B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and services in Zimbabwe by a “registered operator” (see Section C)
• The importation of goods into Zimbabwe by any person
• The consumption of imported services by any resident
• The supply of electronic services or satellite broadcast services by a nonresident person to a resident person (for both business-to-business [B2B] and business-to-consumer [B2C] supplies)
• The supply of goods and services through an auctioneer
Withholding VAT. Value-added withholding tax of one-third of the VAT payable on an invoice applies. A VAT withholding tax agent is required to withhold and pay VAT in the currency in which the goods and services were purchased. VAT withholding tax is considered as not paid if it is paid using a different currency than the currency that was withheld.
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment rules” that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in that jurisdiction where it has customers that are not taxable persons. In Zimbabwe, the “use and enjoyment” provisions (B2B/B2C) apply to supplies of electronic services or satellite broadcast services by a nonresident person to a resident person. The nonresident person supplying the services is deemed to be trading in Zimbabwe and is invariably required to register and account for VAT. It applies to both B2B and B2C transactions.
Transfer of a going concern. Normally, the sale of the assets by a VAT-registered or VAT-registrable business is subject to VAT at the appropriate rate. However, a transfer of a business as a going concern (TOGC) would be subject to VAT at 0% provided all conditions precedent are fulfilled. A TOGC applies on the sale of a business or part of a business that is capable of separate operation including assets. Where the sale meets the conditions, the supply does not result in a VAT charge. The seller and the buyer must both be registered operators and must elect in writing to transfer a business or part of a business as a going concern. The transferred business must immediately after the sale be able to operate.
Transactions between related parties. Transactions between related parties are chargeable to VAT at the standard rate. Where both parties are VAT registered, the value of the supply of the transacted goods or services is any amount charged by the parties. However, where the transferee is not registered or required to be registered for VAT, the consideration of the supply shall be the open market value of the supply.
C. Who is liable
A “registered operator” is required to account for output tax on all goods and services supplied unless the supply is exempt.
A “registered operator” is any person who is carrying out trade in taxable supplies wholly or partly in Zimbabwe. Taxable supplies must at least be USD25,000 in any period of 12 months. A person includes a public authority, local authority, company or body of persons, whether corporate or unincorporated, the estate of a deceased or insolvent person and a trust fund.
With effect from 1 January 2024, the registration threshold is USD25,000. A taxable person must apply for VAT registration within 30 days of becoming obliged to register.
The auctioneer through whom a non-registrant supplies goods and services is responsible for the VAT on the supply of such goods and services.
Exemption from registration. Traders of exempt supplies and supplies by exempt bodies under the Geneva Convention are exempt from VAT registration in Zimbabwe.
Voluntary registration and small businesses. The law requires a trader to satisfy the Commissioner General that they are eligible to register for VAT before it is approved. The 2024 Finance Bill proposes to compel traders designated as emerging sector to apply and charge VAT even if their revenues are below the registration threshold. A company cannot apply for VAT registration solely for recovering input tax unless it was a holder of a Special Mining Lease and commenced mine development in the year of assessment beginning 1 January 2020.
Group registration. Group VAT registration is not allowed in Zimbabwe.
Fixed establishment. In Zimbabwe, there is no legal definition of the term “fixed establishment” in the VAT Act.
Non-established businesses. A non-established business is a person who supplies goods or services and does not have a fixed place of business in Zimbabwe. Generally, the Revenue Authority does not register for VAT purposes a nonresident person who does not have fixed place of business.
However, a non-established business that supplies goods or services in Zimbabwe must register and charge VAT on supplies of goods or services. Trade is defined in the VAT Act as meaning “any trade or activity that is carried on continuously or regularly by any person in Zimbabwe or partly in Zimbabwe and in the course or furtherance of which goods or services are supplied to any other person for a consideration, whether or not for profit …” The foreign registered operator must appoint a representative to account for VAT on its behalf. The representative must be a resident in Zimbabwe.
Tax representatives. Foreign companies or persons who do business in Zimbabwe but do not reside in Zimbabwe must appoint a resident Zimbabwean to act as their representative. The representatives are responsible for all compliance obligations of the principle.
