The ultimate 2024 VAT guide for Zimbabwean businesses and individuals

Value Added Tax (VAT) is a crucial part of Zimbabwe’s tax system, impacting both businesses and individuals. Understanding VAT, how it works, and your obligations can help you comply with the law and manage your finances effectively. This comprehensive guide covers everything you need to know about VAT in Zimbabwe in 2024, based on the latest regulations from ZIMRA and Statutory Instrument 15 of 2024.

What is VAT?

VAT is a consumption tax levied on the value added to goods and services at each stage of production or distribution. It is ultimately borne by the final consumer but collected at each stage of production and distribution.

How does VAT work?

VAT is charged on most goods and services sold for domestic consumption. Businesses charge VAT on their sales (output tax) and pay VAT on their purchases (input tax). They then remit the difference to the Zimbabwe Revenue Authority (ZIMRA).

For example:

• Manufacturer: Produces goods and sells them to a wholesaler, charging VAT.
• Wholesaler: Buys goods from the manufacturer, pays VAT, and sells to a retailer, charging VAT.
• Retailer: Buys goods from the wholesaler, pays VAT, and sells to the final consumer, charging VAT.
• Consumer: Buys the goods, paying the VAT included in the final price.

Who should register for VAT?

In Zimbabwe, businesses must register for VAT if their annual turnover exceeds US$25,000 or the equivalent in ZiG. Even if your turnover is below this threshold, you may opt to register voluntarily.

Key Points for Registration:

• Compulsory Registration: If your business’s annual turnover exceeds US$25,000 or ZiG equivalent.
• Voluntary Registration: If your turnover is below the threshold but you find it beneficial to register (e.g., to claim input tax credits).
• Category C Threshold: US$240,000 or ZiG equivalent.
• Category D Threshold: US$120,000 or ZiG equivalent.

Exclusions from Registration:

• Traders dealing solely in exempt supplies.
• Individuals engaged in private or recreational pursuits or hobbies.
• Small traders with a taxable turnover below US$25,000 or ZiG equivalent per annum.

VAT Registration Requirements

To register for VAT, you need to follow these steps:

1. Register with ZIMRA: Obtain a Taxpayer Identification Number (TIN).
2. Submit the VAT Registration Form (REV 1): This form can be downloaded from the ZIMRA website and must be completed with accurate information.
3. Provide Supporting Documents:

• Copy of Certificate of Incorporation.
• CR14 and CR6 forms.
• Current stamped bank statement.
• Certified copies of the Memorandum and Articles of Association.
• Certified copies of IDs and proof of residence for at least two directors.
• Letter appointing a public officer with signing authority for the bank account.

1. Sales Schedule: Provide a sales schedule from the time of trade commencement to date, along with sales projections for the next 12 months.
2. Proof of Business Address: Submit a valid lease agreement or title deed.

How to Register for VAT Online

1. Login to ZIMRA’s e-Services Portal: Access the registration section.
2. Navigate to Taxpayer Profile > Tax Type > New Tax Type: Select VAT.
3. Select the Type of Sales: Local or export.
4. Enter the Effective Date of Registration: Usually the first day of the next month after reaching the registration threshold.
5. Complete the Necessary Fields: Include details like taxable turnover, preferred tax period, and asset values.
6. Attach Required Documents: Upload all supporting documents mentioned above.

Responsibilities of a Registered Person

As a registered VAT operator, you must comply with the following:

• Maintain Accounting Records: Keep records for at least six years.
• Submit VAT Returns: File returns regularly as required by ZIMRA.
• Remit VAT: Pay the VAT due on or before the due date.
• Issue Fiscal Tax Invoices: Provide proper invoices, debit notes, or credit notes.
• Account for VAT on Stock and Assets: Ensure proper accounting if you sell or retain stock.
• Notify ZIMRA of Business Changes: Inform ZIMRA of any changes in business details or cessation of trade.

How to Submit VAT Returns

Registered businesses must submit VAT returns and remit the tax collected to ZIMRA. Here’s how you can do it:

1. Frequency: VAT returns are typically submitted every month or every quarter, depending on your business’s turnover.
2. Fill Out VAT Return Form (VAT 7): Include details of sales, purchases, output VAT, and input VAT.
3. Calculate Net VAT: Subtract input VAT from output VAT. If the result is positive, you owe ZIMRA. If negative, you may be eligible for a VAT refund.

Implications of Non-Compliance

Failure to comply with VAT regulations can result in severe penalties, including fines, interest on unpaid VAT, and potential legal action. Non-compliance can also lead to compulsory registration by ZIMRA, which may include backdating VAT liability and additional penalties.

