The Zimbabwe Revenue Authority (ZIMRA) has embarked on lifestyle audits as one of its initiatives to improve tax compliance levels and to assist taxpayers with information on tax matters. The audits are carried out to verify compliance of individual taxpayers in terms of the statutes administered by ZIMRA, which include Income Tax Act [Chapter 23:06]; Capital Gains Act [Chapter 23:01]; Value Added Tax Act [Chapter 23:12] and Customs and Excise Act [Chapter 23:02].

What is a lifestyle audit?

This is a type of audit carried out with specific attention on income received by individuals. It involves verification of a person’s personal expenditure patterns to determine if it is consistent with his declared taxable income to ZIMRA. Any variances noted will result in an amendment to the declared income and recovery of any additional tax.

Objectives of Lifestyle Audits

Lifestyle audits are carried out to:

v  assess and collect additional revenue

v  educate clients on how to correctly declare their income and make self-assessment of their tax status in terms of the law

v  promote compliance

v  update clients tax affairs

Benefits to the client

v    tax status will be regularised and a tax clearance certificate can be issued

v    increased knowledge by the client on tax matters

v    greater understanding of the client of their personal tax status

Focus of the audit

The lifestyle audit focuses on every individual who is in receipt of income. The income may be from employment, pension payments, business operations, dividends, rental income, disposal of shares and or real estate, among others.

What is involved and the intended outcome?

The verifications will involve the following, among others:

v  interviewing clients

v  requests for information to support sources of income and/or expenditure

v  education of clients on tax matters

v  issuing of amended assessments where discrepancies are noted and collection of any tax due

Why clients should cooperate

The following are benefits for cooperating with ZIMRA officers as they carry out lifestyle audits:

v  reduction in cost of compliance by clients

v  client’s cooperation is taken into consideration whenever penalty reduction is considered

v  reduction of time spent by the clients on traditional audits

v  results in regularisation of the client’s tax affairs

v  the issued tax clearance certificate can enhance clients’ business opportunities and prospects.

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.

 

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