Reverse charge. The reverse charge mechanism is applicable on imported services. The recipient of the service is treated as having made the supply itself, and accordingly it is required to account for the VAT due.
An importer of goods is responsible for the payment of import VAT. The recipient of “imported services” must self-assess and declare the tax to ZIMRA. Effective 1 January 2025, the due date was brought forward from the 25th to the 15th day of the following month.
Domestic reverse charge. Applicable in limited situations. The Commissioner’s approval is required before it is applied. The domestic reverse charge applies to the following:
• Supplies of commodities
• Supplies made within the mining sector
• Supplies of returnable containers (upon agreement between the supplier and customer)
For such supplies, the customer is required to self-account for the VAT due. It is also allowed to self-bill for the supplies made, as only the purchaser can determine the value of the goods.
Digital economy. With effect from 1 January 2020, foreign satellite broadcasting services and electronic commerce operators who supply services to residents of Zimbabwe with a minimum annual revenue of USD25,000 must register and account for VAT. See the Online marketplaces and platforms subsection below. This applies to both B2B and B2C transactions.
The supply of radio and television services from outside Zimbabwe to an address in Zimbabwe or of electronic service by an electronic commerce operator domiciled outside Zimbabwe to a person resident in Zimbabwe are be deemed to be supplies made in Zimbabwe. VAT thereon is
Deposits and prepayments. The time of supply for prepayments is the date when payment is received. If deposits form part of the consideration, the time of supply is when the deposit is paid or received. The time of supply for a deposit may be delayed if the supply of goods or service is conditional.
Continuous supplies of services. The time of supply for periodic supplies is the earlier of the date on which the payment is due, the date on which payment is received or the date on which an invoice relating only to that payment is received.
Goods sent on approval for sale or return. The time of supply is dependent on the “cooling off period” under the agreement of sale. If goods are returned during a cooling off period, there is no supply. The date of decision to buy during the cooling off period is the time of supply. If goods are not returned, the time of supply is on the day the cooling off period expires.
Reverse-charge services. These are permissible subject to the Commissioner’s approval. As the VAT due on imported services is accounted for by way of the reverse-charge mechanism (i.e., the customer self-accounts for the VAT), the tax point for imported services is the earlier of the receipt of the invoice or receipt of payment.
Leased assets. In general, there are no special time of supply rules in Zimbabwe for supplies of leased assets. As such, the general time of supply rules apply (as outlined above). However, there are special rules depending on the supply being made, as outlined below.
Rental agreements. The time of supply for rental agreements is the earlier of the date on which the payment is due or the date on which payment is received.
Installment credit agreements. For installment credit agreements, the supply is deemed to take place at the earlier of when the goods are delivered or when a payment of the consideration is received.
Immovable property. The time of supply for the supply of fixed property is the earlier of the date on which the change of ownership is registered in the deeds office or the date of receipt of a payment of the consideration. If the sale is settled over a period, VAT is payable on each installment.
Imported goods. VAT is paid at the earlier of the time of importation or on removal of goods from a bonded warehouse.
Supplies between related persons. Two value of supply rules apply for supplies between related persons. Where both are VAT registered, the value of supply is any amount agreed to. Where the customer is not registered or not required to register, the value of supply is the open market value of the supply.
F. Recovery of VAT by taxable persons
A registered operator may claim input tax (that is, VAT charged on goods and services supplied to it for business purposes) by deducting it from output tax, which is VAT charged on supplies made. Input tax may be deducted if all the following conditions are satisfied:
• The expenses are incurred in the making of taxable supplies
• The claimant has a valid tax invoice or bill of entry (imports)
• The claiming of input tax deduction is not specifically prohibited by the VAT Act
• Input tax is only claimed when supported by fiscal tax invoices. The invoice must carry the words “fiscal invoice” prominently displayed
• Tax clearance certificates will not be issued to registered operators whose fiscal devices are not interfaced with ZIMRA servers
• The time limit for a taxable person to reclaim input tax in Zimbabwe is 12 months. This is from date of the invoice
• Input tax is claimed on domestic purchase of goods and services, imported goods and on VAT on imported services
Nondeductible input tax. Input tax incurred on goods and services used for nontaxable purposes is not deductible. It is only deductible where exempt supplies are less than 10% of total supplies during a tax period.
