VALUE ADDED TAX

IV
VAT:REGISTRATION-SEC 23
A trader becomes liable for VAT registration if
the value of taxable supplies in any past period
up to 12 months exceeds $500 000 ( or the
prescribed amount) or if there are reasonable
grounds for believing that the value of the taxable
supplies will exceed $500 000 in the next 12
months
VAT:COMPULSORY REGISTRATION
•Historical test
•If cumulative sales of taxable supplies
for the previous 12 months to date
exceeds $500 000 or the prescribed
amount the trader has to register for VAT
VAT:COMPULSORY REGISTRATION
•Historical test
•Trader must notify ZIMRA within 30days
of expecting to meet the threshold, and the
trader will be accordingly registered from
the 1st day of the month following
notification
VAT:COMPULSORY REGISTRATION
•Historical test
•The notification must done on the
prescribed form
•If all is in order ZIMRA issues a
certificate of VAT registration
VAT:COMPULSORY REG-EXAMPLE
Ndodha started to trade kitchen ware on 1 January
2019. Sales for the period Jan to September averaged
$51 000 per month and thereafter $55 000 a month.
REQUIRED
•From what date should Ndodha be registered for
VAT?
•(Assume the 2020 thresholds applied in 2019)
VAT:COMPULSORY REG.EXAMPLE
Sales Jan-Sept $459 000
Sales to 31October $514 000 (exceeds $500
000)
Ndodha to complete form VAT 1 by 30
November 2019 and will registered from 1
December 2019 or at an earlier agreed date
VAT:COMPLUSORY REGISTRATION
•Future test
•A person is liable to register at any time if
there are reasonable grounds for believing
that his/her cumulative taxable supplies
excluding VAT in the next 12 months is
expected to exceed $500 000
VAT:COMPLUSORY REGISTRATION
•Future test
•Trader must notify ZIMRA within 30days of
expecting to meet the threshold
•ZIMRA will register the trade w.e.f. the 1st
day of the month following notification
VAT:COMPULSORY REGISTRATION
Registration is not required iro services rendered
by an employee in the course of his employment,
pvt recreational pursuits or hobbies of any
person
suppliers of exempt supplies
private occasional transactions
VAT:REGISTRATION
•In determining the threshold exempt
supplies, sale of capital assets used in
the business and abnormal sales of
stock
•Zero rated supplies are considered
VAT:REGISTRATION
Example
Ndodhana Ltd’s sales for the 12months ended Dec 2019 are:
Standard rated supplies $300 000
Sale of obsolete PPE $200 000
Exports to the P.R.China $100 000
Exempt supplies made $300 000
REQUIRED
Is Ndodhana Ltd liable for VAT registration?
VAT:REGISTRATION
•Solution
•Ndodhana Ltd’s taxable supplies are:-
Standard rated sales $300 000
Zero rated sales $100 000
Total sales $400 000
VAT:REGISTRATION
•Should a trader who should register fails to do so
ZIMRA can backdate th registration and call upon
the trader to pay output tax the trader was supposed
to have paid from the effective date of registration
•Interest and penalty will be chargeable on the
output tax he should have collected from the date
of effective registration
VAT:REGISTRATION
•A registered operator should notify ZIMRA in
writing within 21 days in the event of:-
–Change of name, address, constitution or nature of
the registered operator
–Physical address and change of name
–Change in accounting basis
–Change in tax category
VAT:VOLUNTARY REGISTRATION
•A person whose sales threshold is less
than $500 000 or the prescribed amount
in any period of 12 months may apply
to ZIMRA for voluntary registration
VAT:VOLUNTARY REGISTRATION
•Voluntary registration is accepted by the
COG subject to the following being met:-
–Is carrying or intends to carry on trade
from a specified date
–Has a fixed abode of business
–Keeps proper accounting records
VAT:VOLUNTARY REGISTRATION
•Voluntary registration is accepted by the
COG subject to the following being met:-
–Has opened a banking account with any
bank or similar financial institution
–Previously registered for sales tax and has
not failed to perform the prescribed duties
VAT:VOLUNTARY REGISTRATION
•Advantageous where a trader wishes to
recover input tax on purchases
•No hassle of monitoring sales and
possibility of penalties etc
•Participation in govt tenders
VAT:VOLUNTARY REGISTRATION
•Charging of output tax to unregistered customers may not
always outweigh the advantages of recovering input tax
•If main expense is in the form of salaries and wages
where no input tax is claimed
•Administrative costs and penalties
•Unregistered traders prefer to deal with unregistered
operators because of pricing
VAT:PRE-REGISTRATION VAT
•Pre-incorporation
A company being a registered operator shall be
entitled to claim a refund of input tax paid on the
acquisition of goods and services for and on behalf
of that company or in connection with the
incorporation of that company, if the expenditure
was incurred by a person who:
VAT:PRE-REGISTRATION VAT
•Pre-incorporation
–Was reimbursed by the company for the whole
amount of the consideration paid for the goods
and services
–Acquired those goods or services wholly for the
purpose of a trade to be carried on by the
company
VAT:PRE-REGISTRATION VAT
•Pre-incorporation claim is not allowed where:-
–Supply of those goods/services by that person to
the company is a taxable supply or supply of
second hand goods
–Goods/services acquired more than 6 months prior
to the date of incorporation of the company