Example: A business that exceeds the US$25,000 turnover threshold but fails to register will be required to pay the VAT due, along with interest and penalties on the computed debt.

VAT Deregistration

Deregistration can occur at the Commissioner’s discretion, upon voluntary application, or due to cessation of trade. Notify ZIMRA within 21 days of ceasing trade. Deregistration requires a thorough audit to ensure all obligations have been met.

FAQs on VAT in Zimbabwe for 2024

1. What is the current VAT rate in Zimbabwe for 2024?

The standard VAT rate in Zimbabwe for 2024 is 15%.

2. Who is required to register for VAT in Zimbabwe?

Businesses with an annual turnover exceeding US$25,000 or the equivalent in ZiG are required to register for VAT. Voluntary registration is also available for businesses below this threshold.

3. How can I register for VAT?

You can register for VAT by visiting the ZIMRA office or through the online e-Services portal. You need a TIN and must complete the VAT registration form (REV 1) with supporting documents.

4. What documents are required for VAT registration?

For companies, you need the Certificate of Incorporation, CR14, CR6, bank statements, Memorandum and Articles of Association, IDs and proof of residence for directors, a letter appointing a public officer, and a valid lease agreement or title deed.

5. How often do I need to submit VAT returns?

VAT returns are typically submitted monthly or quarterly, depending on your business’s turnover. The specific schedule will be communicated upon registration.

6. What happens if I fail to register for VAT when required?

Failure to register for VAT can result in penalties, including fines, interest on unpaid VAT, and compulsory registration by ZIMRA. You may also be liable for backdated VAT payments.

7. What are exempt supplies under VAT?

Exempt supplies include certain goods and services like water for domestic use, domestic electricity, agricultural equipment, and specific medical services. Detailed exemptions are listed in the Statutory Instrument 15 of 2024.

8. How do I calculate the VAT due?

VAT due is calculated by subtracting input VAT (VAT paid on purchases) from output VAT (VAT charged on sales). If the result is positive, you owe ZIMRA. If negative, you may be eligible for a refund.

9. What should I do if I cease trading?

If you cease trading, you must notify ZIMRA within 21 days. Deregistration can be applied for through the e-Services portal, and you must ensure all tax obligations are met before deregistration is approved.

10. How long should I keep my VAT records?

You must keep accounting records for at least six years after the tax period to which they relate. This includes invoices, receipts, and all documents related to your VAT transactions.

11. Can I claim a refund on VAT?

Yes, if your input VAT exceeds your output VAT, you can claim a refund from ZIMRA. Ensure all claims are supported by valid documentation.

12. What are the penalties for late submission of VAT returns?

Late submission of VAT returns can attract penalties and interest on the unpaid VAT amount. It’s crucial to submit returns on time to avoid these additional costs.

13. Are there any recent changes to the VAT Act?

Yes, recent changes include updates to the registration thresholds, exempt supplies, and procedural requirements as per Statutory Instrument 15 of 2024. It is essential to stay updated with these changes to ensure compliance.

14. What is the VAT registration threshold for voluntary registration?

For voluntary registration, the minimum turnover is subject to the conditions set by the Commissioner of ZIMRA. Businesses can register voluntarily if it benefits them, even if their turnover is below the compulsory registration threshold.

15. How do I submit VAT returns online?

VAT returns can be submitted online through ZIMRA’s e-Services portal. You need to fill out the VAT return form (VAT 7) with accurate details of your sales, purchases, and VAT calculations, and then submit it electronically.

VAT Registration FAQs

16. How will I know my VAT category after registering?

You will receive a registration confirmation letter from ZIMRA that specifies your VAT category. If you do not receive this letter within a specified number of days, please visit the ZIMRA office where you submitted your application.

17. What are the current VAT categories and their filing requirements?

• Category A & B: Returns and tax due are submitted and paid bi-monthly.
• Category C: Returns and tax due are submitted and paid monthly.
• Category D: The tax period is allocated for special businesses as determined by the Commissioner.

18. What should I do if I don’t receive my registration confirmation letter on time?

If you do not receive your registration confirmation letter within the specified number of days, you should approach the ZIMRA office where you submitted your application to inquire about the status.

19. How often do I need to submit VAT returns for Category C?

For Category C, VAT returns and tax payments must be submitted monthly.

20. What is Category D, and how is it determined?

Category D is for special businesses, and the tax period is allocated by the Commissioner. The specifics of this category are determined based on the nature and needs of the business.

Understanding and complying with VAT regulations in Zimbabwe is essential for businesses to avoid penalties and manage their finances effectively. By registering, maintaining accurate records, submitting returns on time, and staying informed about regulatory changes, businesses can ensure they meet their VAT obligations and contribute to the country’s tax system.