This article seeks to clarify what seems to be a misunderstanding between or amongst trading parties and give the correct position in terms of the Value Added Tax Act.

Does a trader need to be registered for VAT in order to conduct any business with any other person?

It is not a precondition for anyone to first register for VAT before entering into business agreements, transactions or arrangements of their choice. A trader is free to trade with any person whether VAT registered or not. It should be noted that some traders are not registered for VAT because they are not eligible for registration. Such traders should not suffer any prejudice in transacting business with registered traders in the market place. They can sell their goods or services to any trader without charging VAT. However when they buy from a registered trader they still pay VAT for any goods or services that are properly chargeable.

Who is eligible to register for VAT?

A trader is eligible to register for VAT purposes if the value of taxable supplies exceeds or is expected to exceed $60 000 within a period of 12 months.

 

Can an unregistered operator charge VAT?

Only a properly registered operator for VAT purposes may charge VAT on the supply of goods and services. It should be stated that although a non- registered trader is free to trade with any other person, such unregistered operator cannot charge VAT in respect of the supplies made.

Who May Be Excluded From Registration?

The following persons are not required to register for VAT:

v  Traders whose taxable turnover is below US$60000.00 per annum

v  Traders who will be solely dealing in exempt supplies

v  An employee providing service to his/her employer

What are the responsibilities of a trader who is registered or is eligible for VAT registration?

A trader who is registered or is eligible for registration is obliged to comply with the following requirements of the VAT Act:

v  Charge VAT where applicable, issue tax invoices, debit notes or credit notes as prescribed

v  complete and submit VAT returns to ZIMRA  as prescribed under the VAT Act

v  calculate and remit the VAT due to the Commissioner General of ZIMRA on or before the 25th of every month

v  keep accounting records for at least six years after the tax period to which they relate

v  account for VAT if one sells or retains stock or assets when one ceases to be registered for VAT

v  advise the Commissioner General of ZIMRA of any changes in business details

 

What are the consequences of failure to comply with registration requirements?

Failure to register for VAT when a trader is eligible constitutes an offence in terms of the VAT Act. In the case of failure to register and in cases where the operator has reached/exceeded a turnover of $60 000, the Commissioner General of ZIMRA may compulsorily register the operator. The operator would be required to pay the VAT due, interest and penalties on the computed debt.

It is also an offence for a trader to charge VAT without being properly registered and any person who is involved in such malpractice may be prosecuted in terms of the provisions of the VAT Act