Zimbabwe presents 2018 budget proposals

Transcription

1 18 December 2017 Global Tax Alert Zimbabwe presents 2018 budget proposals EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: Executive summary On 7 December 2017, Zimbabwe s Minister of Finance & Economic Development presented his 2018 budget statement to the Parliament. The draft Finance Bill will be promulgated as an Act of Parliament in order to formalize the budget proposals. Accordingly, the budget proposals may be modified prior to enactment of the Finance Bill. Therefore, any financial decisions taken in response to the proposals should be made with this consideration in mind. This Alert summarizes the key proposals contained in the Bill and the Minister s speech. Detailed discussion Company Taxation Withholding tax on tenders Payments for tobacco purchased on both the auction and contract floors are exempt from 10% withholding tax.

2 2 Global Tax Alert Presumptive taxes The Minister has proposed allocation of presumptive taxes equally towards the formalization of the activities of the informal sector and on programs that provide loans and other credit facilities to small and medium enterprises. Moratorium on companies assisted by ZAMCO The Government will consider, where warranted, a moratorium on tax arrears owed by companies that benefited from debt assumption by the Zimbabwe Asset Management Corporation (ZAMCO). Exemption on export and foreign remittance incentive With effect from 1 June 2016 The Reserve Bank of Zimbabwe (RBZ) incentive on export proceeds and foreign remittances received would be exempt from income tax. Interest on penalties The Minister has proposed the repeal of levying interest on penalties. Input tax not claimed from ZIMRA Input tax not claimed from Zimbabwe Revenue Authority (ZIMRA) is not allowable as a deduction for income tax purposes. Mineral royalties With effect from 1 April 2017 A uniform royalty rate of 2.5% to apply on export of platinum by mining houses operating on a special lease and ordinary mining license. Royalty on diamonds will remain at 15%. However no royalty is payable on diamonds sold to a manufacturer at a discount that is equal to the royalty. Non-deductible expenses The Minister proposes an amendment of the general deduction section to exclude the deduction of expenses that are capital in nature and prepaid expenses. Prepaid expenses are claimed proportionately in the years in which they are utilized. Expenditures on technical and support services This proposal relates to expenditures related to technical and support services incurred by a taxpayer who is an anchor farmer to a small holder farmer. The anchor farmer is allowed a further allowance of 50% of the cost. Anchor farmer means a person engaged in commercial farming who provides, agronomic advice and marketing opportunities to a group of smallholder farmers. Thin capitalization Interest expenses incurred where debt is more than three times equity is not deductible. The interest is deductible if the debt is from a local financial institution or from any other local source and in both cases where the parties are not related. Equity is defined as issued and paid up capital, unappropriated profits, reserves, realized reserves and interest free loans from shareholders. Debt has not been defined. Special mining leases Value of a staff house by a miner operating a special mining lease will increase from US$ 1 10,000 to $25,000. Expenditure on housing used by staff at school, hospital nursing home or clinic will increase from $100,000 to $150,000. Tax on bookmakers Bookmakers income will be subject to a 5% levy on gross takings.

