Nearly 9 000 SMEs have complied with a Zimbabwe Revenue Authority directive to register for tax purposes before June 30, 2017.
Government, through the Ministry of Finance and Economic Development, issued a six-month moratorium on penalties for non-compliant small and medium-sized enterprises that were eligible for tax registration before January this year. Policymakers are betting that main streaming informal businesses will improve revenue flows into the fiscus.
Small businesses that do not qualify for tax categories stipulated by Zimra are usually obliged to pay presumptive tax, which is essentially a tax levied on presumed income. Zimra director of legal and corporate services Ms Florence Jambwa told The Sunday Mail Business that SMEs should use the window provided to comply as penalties were likely to become effective after the deadline expired. “To date, a total of 8 944 clients have been registered under the moratorium. Zimra urges its clients in the SMEs sector to take advantage of the moratorium and to register before the deadline, which is June 30, 2017.
“The moratorium means that any small-to-medium enterprise who is liable to register for Value Added Tax but failed to do so before 1 January 2017 can now apply for registration without being charged penalties for late registration.” The present dispensation waives output tax, which is payable from the date the taxpayer first becomes liable for registration for VAT purposes. Output tax is usually charged on supplies made.
Ms Jambwa said: “After 30 June 2017, the moratorium would have expired implying that penalties for late registration, as well as output tax, will be payable from the date when the SME is deemed to have become liable for VAT registration. “It is in the interest of an SME which is not registered at the moment to take heed of this deadline as there will be no lenience by the Revenue Authority when they eventually get caught.”
Other tax concessions include the Special Initial Allowance in which qualifying enterprises are entitled to a 100 percent SIA over a three-year period. The first 50 percent is applicable within the first year, while the remainder is spread over the next two years of assessment. 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 operations.
Many SMEs view paying tax as an unwanted cost to business rather than a normal business practice. Taxes applicable to SMEs include presumptive tax, income tax, value added tax, pay as you earn and withholding tax. The Small and Medium Enterprises and Co-operatives Development Ministry says its database shows that more than 5,7 million businesses are operating in the informal sector.
Zimra is broadening its tax base and speeding up fiscalisation to enhance revenue collections through plugging leakages and minimising tax fraud. Fiscalisation has seen fiscal devices linking Zimra servers and companies’ electronic registers to provide real-time transmission of transaction data to the tax man.
Fiscalisation initially targeted VAT-registered operators whose annual turnover exceeds US$240 000 (category C) and now covers all businesses that have turnover of more than US$60 000 (categories A, B and D). The revenue enhancement strategy has seen Zimra increasing its first quarter target by six percent at US$812,9 million, from US$862,5 million in the same period a year earlier.
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