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18 December 2017 Zimbabwe presents 2018 budget proposals 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. Payments for tobacco purchased on both the auction and contract floors are exempt from 10% withholding tax. 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. 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). The Reserve Bank of Zimbabwe (RBZ) incentive on export proceeds and foreign remittances received would be exempt from income tax. Input tax not claimed from Zimbabwe Revenue Authority (ZIMRA) is not allowable as a deduction for income tax purposes. 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. 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. 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. 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. Value of a staff house by a miner operating a special mining lease will increase from US$110,000 to $25,000. Expenditure on housing used by staff at school, hospital nursing home or clinic will increase from $100,000 to $150,000. Investors in the power sector will receive a five-year income tax holiday and a 15% rate of tax thereafter. Value added withholding tax reduced from 2/3 to 1/3 of VAT of the amount that is paid to a supplier. 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. No VAT liability arises on the change of use of capital goods caused by the Government's change of policy. 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. The refund of VAT charged on development partners will be extended to 2019. VAT will be refunded within 30 days. The collection of VAT on the export of unbeneficiated platinum has been deferred to 1 January 2019. 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. 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. 15% Customs Duty on commercial tires by commercial vehicle operators on 100,000 units during the first quarter of 2018. 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. The Minister proposes mandatory pre-clearance of commercial consignments imported by road at ports of entry. The Minister proposes a full roll out of the cargo tracking system and Zimra to report on implementation progress by end of March 2018. 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 2018. The amnesty covers penalty and interest on all taxes. Ground rental fees on diamond concessions will be reduced from $3,000 to $225 per hectare per annum.
Document ID: 2017-5041 |
