Small-to-medium enterprises (SMEs) can benefit from a number of tax concessions which are meant to facilitate their growth. One such benefit is the Special Initial Allowance (SIA).  SMEs registered for Income Tax purposes with ZIMRA, are eligible for applicable deductions provided for in the Income Tax Act in respect of expenditure related to their business operations. As a special tax incentive, SMEs may be eligible to enjoy 100% Special Initial Allowance on qualifying capital assets. It is allowed over a period of three years, 50% during the first year and  25% in each of the next two years of assessment.

Tax Obligations

The operation of SMEs may give rise to obligations for any, or all of the following taxes: Presumptive Tax, Income Tax, Value Added Tax (VAT), Pay As You Earn (PAYE) and Withholding Tax.

Registration and Payment of Tax

Presumptive Tax

Tax on the earnings of small traders who may not be required to register for Income Tax is based on estimated income and is referred to as Presumptive Tax. Operators liable to this tax are not expected to submit Income Tax returns.

Examples of operators in this category of taxpayers include cross-border traders, furniture making traders, transport operators, small-scale miners, restaurant operators, flea market operators and small miners, among others. These operators are required to pay Presumptive Tax each quarter on the 10th of the following months: January, April, July and October.

Income Tax

Every business operator who is not eligible to pay Presumptive Tax is required to register for Income Tax purposes with the Zimbabwe Revenue Authority (ZIMRA) and comply with statutory requirements regarding the submission of returns and payment of taxes. A company is required to furnish ZIMRA with its memorandum and articles of association within 30 days of incorporation. In addition, the company is also required to nominate a Public Officer through whom all the correspondence with ZIMRA is channelled. The tax rate on taxable income is currently at 25% plus 3% Aids Levy for companies and individuals in trade.

PAYE

Every person who becomes an employer is required to register for PAYE within 14 days of them becoming an employer. The employer will then be required to withhold Employees’ Tax, including Aids Levy, from any remuneration paid or payable to the employees, subject to observing the tax-free threshold normally prescribed. PAYE is deducted in accordance with the tax tables availed by ZIMRA. The withheld tax should be remitted to ZIMRA on or before the 10th day following the month in which it was withheld.

VAT

Business operators (registered with ZIMRA) whose total annual value of taxable supplies in respect of VAT exceeds US$60,000 are required to register for Value Added Tax. After registration, the operator will then be required to charge VAT on all the taxable supplies. Any operator who is not registered for VAT is not allowed at law to charge VAT. VAT charged should be remitted to ZIMRA on or before the 25th day of the month following the month in which the tax was charged.

Withholding Tax on Contracts

A business operator who is registered with ZIMRA is required to withhold and remit to ZIMRA a 10% Withholding Tax from all amounts payable to persons whom he/she concludes contracts with, unless the payee furnishes the registered operator with a Tax Clearance Certificate. The business operator should issue a certificate confirming amount withheld to the person from whom the tax has been deducted.

Any person who concludes a contract (whether for goods or services) totaling US$1,000 or more per year involving a single transaction or multiple transactions should comply with this legal requirement.

Where an SME who is not registered with ZIMRA or a registered SME who does not hold a valid Tax Clearance Certificate supplies goods or services, the person making payment to the SME is required to withhold 10% and remit the withheld amount to ZIMRA. In addition, the registered supplier should issue the SME from whom the tax has been withheld with a certificate to that effect.

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.

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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