3 Global Tax Alert 3 Power sector Investors in the power sector will receive a five-year income tax holiday and a 15% rate of tax thereafter. Value Added Tax (VAT) VAT withholding tax Value added withholding tax reduced from 2/3 to 1/3 of VAT of the amount that is paid to a supplier. Financial services Services provided by or on behalf of a banking institution registered or required to be registered in terms of the Banking Act are exempt from VAT. VAT on capital equipment resulting from policy change No VAT liability arises on the change of use of capital goods caused by the Government s change of policy. Goat and Sheep Meat Goat and sheep meat will be reclassified from standard-rated VAT to exempt. Fiscalization Failure to report a malfunctioning fiscal device will be an offense subject to a civil penalty of $25 per day up to a maximum of 181 days. Refund of VAT charged to development partners The refund of VAT charged on development partners will be extended to VAT will be refunded within 30 days. VAT on unprocessed (unbeneficiated) platinum The collection of VAT on the export of unbeneficiated platinum has been deferred to 1 January The rate of the export tax is reduced from 15% to 5% of the value of the unbeneficiated platinum where the supplier has built a plant in Zimbabwe capable of producing platinum group concentrates or 2.5% where the supplier has also build a plant in Zimbabwe capable of smelting to produce matter and 1% of the unbeneficed platinum the supplier has built a base metal refinery in Zimbabwe and 0% where the supplier has built in Zimbabwe a precious metal refinery that is capable of recovering precious metals. VAT on unbeneficiated lithium The collection of 5% export VAT on export of unbeneficiated lithium and dimensional stones. VAT on unbeneficiated black granite The collection of export VAT on export of unbeneficiated black granite. Customs and Excise Special excise duty on airtime The effective date for the special excise duty on airtime is 23 March Bonded warehouse The bonded warehouse definition extended to include both private and public warehouse. Rutenga Port of Entry Rutenga is designated as a new port of entry on which goods may be entered in terms of section 14 of the Customs and Excise Act. Goods imported by rail from the Sango Border post will be cleared at Rutenga. Duty on commercial tires 15% Customs Duty on commercial tires by commercial vehicle operators on 100,000 units during the first quarter of 2018.

4 4 Global Tax Alert Cancellation fee for export bills of entry The fee for cancellation of an export bill of entry is reduced from $50 to $10. Beitbridge Border Post Changes To be developed to handle electronic manifest systems, enable scanners to interface with Asycuda, future searches to be carried out on one bay, erecting of a customs barrier and, lodgment of an electronic systems to direct travelers, development of a motor vehicle shade and authorization of security services to clean up touts at the border. ZIMRA to assume control of the administration of border posts in preparation for the set-up of the National Ports Authority. Motor vehicles exported temporarily to be recorded on the automated system (all border posts). Mandatory pre-clearance of commercial goods With effect from 1 February 2018 The Minister proposes mandatory pre-clearance of commercial consignments imported by road at ports of entry. Full roll out of electronic cargo tracking system The Minister proposes a full roll out of the cargo tracking system and Zimra to report on implementation progress by end of March Tax amnesty A new tax amnesty law will require taxpayers to voluntarily disclose previously unpaid taxes or tax irregularity. The disclosure is to be made between 1 January and 30 June The amnesty covers penalty and interest on all taxes. The amnesty precludes the Commissioner or the Prosecuting Authority from prosecuting the taxpayer. The amnesty is to be made in writing and shall be made not later 30 June The tax should be paid on or before 30 June Ground rental fees Ground rental fees on diamond concessions will be reduced from $3,000 to $225 per hectare per annum. Endnote 1. Currency references in this Alert are to US$.

5 Global Tax Alert 5 For additional information with respect to this Alert, please contact the following: Ernst & Young Chartered Accountants (Zimbabwe), Harare Nigel Forsgate nigel.forsgate@zw.ey.com Josephine Banda josephine.banda@zw.ey.com RameckMasaire rameck.masaire@zw.ey.com Lonah Kali lonah.kali@zw.ey.com Ernst & Young Chartered Accountants (Zimbabwe), Bulawayo Jannie Jacobs jannie.jacobs@zw.ey.com Sifelani Nhliziyo sifelani.nhliziyo@zw.ey.com Ernst & Young Chartered Accountants (Zimbabwe), Mutare Peter Tinorwa peter.tinorwa@zw.ey.com Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg Justin Liebenberg justin.liebenberg@za.ey.com Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London Rendani Neluvhalani rendani.mabel.neluvhalani@uk.ey.com Byron Thomas bthomas4@uk.ey.com Ernst & Young LLP, Pan African Tax Desk, New York Silke Mattern silke.mattern@ey.com Dele A. Olaogun dele.olaogun@ey.com Jacob Shipalane jacob.shipalane1@ey.com Ernst & Young LLP, Pan African Tax Desk, Houston Elvis Ngwa elvis.ngwa@ey.com

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