zimbabwe.

PART I

Preliminary

1    Short title

This Act may be cited as the Finance Act, 2010.

part iI

Income Tax

Amendments to Chapter I of Finance Act [Chapter 23:04]

2    New section inserted in Cap. 23:04

The Finance Act [Chapter 23:04] is amended by the insertion of the  following section after section 2—

“2B  Meaning of small or medium enterprise or business

(1)  In this section, a “Scheduled Act” means this Act or any of the other Acts specified in the First Schedule (“the Scheduled Acts”) to the Revenue Authority Act [Chapter 12:11] (No. 17 of 1999).

(2)  For the purposes of any Scheduled Act, a reference to a “small enterprise”, “small business”, “medium-sized enterprise”, “medium-sized business”, “small or medium enterprise”, “small or medium sized enterprise, “small or medium enterprise”, “small or medium sized business” shall be construed as meaning any business or enterprise of such a size as is determined in accordance with the following formula—

A + B + C

whose meaning and application  is further described in the following subsections.

(3)  The factors “A”, “B” and “C” represent respectively the average maximum total number of full-time employees during any calendar year of a business or enterprise, the maximum total annual turnover of a business or enterprise and the maximum gross value of the assets (excluding immovable property) of a business or enterprise.

(4)  Each of the factors “A”, “B” and “C” is assigned a predetermined number of points, such that if the total sum of the formula as applied to any particular business or enterprise is nine (9) points or less, the business or enterprise in question shall be deemed to be a small- or medium-sized business or enterprise.

(5)  Points are assigned to each factor on the following basis—

                   A   if the business or enterprise in question—

                             I.   employs in excess of seventy-five (75) full-time employees on average during any calendar year, this factor is worth four points;

                           II.   employs not more than seventy-five (75) and not less than forty-one (41) full-time employees on average during any calendar year, this factor is worth three points;

                          III.   employs not more than forty (40) and not less than six full-time employees on average during any calendar year, this factor is worth two points;

                          IV.   employs not more than five full-time employees on average during any calendar year, this factor is worth one point;

                   B   if the maximum total annual turnover of the business or enterprise in question—

                            I.   exceeds one million United States dollars (US$1 000 000) per annum, this factor is worth four points;

                           II.   does not exceed one million United States dollars (US$1 000 000) per annum but is not less than five hundred thousand United States dollars (US$500 000) per annum, this factor is worth three points;

                          III.   is less than five hundred thousand United States dollars (US$500 000) per annum, but is not less than fifty thousand United States dollars (US$50 000) per annum, this factor is worth two points;

                          IV.   is less than fifty thousand United States dollars (US$50 000) per annum, this factor is worth one point;

                   C   if the maximum gross value of the assets (excluding immovable property)of the business or enterprise in question—

                             I.   exceeds on average two million United States dollars (US$2 000 000) in any calendar year, this factor is worth four points;

                           II.   does not exceed on average two million United States dollars (US$1 000 000) in any calendar year, but is not less than one million United States dollars (US$1 000 000) in any calendar year, this factor is worth three points;

                          III.   does not exceed on average one million United States dollars (US$1 000 000) in any calendar year, but is not less than fifty thousand United States dollars (US$50 000) in any calendar year, this factor is worth two points;

                          IV.   does not exceed on average fifty thousand United States dollars (US$50 000) in any calendar year, this factor is worth one point.

(6)  Any score—

                 (a)   of eight or nine points qualifies the business or enterprise in question as a “medium-sized” business or enterprise;

                 (b)   of five, six or seven points qualifies the business or enterprise in question as a “small-sized” business or enterprise;

                 (c)   of three or four points qualifies the business or enterprise in question as a “micro-enterprise”;

 

and any reference in a Scheduled Act to a “small enterprise”, “small business, “medium-sized enterprise”, “medium-sized business”, “small or medium enterprise”, “small or medium sized enterprise, “small or medium enterprise”, “small or medium sized business” shall be construed as a reference to any business or enterprise referred to in paragraph (a), (b) or (c).

(7)  The Minister may, by notice in a Statutory Instrument amend on a business-sector-specific basis, either or both of the following—

                 (a)   the points assigned to any factor “A”, “B” or “C”;

                 (b)   the values representing the average maximum total number of full-time employees during any calendar year of a business or enterprise, the maximum total annual turnover of a business or enterprise and the maximum gross value of the assets (excluding immovable property) of a business or enterprise.

3    Amendment of section 14 of Cap. 23:04

Section 14 (“Income tax for periods of assessment after 1.4.88”) of the Finance Act [Chapter 23:04] is amended—

       (a)   in subsection (1) by the insertion of the following definition—

“ “licensed investor” means a person licensed under the Export Processing Zones Act [Chapter 14:07] before its repeal by the Zimbabwe Investment Authority Act [Chapter 14:30] (No. 4 of 2006) on the 1st January, 2007;”;

       (b)   in subsection (2) —

                  (i)   with effect from the 1st September, 2010, in paragraph (a) by the repeal of subparagraphs (i) and (ii)and the substitution of—

                          “(i)   so much as does not exceed one thousand nine hundred and eighty United States dollars;

                          (ii)   so much as exceeds one thousand nine hundred and eighty United States dollars but does not exceed six thousand United States dollars;”;

                 (ii)   by the repeal of paragraphs (i) and (j) and the substitution of—

                          “(i)   in respect of that part of the income earned in foreign currency of an industrial park developer which is attributable to the operations of his or her industrial park, at the specified percentage of each United States dollar of that income in the year of assessment in which he or she commences such operations before the year of assessment beginning on the 1st January, 2010, and in each of the four years of assessment next following that year of assessment, and thereafter at the higher specified percentage;”.