Examples of items for which input tax is non-deductible
• The hire, purchase and importation of a passenger motor vehicle
• Fees or subscriptions paid by registered operators with respect to memberships in clubs, associations or societies of a sporting, social or recreational nature
• Amounts with respect to goods or services acquired for the purposes of business or staff entertainment
• VAT payable on exports of unbeneficiated hides and unbeneficiated platinum
Examples of items for which input tax is deductible in making taxable supplies
• Maintenance and repair costs of passenger motor vehicles
• Purchase, hire and maintenance costs of non-passenger motor vehicles, such as vans and trucks
• Cost of inputs made in the supply of food and leisure for which VAT is chargeable
• Expenses incurred by registered operators in the making or importation of taxable supplies, such as trading stock, raw materials, administration expenses and marketing costs
Partial exemption. VAT incurred in the making of exempt supplies is not deductible. Where a registered operator makes both exempt and taxable supplies (mixed supplies) input tax must be claimed based on their relative weighting.
If VAT is incurred in the making of both exempt and taxable supplies, deductible input tax is determined using a two-stage calculation, which is described below.
Direct attribution. For direct expenses, the first stage is to identify expenses incurred in making taxable supplies and those incurred in making exempt supplies. VAT paid on expenses incurred in making taxable supplies is deductible as input tax while VAT paid on expenses incurred in making exempt supplies is not deductible.
Apportionment. For overheads, the turnover method or another apportionment method acceptable to ZIMRA must be used to allocate the VAT between taxable supplies and exempt supplies. Input tax related to taxable supplies is deducted, while input tax related to exempt supplies is not deducted. If taxable supplies exceed 90% of the total supplies made by a registered operator, all the VAT incurred by the registered operator is deductible as input tax.
Approval from the tax authorities is not required to use the partial exemption standard method in Zimbabwe. Special methods are not allowed in Zimbabwe.
Capital goods. The sale of capital goods is subject to VAT. Equally, input tax incurred on capital goods that are used in producing taxable supplies is deductible. Where capital goods are used to produce both exempt and taxable supplies, input tax must be claimed proportionately. The input tax amount shall bear the ratio of intended use of the goods. If 90% of such capital goods are used to produce taxable supplies, input tax must be claimed in full. A change of use of the capital goods triggers a reapportionment of the input tax.
Refunds. If the amount of input tax recoverable in a tax period exceeds the amount of output tax payable in that period, the excess is refunded by the Commissioner. Amounts below ZWL1,000 may be claimed as a credit on subsequent VAT return. The Commissioner does not refund amount below ZWL1,000. In addition, any VAT refund can be utilized to settle other tax liabilities.
Pre-registration costs. VAT incurred on capital goods prior to VAT registration is claimed as input tax on submitting the first VAT return upon registration. The goods should have been used for
• Tax clearances to be issued to registered operators who are compliant with FDMS
• With effect from 1 January 2025, every micro and small enterprise must implement virtual fiscalization, including those who do not qualify for VAT registration
Supplies to nontaxable persons. There are no special invoicing rules for supplies to nontaxable persons in Zimbabwe. As such, full VAT invoices are required. However, all VAT-registered taxable persons are required to install fiscal devices at all points of sale.
Records. In Zimbabwe, every registered operator must maintain and keep records. This also applies to non-established businesses.
In Zimbabwe, examples of what records must be held for VAT purposes include the following:
• Sales and purchases records
• A record of all goods and services supplied by or to the registered operator showing suppliers or agents in sufficient detail
• A record of all importations of goods and documents relating thereto
• The charts and codes of account, the accounting instruction manuals and the system and program documentation
• Any documentary proof required to be obtained and retained
In Zimbabwe, VAT books and records must be held within the country. Specifically, they must be held at the local registered office.
Record retention period. VAT records must be held for a period of six years from the date of the last transaction in any book or within six years after the completion of the transaction, acts or operation of which they relate. The records must be ready for the Commissioner’s inspection. However, the Companies and Other Businesses Act requires company records to be retained for eight years.
