All companies registered with the local tax authority obtain a tax clearance certificate also known as ITF263 document, it is issued by the Commissioner General of the Zimbabwe Revenue Authority (ZIMRA) to a person liable to pay tax under any of the Acts administered by ZIMRA and shows holder of the certificate is tax complaint.

How to obtain a tax clearance certificate

Starting in 2016, ZIMRA typically issues annual certificates thus once you obtain it, it’s valid up to the last date of that calendar year. Tax clearance certificates are applied online through the selfservices function on the ZIMRA website and the system makes a decision based on your tax account history. The system checks if you have made all the necessary returns and paid your dues timely on all the tax heads that you are registered for. If the system approves, then the tax clearance is put in your online account and from there onwards you can download it and start using it. If it is declined, then you can go and see your account manager who will give you reasons why it was declined and you can rectify your account. There are a few cases however, whereby your account will be up-to-date but the system declines your application, in such instances you can see your account manager and a manual override can be applied by ZIMRA officials and you will be able to obtain your tax clearance.

Avoiding withholding tax

Any person who enters into a contract (goods or services) of an aggregate amount of USD$1,000.00 or more over a year of assessment  involving a single transaction or multiple transactions should comply with Section 80 of the Income Tax Act [Chapter: 23:06]. The legal requirement is that a 10 percent Withholding Tax is deductible from all amounts payable to all persons who enter into contracts with the government, statutory agencies, quasi-government bodies and taxpayers who are registered with ZIMRA unless the payee furnishes the payor with a tax clearance certificate. This practice is meant to encourage those actively trading in business to register with ZIMRA and pay their fair share of taxes. However, in a few instances, suppliers especially individuals who do not understand the tax laws may react negatively to news that they are being paid less than 10% of their billed invoice. Thus, when dealing with individual suppliers, it is advisable to advise them in advance that it is your normal practice to deal with other tax registered entities and should they not have an ITF263, you will be forced by law to withhold 10% of the payment. Fore warned is fore armed, thus you are bound not to face much resistance if you disclose this information prior to engaging in any transactions with all your suppliers. You can also find yourself on the other side of the transaction and losing 10% of a significant invoice can really affect your financial planning. Thus it is advisable for all activity trading entities to obtain tax clearance certificates.

Participating in Tenders

A tax clearance certificate is a prerequisite in all government tenders, either directly through local governments, ministries, parastatals or quasi government institutions like government schools etc. Listed and large private companies also required the ITF263 for tenders and awarding contracts to outside companies..

A tax clearance therefore will ensure you will get your invoice amount in full and you can participate in tenders and trading engagements with the government and large companies. This brings to your business scope to grow and being activity trading with large corporate and government improves your visibility as well.

If you need more information on this tax subject or assistance with obtaining a tax clearance certificate please get in touch with Tanaka on landline 08677 130 017,  cell 0732 469 712 or email tanaka@smezim.com