                           (j)   in respect of that part of the taxable income earned in foreign currency of the operator of a tourist facility in an approved tourist development zone which is attributable to his or her operation of that facility, at the specified percentage of each United States dollar of that income in the year of assessment in which he or she commences such operation before the year of assessment beginning on the 1st January, 2010, and in each of the four years of assessment next following that year of assessment, and thereafter at the higher specified percentage;”.

 

4    Amendment of Schedule to Chapter I of Cap. 23:04

With effect from the 1st September, 2010, the Schedule (“Credits and Rates of Income Tax”) to Chapter I of the Finance Act [Chapter 23:04] is amended in Part II by the deletion of the items relating to sections 14(2)(a)(i) and 14(2)(a)(iI) and the substitution of—

“14(2)(a)(i)

Up to $1 980.....................................................................

0

14(2)(a)(ii)

US $1 981 to US $6000 .................................................

20”.

       

5    Amendment of section 20 of Cap. 23:04

Section 21 (“Non-residents’ tax on remittances”) of the Finance Act [Chapter 23:04] is amended by the deletion of “twenty per centum” and the substitution of “fifteen per centum”.

Amendments to Income Tax Act [Chapter 23:06]

6         Amendment of Third Schedule to Cap. 23:06

The Third Schedule (“Exemptions from Income Tax”) to the Income Tax Act [Chapter 23:06] is amended—

       (a)   in paragraph 4 by the repeal of subparagraphs (q) and (r);

       (b)   in paragraph 6 by the repeal of paragraph (d);

       (c)   in paragraph 10—

                  (i)   by the repeal of subparagraph (g) and the substitution of—

                         “(g)   any loan to the Infrastructure Development Bank of Zimbabwe established by section 3 of the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] made by an institutional shareholder as defined in that Act who is not ordinarily resident in Zimbabwe;”;

                 (ii)   by the repeal of subparagraph (j);

       (d)   in paragraph 11(1) by the repeal of subparagraph (e).

7    Amendment of Fourth Schedule to Cap. 23:06

The Fourth Schedule (“Deductions to be Allowed in Respect of Buildings, Improvements, Machinery and Equipment Used for Commercial, Industrial and Farming Purposes, and Other Provisions Relating Thereto”) to the Income Tax Act [Chapter 23:06] is amended

       (a)   with effect from the 1st October, 2010, in paragraph 2 (“Deduction of special initial allowance”) by the insertion of the following proviso thereto after proviso (iii)—

              “(iv)   the special initial allowance shall not be allowed in respect of half of the capital expenditure incurred in the purchase of any fiscalised electronic register whose purchase qualifies for relief in terms of section 15(3)(k) of the Value Added Tax Act [Chapter 23:12].”;

       (b)   in paragraph 9 (“Rates of special initial allowance”) by the repeal of paragraph (g) and the substitution of—

            “(g)   on the 1st January, 2011, or in any subsequent year of assessment, be a sum equal to one hundred per centum in the case of a taxpayer which is a “small or medium enterprise” as defined in section 2B of the Charging Act::

                     Provided that fifty per centum shall be allowed in the first year of assessment in which the taxpayer claims the special initial allowance in terms of this subparagraph, and twenty-five per centum in each of the next two years of assessment following that year;”.

8         Amendment of Thirteenth Schedule to Cap. 23:06

With effect from the 1st September, 2010, the Thirteenth Schedule (“Employees’ Tax”) to the Income Tax Act [Chapter 23:06] is amended in paragraph 3(“Employers to withhold tax”) by the deletion of “on the third day of the month following, or within such longer period not exceeding seven days as the Commissioner may for good cause allow, after the end of the month during which the amount was withheld or, in the case of a person who ceases to be an employer before the end of such month, on the following day after the day on which he ceases to be an employer” and the substitution of “on the tenth day of the month following, or within such longer period not exceeding seven days as the Commissioner may for good cause allow, after the end of the month during which the amount was withheld or, in the case of a person who ceases to be an employer before the end of such month, on the following day after the day on which he ceases to be an employer”.

9         Repeal of Fourteenth Schedule to Cap. 23:06

The Fourteenth Schedule to the Income Tax Act [Chapter 23:06] is repealed.

part III

Value Added Tax

10       New section substituted for section 12B of Cap. 23:12

With effect from the 1st August, 2010, the Value Added Tax Act [Chapter 23:12] is amended by the insertion of the following section after section 12A¾

“12B Collection of tax on exportation of unbeneficiated chrome, determination of value thereof

(1)  In this section, “unbeneficiated chrome” means chrome ore and fines which have not been subjected to the following processes¾

                 (a)   crushing, milling and washing to remove waste material;  and

                 (b)   the smelting of the resulting chrome concentrate into pellet or ingot form.

