Q: We are a third party logistics company which provides transport services and procurement services to the agricultural sector. Our main focus is moving agricultural inputs, implements, animal stock feed and agricultural chemicals. I understand these are zero-rated supplies. My first question is when we provide transport service exclusively carrying these zero-rated supplies, should we collect standard (15%) VAT on such services? My second question is what is input tax credit and in this case are we allowed to claim it? If we are allowed to apply zero rates on this service, how do we obtain documentary proof of our entitlement?

A: The transportation of goods whether zero rated or standard rated is liable to Value Added Tax (VAT) at 15%. As a provider of the transport service, you are required to charge VAT at 15% on the service provided. If the recipient of the service is registered for VAT, he can claim the VAT incurred as input tax provided he has a tax invoice in his possession.

Q: Please advise on whether the legislation makes any social considerations for the elderly and disabled persons?

A: The current tax legislation provides for a number of tax concessions which are meant to provide tax relief to elderly persons. These tax concessions, which are mostly in the form of tax exemptions and credits, are contained in the Income Tax Act [Chapter 23:06], the Finance Act [Chapter 23:04] and the Capital Gains Tax Act [Chapter 23:01].

Income Tax

  1. Exemption from Income Tax of the first US$3 000.00 per annum on rental income earned by persons aged 55 years or above.
  2. Exemption from Income Tax of the first US$3 000.00 per annum on income earned by persons aged 55 years or above from bankers acceptances
  3. Exemption from Income Tax of the first US$3 000.00 per annum on income earned by persons aged 55 years or above from interest on deposits to financial institutions.
  4. Taxpayers aged 55 years or above are entitled to an elderly persons’ credit of US$900.00 per annum.
  5. Pensions received from a pension fund or the Consolidated Revenue Fund by taxpayers aged 55 years or above are exempt from Income Tax.
  6. Where an employer disposes of a motor vehicle to an employee aged 55 or above whether on termination of employment or otherwise, the benefit is exempt from tax.

Capital Gains Tax


• The full amount arising from the disposal of a Principal Private Residence (PPR) by persons who are 55 years or above on the date of the sale is exempt from Capital Gains Tax.
• The first US$1 800.00 that accrues to a person aged 55 years or above on the sale of any unlisted marketable security is exempt.

Customs Duty

Duty is wholly suspended on any motor vehicle, classified under tariff heading 87.03 which was manufactured or assembled not more than ten years preceding the date of its importation, imported by a person—

a) Who is blind, if the Commissioner is satisfied that the vehicle is to be used for the benefit of that person; or

b) with a physically disability that is not temporary, if the vehicle has automatic transmission and additionally, or alternatively, special controls that render it suitable for use by that person, and the Commissioner is satisfied that the vehicle is to be used by that person; or

c) with any physical disability that impedes his personal mobility and is not temporary, whether or not the vehicle is not the vehicle is of a description referred to in paragraph (b), so long as the Commissioner is satisfied that the vehicle is to be used by that person;

Q: I have been working in Tanzania for the past two years and now I am considering returning to Zimbabwe.  I want to understand whether I am eligible for any duty rebates and on what sort of goods.

A: After a period two years, you qualify for a rebate of duty and import Value Added Tax (VAT) on household and personal effects.

Requirements:

Goods should be have been owned by you at the time of arrival in Zimbabwe and at the time of their importation. They must be in physical existence and fully paid for by you before the time of your arrival. Proof of termination of employment should be presented on application. Vehicles are limited to one per individual.

Q: Could you please assist by providing information on how to tax retrenchment packages?  If possible can you include examples?

A: Please be advised that the greater of $5 000.00 or 1/3 of the retrenchment package, up to a maximum of $45 000.00, is exempt (i.e. it is tax free).

Example

Mr X has been retrenched after working for his company for some time. His company pays him $8 000.00 in a retrenchment scheme approved by the Ministry of Labour.

Answer

1/3 of the retrenchment package is $2 667.00. Comparing 1/3 of the package (i.e. $2667.00 and $5 000.00) you will notice that the greater of the two is $5 000.00. Therefore, $5 000.00 from a retrenchment package of $8 000.00 is exempt from Income Tax.