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The Government made critical amendments to the Value Added Tax (VAT) legislation during this first half of this year.

These changes have some significant tax effects which operators need to take note of when submitting returns for February and in 2017.

Value Added Tax Regulations promulgated in Statutory Instrument 20 of 2017

The VAT Regulations were initially amended by Statutory Instrument 20 of 2017 to charge VAT at 15 percent on Potatoes, rice, margarine, mahewu, meat of bovine animals, meat of swine, edible offals of animals and fish.

This Statutory Instrument 20 of 2017 was repealed by Statutory Instrument 26A of 2017 with effect from 16 February 2017. Following the repeal, all goods that were previously standard rated (charged tax at 15 percent) are now exempted from VAT.

Implications of Repeal of Statutory Instrument 20 of 2017

Registered operators who had stocks of the now exempt goods which they were supplying during the course of their businesses are supposed to make certain adjustments as provided for in section 17 of the VAT Act. The same applies to capital items that they are or were using for supplying these exempt goods. The adjustments include the following:

Change in use of goods

In terms of Section 17(1) of that Act, registered operators are required to account for output tax on the value of any stocks of goods that are now exempt which were at hand on February 16, 2017. They are also required to calculate the VAT which relates to the closing balances of capital items which were used in making exempt goods and or services and account for it as output tax payable as at February 16, 2017.

Decrease in extent of taxable use of capital goods

In terms of Section 17(2) of the same Act where registered operators are required to account for output tax on change is use of capital goods. The VAT due should be accounted for in the December 2017 return or in the return for the last year of an approved tax year.

Prohibited input tax claim

Registered operators are also required to determine whether they should claim input tax in full or are supposed to apportion in terms of Section 16 of the Act.

This applies to registered operators supplying taxable and exempt goods where the value of taxable goods and or services being supplied is less than 90 percent.

Deregistration of some registered operators

All operators who are now exclusively supply exempt goods and services as a result of this amendment should apply for de-registration.

NB: Registered operators and those who were supplying the affected goods should ensure they adhere to all requirements in the VAT Act.

Disclaimer

This article was compiled by the Zimbabwe Revenue Authority for information purposes only. Zimra shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.

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