Electronic archiving. Electronic archiving is allowed in Zimbabwe. However, there is no provision for electronic archiving in the VAT law, and as such, generally, taxable persons are required to maintain physical archiving (i.e., paper, computer printouts). Where records are electronically archived, the system should have capacity to produce printed copies on request. Generally paper records must be held as well as electronic records (if opted), because the paper records must be kept as alternatives.
I. Returns and payment
Periodic returns. VAT returns can be filed monthly or bimonthly in Zimbabwe. The filing frequency is split into three categories, depending on levels of annual taxable supplies.
For monthly returns there is one category – C. All registered operators with annual taxable supplies greater than RTGS19.2 million have a monthly tax period.
For bimonthly returns, there are two categories – A and B. Category A is the two months starting with an even number and ending with an odd one, e.g., December/January. Category B is the two months starting with an odd number and ending with an even one, e.g., January/February. The threshold for category A and B is RTGS7.8 million to 19.2 million.
Additionally, category D is allocated to traders whose income is discretely received, such as income form pastoral activities.
In terms of the filing deadline, VAT returns must be filed by the 15th day of the month following the tax period. If the due date falls on a Saturday, Sunday or public holiday, the due date is the last business day before the 15th.
Periodic payments. The payment of VAT and submission of the returns are done concurrently, by no later than the 15th day of the month following the tax period. Payment of VAT is done through
bank transfer or bank deposits or other online platforms. The Commissioner of Taxes does not accept cash payments.
VAT deferment is allowed on imported capital equipment. Deferment ranges from 90, 120 or 180 days from the date of importation. To qualify for this deferment, the value of such imported plant, equipment and machinery must be USD100,000 to USD1 million (90 days), USD1 million to USD10 million (120 days) or more than USD10 million (180 days).
Electronic filing. Electronic filing is mandatory in Zimbabwe for all taxable persons. VAT returns must be submitted through the Zimbabwe Revenue Authority web portal. The exception is where the return has failed to go through the revenue authority e-services portal (for example, due to a technical issue). In this case the return must be scanned and emailed instead.
Payments on account. Payments on account are optional in Zimbabwe. Registered operators may apply to the Commissioner for specific payment terms. Interest at 25% is charged for payments received after due date.
Special schemes. No special schemes are available in Zimbabwe.
Annual returns. Annual returns are not required in Zimbabwe.
Supplementary filings. Supplementary filings are only required at the instance of the Commissioner, where revenue was understated.
Correcting errors in previous returns. VAT returns can be amended within a six-year prescription period. Registered operators (i.e., those who are registered or are required to be registered under the VAT Act) are encouraged to submit a voluntary disclosure to reduce or eliminate any penalties. A manual (i.e., paper) amended return is required to correct errors. In the case of additional tax payable, interest is charged at 10% or bank rate if tax is payable in foreign or local currency.
Digital tax administration. Real-time transactional reporting. All VAT-registered taxable persons are required to install (at the time of registering for VAT), electronic registers or electronic signature devices, with prescribed specifications to record taxable transactions. Fifty percent of the cost of acquiring these prescribed, “fiscalized” electronic registers is deductible from VAT payable. The law requires transmission of sales data online to ZIMRA through a server-to-server connection. Therefore, all transactions are transmitted to the ZIMRA on a real-time basis. Note, these fiscal devices are to be phased out after the introduction of a virtual fiscalization solution.
J. Penalties
Penalties for late registration. A person becomes liable to pay tax from the time that person first becomes liable to be registered. A penalty of up to 100% of the amount of VAT and 10% or bank rate if tax is payable in foreign or local currency. Interest is assessed for the period when the person first became liable to be registered and the late-registration date.
Penalties for late payment and filings. A penalty is imposed for late payment of VAT at a rate of up to 100% of the outstanding tax for each month. Additional tax equal to 100% of the relevant tax may be levied in cases of fraud. From 1 January 2024, failure to pay tax by the due date is an offense liable to a fine not exceeding level seven or imprisonment for a period not exceeding three months. The property of a taxpayer who fails to pay tax on due date may be attached.
