Did you know that church or religious organisations have tax obligations too?

This edition is aimed at educating and creating awareness of the tax obligations that may be expected in respect of church or religious organisations.

Main Taxes charged in Zimbabwe

The main taxes levied by the Zimbabwe Government are Income Tax, Capital Gains Tax, Withholding Taxes, Employees Tax (PAYE) and Value Added Tax. These taxes are collected through the Zimbabwe Revenue Authority (ZIMRA). There are situations where a church or religious organisation is required to perform certain statutory and tax obligations as prescribed in the respective legislative provisions. This may result in the church paying the tax due or payment of penalties and interest for not fulfilling the statutory obligations. The taxes and the specific obligations are highlighted and briefly explained as follows;

Income Tax on business profits

This tax is payable on business profits i.e. income derived from, or deemed to be from a source within Zimbabwe. Receipts and accruals of church or religious organisations are exempt from income tax. The exemption stated above however, does not cover a situation where the church carries on a trade through a company or other statutory corporation.

 

Capital Gains Tax

Capital Gains Tax is payable on capital gains realised from the sale of specified assets (immovable property, shares and other securities). A church is exempt from   Capital Gains Tax in respect of any sale of specified assets. However the exemption stated in the foregoing does not cover a situation where the church carries on a trade through a company or other statutory corporation and the latter sells a specified asset.

 

Withholding Taxes

There are a number of withholding taxes chargeable in Zimbabwe in terms of the Income Tax Act. Examples are:  Non –Residents Tax on Fees, Non-Residents Tax on Royalties, Non-Residents Tax on Remittances, and Withholding amounts payable under contracts. A church or its paying agent is expected to withhold the tax and remit it to ZIMRA in cases where a payment is made. Withholding taxes are generally supposed to be remitted by the 10th of the following month after payment or a deemed payment of the fees or service is made.  Detailed information regarding the specific withholding taxes is obtainable on the ZIMRA website www.zimra.co.zw

 

Employees’ Tax (PAYE)

In Zimbabwe, every employer who pays remuneration to an employee is required to withhold employees tax commonly called Pay As You Earn (PAYE) from remuneration paid. The definition of what constitutes remuneration is very wide and includes salaries, bonuses, overtime and all kinds of fringe benefits that may be granted to employees in the course of their employment. A church may qualify as an employer where it pays any type of remuneration for instance by way of a salary, wage, allowance to priests, pastors, caretakers, gardeners, secretaries and bookkeepers etc. In this case the organisation is required to register with the ZIMRA and ensure that the correct PAYE is deducted every month and remitted to the tax authority by the 10th of the following month.

It should also be specified that penalties and interest are payable by the church in the case of failure to remit the tax on time and as prescribed.

 

Value Added Tax

This is an indirect tax charged on the consumption of goods and services. A church is not exempt from the payment of Value Added Tax (VAT). In this case it expected to pay the tax when purchasing or consuming certain goods and services subject to tax. Any organisation that trades in Zimbabwe and sells goods or services amounting to US$5000 per month or US$60 000 per annum should register for Value Added Tax purposes. Goods include the supply of accommodation for rental purposes. The organisation should charge VAT on all the sales (output tax). When purchasing goods for resale, the organisation pays VAT to the suppliers on such purchases (input tax). It is however expected and remit the difference to ZIMRA.

 

  • VAT payable should be remitted to ZIMRA by the 25th of the following month. A church may qualify to register for VAT if it undertakes various trading activities and observe the foregoing statutory obligations. There are however, exceptions to this position of which a church or religious organisation may qualify for an exemption as provided under VAT Regulations.