The 2016 mid term fiscal policy review announced by Finance Minister Chinamasa on 8 September 2016 introduced Withholding Tax on value added tax (VAT) at a rate of 10% with effect from 1 October 2016. This withholding tax is Chinamasa’s measure to minimise the loss of revenue arising from failure to fully declare and remit VAT by taxpayers, especially small to medium enterprises (SMEs). Many small businesses have been wondering how this new withholding tax works and who should be registered for it. Zimbabwe Revenue Authority (ZIMRA) held a workshop to clarify how the withholding tax is being implemented and shed light on a couple of gray areas.

  1. Withholding VAT is meant for VAT registered taxpayers

Firstly, the VAT withholding tax is meant for those companies which are already VAT registered. Therefore those businesses which are not VAT registered need not to worry. Instead when you reach VAT threshold; you can refer to this blog on tips of how to can deal with your dilemma.

2. VAT Withholding agents will be appointed by Commissioner in writing

Not all VAT registered taxpayers are going to be VAT withholding tax agents. The Commissioner shall appoint agents and advise them in writing of such appointment and the obligation to withhold Withholding VAT on payments made in respect of taxable goods and services and remit same to ZIMRA on the specified dates.

3. Only ‘VATable’ supplies are subject to withholding VAT

Only payments in respect of the supply of taxable goods and services  are liable to withholding VAT.

4. VAT Withholding Agent shall issue withholding certificates to suppliers

The VAT Withholding Agent shall be required to issue a VAT withholding certificate to the supplier.

5. Excess credits/refunds shall be settled if need be

Excess credits shall be set off against any tax due or to be refunded if all tax heads are up to date. The refund shall be processed through the VAT refund processing system already in place at ZIMRA.