–Company has insufficient documentation
VAT:PRE-REGISTRATION VAT
•Pre-registration VAT
No VAT is claimed on purchases before
registration
Input tax on trading stock and consumables
purchased by a person prior to registration on hand
at the date of the registration shall be claimed
VAT:PRE-REGISTRATION VAT
•Pre-registration VAT
Stock take is required and properly
prepared stock lists should be prepared
COG may agree on the amount to claimed
over 6 months where no sock take is done
VAT:DEREGISTRATION
•A registered operator may deregister on
request if the value of taxable supplies in
the following one year will be less than
the threshold or is no longer making or
intending to make taxable supplies
VAT:DEREGISTRATION
•Cessation of trading with no intention
to recommence within the next 12
months a trader should notify ZIMRA
of such within 21days of such cessation
for deregistration
VAT:DEREGISTRATION
•Voluntary registered operators are
registered when they fail to comply with
the conditions of voluntary registration
in which case the COG will notify the
operator of such decision in writing
VAT:DEREGISTRATION
•An operator must deregister if he/she
never commenced trade or will not
commence trade in the next 12 months
•Deregistration normally takes place the
last day of the operator’s tax period
VAT:DEREGISTRATION
•Consequences of deregistration
-VAT is chargeable on all goods and services on
hand at the date of deregistration
-VAT is also chargeable on all stocks and capital
assets in business on which input tax was claimed,
since the registered trader is in effect making a
taxable to himself as a newly unregistered trader
VAT:DEREGISTRATION
•Consequences of deregistration
-trader must surrender the VAT certificate
-Trader is required to fulfil all obligations
under the Act as if he/she was registered
VAT:TAX PERIODS SEC 27
Tax period refers to the intervals that
registered operators submit returns
there are four different categories of
tax periods i.e. A;B;C & D
VAT:TAX PERIODS SEC 27
Category A
Means the category of registered operators
whose tax periods are periods of two
months ending on the last day of the months
of January, March, May, July, September
and November of the calendar year;
VAT:TAX PERIODS SEC 27
Category B
Means the category of registered operators
whose tax periods are periods of two
months ending on the last day of the
months of February, April, June, August,
October and December of the calendar year
VAT: TAX PERIODS EXAMPLE
Magate Pvt Ltd is a sawmill operator, is a
registered VAT operator under category B.
The company’s registered address is 230
Munhondo Street Mufakose. The
following are details for Jan and Feb
2020:
VAT: TAX PERIODS EXAMPLE
Sales on account$300 000
Cash sales $150 000
Sale of old desktop computer $30 000
Purchase of saligna timber $200 000
Purchase of computers $100 000
Fuel coupons $120 000
Repairs to Scania horse $100 000
All the above items are inclusive of VAT.
VAT: TAX PERIODS EXAMPLE
The company intents to move to new factory shells
in Willowvale sometime in April or June 2020
Required
Advise the company of its VAT obligations in
respect of the information availed to you
VAT: TAX PERIODS EXAMPLE-SOLUTION
Amt($)Rate VAT($)
Sales on a/c 300 000 .126637 991.27
Cash sales 150 000 .126618 995.63
Sale of old comp 30 000 .1266 3 799.13
60 786.03
VAT: TAX PERIODS EXAMPLE
Pur of saligna$200 000 .1266 25 327.51
Pur of comp $100 000 .1266 12 663.75
Fuel cuopons $120 000 Exp
Scania repairs $100 000.1266 12 663.75
50 655.01
VAT: TAX PERIODS EXAMPLE
Input tax 50 655.01
Output tax (60 786.03)
VAT payable 10 131.05
VAT: TAX PERIODS EXAMPLE
In addition Magate should notify the COG of their
physical change of place in terms of Sec25
‘Subject to this Act, every registered operator shall within
twenty-one days and in the prescribed form notify the
Commissioner in writing of:…
(b) any change of address at or from which, or the name
in which, any trade is carried on by that registered
operator;’
VAT:TAX PERIODS SEC 27
Category C
means the category of registered operators
whose tax periods are periods of one
month ending on the last day of each of
the twelve months of the calendar year
VAT:TAX PERIODS SEC 27
Category C
A registered operator shall fall within Category C if— (a) the
total value of the taxable supplies of the registered operator,
including the taxable supplies of any branches, divisions or
separate trades of the registered operator registered as separate
registered operators under subsection (2) of section fifty-one—
(i) has in the period of twelve months ending on the last day of
any month of the calendar year exceeded fifty million dollars or
the prescribed amount; or
VAT:TAX PERIODS SEC 27
Category C
(ii) is likely to exceed that amount in the period of twelve
months beginning on the first day of any such month; or
(b) the registered operator has applied in writing for the
tax periods in his case to be on a monthly basis; or
(c) the registered operator has repeatedly made default in
performing any of his obligations in terms of this Act
VAT:TAX PERIODS SEC 27
Category D
means the category of registered operators who
have made written applications for tax periods
other than those of Category A, B or C, and
whose tax periods end on the last day of such
other months as the Commissioner may approve.
