FUNGAI CHIMWAMUROMBE ANDTHEOPHILUS MUBEMI
Introduction:
The Government of Zimbabwe has implemented a number of tax policies in an effort to stimulate economic growth and attract investment into the country.
Two key taxes that play a significant role in the Zimbabwean tax system are Capital Gains Tax (CGT) and Value Added Tax (VAT) to which both are remitted to the Zimbabwe Revenue Authority (ZIMRA).
The government has recently implemented tax deferral programs for both CGT and VAT in an effort to provide relief to taxpayers and promote economic growth.
This article aims to provide a detailed analysis of CGT and VAT tax deferment in Zimbabwe.
CGT
CGT is a tax levied on the profit made from the sale of assets such as real estate, shares, and other investments.
In Zimbabwe, CGT is governed by the Capital Gains Tax Act (Chapter 23:01) and is applicable to both individuals and companies.
However, the government has introduced a tax deferment scheme for CGT to encourage reinvestment and stimulate economic growth.
Under the tax deferment scheme, taxpayers can defer the payment of CGT if they reinvest the proceeds from the disposal of assets into qualifying assets within a specified period.
Qualifying assets include productive assets such as machinery, equipment, and infrastructure that contribute to economic development.
Tax deferment schemes can also be allowed on instances of corporate restructuring to allow business expansion.
Such deferments can only be granted upon application and approval by the Zimbabwe Revenue Authority(ZIMRA) upon satisfaction of the thresholds set.
The deferment period varies depending on the type of asset and also the conditions set in the event deferments approved in the course of corporate restructuring.
The tax deferment scheme aims to provide an incentive for taxpayers to reinvest their capital gains into the economy rather than diverting them elsewhere.
By deferring the payment of CGT, taxpayers have more funds available for productive investment and business expansion, which can lead to job creation, increased economic activity, and overall growth.
VAT
VAT is a consumption tax levied on the value added at each stage of the production and distribution process.
In Zimbabwe, VAT is governed by the Value Added Tax Act (Chapter 23:12) and is applicable to goods and services supplied within the country.
To support businesses and encourage investment, the government has introduced a VAT tax deferment scheme.
Under the VAT tax deferment scheme, eligible businesses can defer the payment of VAT on imported goods and services.
This allows businesses to defer the VAT payment until the goods or services are sold or consumed.
The scheme aims to provide cash flow relief to businesses, especially those involved in importing goods or services, by deferring the VAT payment until the revenue is realized.
To qualify for VAT tax deferment, businesses must meet certain criteria, including being registered for VAT, having a good compliance record, and providing adequate security.
The scheme is intended to support businesses by improving their cash flow and reducing the financial burden associated with upfront VAT payments.
Conclusion
In summation, it is great importance to note that the tax deferment schemes for CGT and VAT in Zimbabwe offer several benefits to taxpayers and the economy as a whole.
By deferring the payment of CGT and VAT, individuals and companies have more capital available for business expansion.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted for feedback at fungai@ zenaslegalpractice.com and WhatsApp 0772 997 889.
Theophilus Mubemi is a registered legal Practitioner and Junior Lawyer at Chimwamurombe Legal Practice and can be contacted for feedback at theophilus@zenaslegalpractice.com. Whatsapp +263 71 793 6310
