TAXES IN ZIMBABWE: VALUE ADDED TAX CHANGES 2023

The Zimbabwe business environment is facing significant changes due to the various macro-economic policies currently being undertaken. An understanding of how Value Added Tax (VAT) operates is essential for businesses operating in Zimbabwe as well as potential investors. This article provides a summary of the VAT measures that were introduced and are effective from the 1^st of January 2023 as promulgated in terms of the Finance Act (No.2) Act,2022 gazetted on the 30^th of December 2022.

What is VAT?

Value Added Tax (VAT) is an indirect tax on consumption, charged on the supply of taxable goods and services. It is levied on transactions and also on the importation of goods and services. The principal legislation is the Value Added Tax Act (Chapter 23:12).

What is the General Rate of VAT?

With effect from the 1^st of January 2023 the general rate of VAT in Zimbabwe is 15%. Section 17 of the Finance (No.2) Act, 2022 which was gazetted on the 30th of December 2022 provides as follows;

(a)The rate of value added tax in respect of—goods or services supplied by any registered operator in the course or furtherance of any trade carried on by the registered operator; and

(b) the importation of any goods into Zimbabwe by any person; and t

(c) he supply of any imported services by any person; and

(d) goods and services sold through an auctioneer (as defined in section 56(6)) of the Value Added Tax Act [Chapter 23:12] by persons who are not registered operators;

shall be fifteen per centum.

Generally, all goods and services are standard rated unless specifically exempted, zero-rated or subject to VAT at a special rate.

(a) Zero-rate (0%)

Exports of goods from Zimbabwe to any address in an export country.

Basic foodstuffs such as sugar.

(b) No value added tax is chargeable on exempt supplies.[1]

Examples of exempt supplies include:

• Financial services.
• Provision of electricity for domestic use.
•  The supply of any medical services by any person or institution;
• Rates charged by Local Authorities.Value Added Tax on Betting and Gaming

(c) Value Added Tax on Betting and Gaming

The rate of value added tax in respect of transactions or receipts on betting and gaming as set out in the table in Part 11 of section 17 of the Finance (No.2) Act,2022 is generally 15%.

(d) General Rate of Value Added Tax on Supply of Cellular Telecommunications Service[2]

The rate of value added tax in respect of the supply of cellular telecommunications services in the course of furtherance of the supply of such service by a registered operator shall be 15%.

(e) Permissible Deductions in respect of Input tax

Section 16 of the VAT Act provides for permissible deductions in respect of input tax where goods or services are acquired or imported by a registered operator partly for consumption, use or supply in the course of making taxable supplies and partly for another intended use and tax has become payable in respect of the supply to him or the importation by him. Section 18 of the Finance Act[3] provides an amendment to section 16 of the VAT Act.

The Value Added Tax Act [Chapter 23:12] is amended in section 16 (“Permissible deductions in respect of input tax”) (2) by the repeal of paragraphs (d1), (e) and (e) and the substitution of—

“(e) in respect of any amount of tax on the exportation of unbeneficiated,

lithium, unbeneficiated hides, unbeneficiated platinum, uncut and cut

dimensional stone, or medicinal cannabis paid by the registered operator

in terms of section 12B, 12C, 12D, 12E or 12F, or any other export tax

of a like nature that may be enacted under this Act;”.

For assistance with inquiries on Tax related issues, kindly got hold of our Corporate and Finance Practice Group on info@mmmlawfirm.co.zw

[1] Section 11 of the Act.

[2] Part 111 of Section 17 of the Finance Act (No.2) Act,2022

[3] Finance Act (No.2) Act,2022