VAT:TAX PERIODS SEC 27
Category D
(a) the registered operator’s trade consists solely of agricultural,
pastoral or other farming activities or the registered operator is a
branch, division or separate trade which is deemed by subsection
(5) of section twenty-three to be a separate person for the
purposes of that section and is as such registered under that
section, or the registered operator is a branch, division or
separate trade registered as a separate registered operator under
subsection (2) of section fifty-one; and
VAT:TAX PERIODS SEC 27
Category D
(b) the activities of any such branch, division or separate trade consist solely of
agricultural, pastoral or other farming activities and activities of that kind are not carried
on in any other branch, division or separate trade of the registered operator or the
association not for gain, as the case may be, by whom a written application referred to in
paragraph (e) is made; and
(c) the total value of the taxable supplies of the registered operator from agricultural,
pastoral or other farming activities—
(i) has in the period of twelve months ending on the last day of any month of the
calendar year not exceeded five million dollars or the prescribed amount; and
(ii) is not likely to exceed that amount in the period of twelve months commencing at
the end of the period referred to in subparagraph (i)
VAT:TAX PERIODS SEC 27
Category D
(d) the registered operator does not fall within Category C; and (e) the
registered operator whose trade consists solely of agricultural, pastoral
or other farming activities or the registered operator referred to in
subsection (2) of section fifty-one or the association not for gain
referred to in subsection (5) of section twenty-three, as the case may be,
has made a written application to the Commissioner, in such form as
the Commissioner may prescribe, for such first-mentioned registered
operator or the branch, division or separate trade in question, as the
case may be, to be placed within Category D;
VAT:QUESTIONS
Summarise stating the relevant authority, the
circumstances or rules of determining when a
taxable supply of goods or services, including
supply on a continuous basis or hire purchase
arrangement, is deemed to occur for the purpose of
charging value added tax (VAT).
VAT:SUGGESTED SOLUTION
(1) A supply of goods or services occurs in terms of the VAT Act (Chapter 23:12)
Earlier of invoice payment
In case of goods or services appropriated to own use, on the date on which the goods or
services are first applied to own use.
Where the goods or services are applied by way of gift, on the date on which ownership in
the goods passes or the performance of the services is completed.
Where the supplier and the recipient are connected persons.
In the case of a supply of goods which are to be removed, at the time of the removal; and
VAT:SUGGESTED SOLUTION
• In the case of a supply of goods which are not to be removed, at the time when they are made available to the
recipient; and
• In the case of a supply of services, at the time the services are performed.
• Agreement subject to cool off period is day after purchaser is entitled to cancel agreement if not cancelled.
• Lay by agreement date the goods are delivered or date of termination of agreement if any amount paid is retained.
• Where the supply is for a consideration in money received by the supplier by means of any machine, meter or
other device operated by a coin or token.
• In the case of such supplier, at the time any such coin or token is taken from that machine, meter or other device
by or on behalf of the supplier; and
• In the case of the recipient of such supply, at the time the coin or token is inserted into that machine, meter or
other device by or on behalf of the recipient.
.
VAT:SUGGESTED SOLUTION
• Supplies to branches in the furtherance of trade at the time of delivery of goods or services.
• Taxable benefits by end of the month in which the benefit accrues
• Reposed goods date on which the goods are repossessed.
• Any importation by an agent at the time duty/tax is payable on such importation.
• The supply of goods under hire purchase agreement or finance lease it will be on the date goods are made
available under hire purchase agreement or lease finance.
Where:
• Goods are supplied under a rental agreement.
• Goods or services are supplied under an agreement, the goods shall be treated as successively supplied and
each successive supply occurs on the earlier of the date on which payment is due or received.