Payment is allowed of the principal amount first before payment of penalty and interest. Interest is charged on outstanding tax at a rate of 200% or 10% per year where VAT is payable in local or foreign currency.
For late submission of VAT returns, a civil penalty of USD30 per day per tax return is imposed. Those daily penalties continue during the first 91 days that each return is in default. If the person
continues to be in default after the 91 days, they shall be guilty of an offense and liable, on conviction, to a level 14 fine not exceeding (USD5,000) or imprisonment for a period not exceeding five years or to both the fine and imprisonment.
Where a taxable person receives income in foreign currency but pays the tax in local currency or does not pay the tax at all, they are liable to a primary civil penalty of twice the USD tax payable.
Penalties for errors. A civil penalty of up to USD25 per point of sale per day is charged for failure to use prescribed “fiscalized” electronic registers. A similar penalty is imposed on approved suppliers of electronic signature devices and fiscalized or non-fiscalized electronic registers who fail to supply them within six weeks of an order with payment in full. Specific fiscalisation offenses and penalties are as follows:
• Failure to issue fiscal invoice or receipt is an offense liable to a fine of USD1,000 or local currency equivalent
• Failure to acquire or use electronic fiscal device attracts a penalty of USD1,000 or equivalent in local currency. In addition, civil penalty of USD25 per point of sale the operator remains in default for a period not exceeding 90 days.
• If the operator remains in default after the specified period, such operator shall be guilty of offense and liable to a fine not exceeding level seven or imprisonment for a period not exceeding six months or to both fine and imprisonment
• Anyone who manufactures, offers for sell or distributes fiscal memory device without ZIMRA approval is liable on conviction to a fine not exceeding level 14 or imprisonment not exceeding five years or to both such fine and imprisonment
• Failure to interface within 96 hours of receipt or expiry of civil penalty order attracts a fine of USD25 per point of sale for each day the operator remains in default up to a maximum of 90 days. If the operator remains in default after the specified period, it shall be guilty of offense and liable to a fine not exceeding level seven or imprisonment for a period not exceeding 12 months or both such fine and imprisonment
• Deliberate tampering with electronic fiscal devices attracts a penalty of USD1,000 or equivalent in local currency or three time the taxes involved, whichever is greater. If the operator continues in default, it shall be liable to a penalty of USD50 per day to a maximum of 90 days. The operator is also guilty of an offense and is liable on conviction to a fine not exceeding level 14 or imprisonment not exceeding five years or to both such fine and imprisonment
Fines, imprisonment or both may also apply to various other offenses, including making false statements and obstructing a revenue officer.
Failure to pay in the prescribed currency will result in a penalty double the amount payable. Failure to pay the penalty results in a civil penalty of USD30 per day that the penalty remains unpaid up to 181 days.
The late notification or failure to notify the tax authorities of changes to a taxable person’s VAT registration details may result in a penalty of USD30 for each day the taxable person remains in default, not exceeding a period of 181 days. For further details, see the subsection Changes to VAT registration details above.
Penalties for fraud. Any person or agent who with intent to evade the payment of tax or obtain a refund that they are not entitled to is liable for any of the following actions:
• Makes or causes or allows to be made any false statement or entry in any return
• Prepares, maintains or authorizes the preparation or maintenance of any false books of accounts or authorizes the falsification of records
• Gives any false answer to any request for information
• Makes use of any fraud or false statement
• Issues erroneous or incomplete invoices, credit notes and debit notes
They shall be guilty of an offense and liable to a level 12 fine of (USD3,000) or imprisonment not exceeding two years.
Personal liability for company officers. Company officers can be held personally liable for errors and omissions in VAT declarations and reporting in Zimbabwe only for fraudulent activities. See the Penalties for fraud subsection above for more details on what penalties can apply.
Statute of limitations. The statute of limitations in Zimbabwe is six years. If fraud and misrepresentation are not suspected, the prescription period is six years. Recent court rulings indicate that submission of a return with errors is considered misrepresentation. This interpretation creates a potential risk that assessments can be reopened beyond six years.