(2)  Notwithstanding section 10(1), tax at the rate of twenty per centum on the value of unbeneficiated chrome shall be levied on a supplier of such chrome for export from Zimbabwe.

(3)  For the purposes of this Act unbeneficiated chrome shall be deemed to be exported from Zimbabwe on the date on which the unbeneficiated chrome is, in terms of section 60 of the Customs Act [Chapter 23:02], deemed to be exported.

(4)  For the purposes of this Act the value to be placed on the exportation of unbeneficiated chrome from Zimbabwe shall be deemed to be¾

                 (a)   the market value thereof on the date of exportation as determined by reference to a reputable metals exchange;  or

                 (b)   the value as reflected on the bill of entry or other document required in terms of section 54 of the Customs and Excise Act [Chapter 23:02] delivered to an officer under that Act;

whichever is the higher value.

(5)  Subject to section 6(1)(b), and this section, any provision of the Customs Act relating to the exportation, transit and clearance of any goods and the payment and recovery of duty shall apply, with such changes as may be necessary, as if enacted in terms of this Act, whether or not the said provisions apply for the purposes of any duty levied in terms of the Customs Act.”.

11       Amendment of section 15 of Cap. 23:12

Section 15 (“Calculation of tax payable”)(3) of the Value Added Tax Act [Chapter 23:12] is amended by the insertion of the following subparagraph after subparagraph (j)¾

     “(k)   an amount equivalent to fifty per centum of the cost of the acquisition of fiscalised electronic registers by a registered operator.

                      For the purposes of this subparagraph, “fiscalised electronic register” means an electronic sales register having certain prescribed features.”.

12       Amendment of section 28 of Cap. 23:12

With effect from the 1st January, 2010, section 28 (“Returns and payments of tax”)(1) of the Value Added Tax Act [Chapter 23:12] is amended by the deletion of “the tenth day” and the substitution of “the fifteenth day”.

part iV

Capital Gains Tax

13       Amendment section 39 of Cap. 23:04

With effect from the 1st September, 2010, section 39 (“Rates of capital gains withholding tax”) of the Finance Act [Chapter 23:04] is amended by the repeal of paragraph (c) and the substitution of¾

     “(c)   in the case of a sale of a marketable security other than a security referred to in paragraph (b), five per centum of the price at which the security was sold.”.

part V

Customs and Excise

14       Amendment of section 136 of Cap. 23:02

Section 136 (“Licensees to enter into bond”) of the Customs and Excise Act [Chapter 23:02] is amended by the insertion of the following subsection after subsection (3)¾

“(4)  The Commissioner may, at the request of a licensee in writing, waive the requirement for a licensee to maintain a bond in terms of this section, if the licensee has, in the period of thirty-six months immediately preceding the request —

                 (a)   not engaged in any attempt by himself or herself or in collusion with others to defraud the State of any duty or surtax on any goods manufactured by him or her;  and

                 (b)   rendered truly and completely all the returns, statements and inventories prescribed or required under this Act;  and

                 (c)   complied in all respects with all the requirements of this Act with respect to the manufacturing of goods liable to excise duty or surtax and paid such duty or surtax as and when required under this Act; and

                 (d)   complied with such other conditions as the Commissioner required when the licensee originally entered into the bond.”.

15       Amendment of section 188 of Cap. 23:02

Section 188 (“Goods and ships, aircraft, vehicles or other things liable to forfeiture”) of the Customs and Excise Act [Chapter 23:02] is amended by the repeal of subsection (2a) and the substitution of¾

“(2a)  Any person who makes available his or her ship, aircraft or vehicle for use by another person for the removal of goods referred to in subsection (2)(a) or (b), shall be guilty of an offence and liable to a fine not exceeding level fourteen or to imprisonment for a period not exceeding one year or to both such fine and such imprisonment, unless he or she proves that he or she was unaware that the ship, aircraft or vehicle would be so used.”.

16       Repeal of section 206 of Cap. 23:02

Section 206 of the Customs and Excise Act [Chapter 23:02] is repealed.

17       Amendment of section 234 of Cap. 23:02

With effect from the 1st November, 2010, section 234 (“Goods in transit”) of the Customs and Excise Act [Chapter 23:02] is amended by the insertion of the following subsection after subsection (2)¾

“(3)  Where the goods in transit concerned are motor vehicles, no such motor vehicle shall be driven on any road in Zimbabwe but shall be transported on a long-haul motor vehicle carrier.”.part VI

Mines and Minerals

18       Amendment of Schedule to Chapter VII of Cap. 23:04

With effect from the 1st October, 2010 2010, the Schedule to Chapter VII of the Finance Act [Chapter 23:04] is amended in the part fixing the rates of royalties for the purposes of section 245 of the Mines and Minerals Act [Chapter 21:05], by the deletion of the item referring to “precious metals” and the substitution of the following item¾

                   “(a) Precious metals…………………………………….                     

4”.

Amendments to Mines and Minerals Act [Chapter 21:05]