VAT implications on supply of goods, services

In terms of the Value Added Tax (VAT) Act [Chapter 23:12], VAT is levied on the supply of goods and services as well as on the importation and exportation of goods and/or services.Taxable supplies attract VAT at specified rates of 0 percent, 5 percent, 15 percent, or any other rate as may be specified by…

In terms of the Value Added Tax (VAT) Act [Chapter 23:12], VAT is levied on the supply of goods and services as well as on the importation and exportation of goods and/or services.
Taxable supplies attract VAT at specified rates of 0 percent, 5 percent, 15 percent, or any other rate as may be specified by the Minister of Finance.

Standard-rated Supplies
These are supplies of goods and services that are taxable at the rate of 15 percent. Most of the goods are standard rated unless they have a specified rate, are zero rated, or exempt.

With effect from January 1 2010, some items which were formerly zero-rated were added on to the list of standard-rated products. This means that the supply of goods listed below is now VAT chargeable at the rate of 15 percent:
l Butter, almonds, hazelnuts, walnuts, chestnuts, pistachios, macadamia nuts, margarine (excluding liquid margarine), groundnuts (peanut butter), lotions, rubber gloves, plastic gloves, raincoats, fish fillers, yoghurt and cream.

Zero-rated Supplies
Zero-rated supplies are taxed at the rate of 0 percent. Zero rating is a way of ensuring that goods or services are provided free of VAT. A registered operator who supplies zero-rated goods or services is allowed to claim input tax credit in relation to that supply. Such an operator must obtain and retain documentary proof of his entitlement to apply the zero rates.

Zero-rated supplies are specified in the VAT Act and include:
l Basic foodstuffs such as mealie-meal, sugar, milk, meat, salt, bread, among others;
l Agricultural inputs such as fertiliser, seeds and pesticides, animal feed, animal remedy, plants, tractors, among others;
l Exported goods with the exception of un-beneficiated chrome which is taxed at 15 percent;
l The supply of day-old chicks weighing not more than 185g is now zero-rated with effect from September 1 2010.

Exempt Supplies
Exempt supplies are supplies of goods and services on which no VAT is chargeable at all. VAT incurred on goods and services acquired to make exempt supplies shall not be claimed as input tax credit.
Traders who exclusively provide exempt supplies are not required to register for VAT purposes.

Exempt supplies include the following services and products:
l Medical services;
l Educational services;
l Rentals from residential properties;
l Transport of fare-paying passengers;
l Water for domestic use;
l Electricity for domestic use;
l Fuel.
Tax on Exportation of Un-beneficiated Chrome
With effect from August 1 2010, the VAT Act was amended by the insertion of Section 12B.
The new section broadens the definition of “un-beneficiated chrome” so as to include chrome ore, chrome fines as well as semi-processed chrome concentrates.

Un-beneficiated chrome means chrome ore and fines which have not been subjected to the following processes:
l Crushing, milling and washing to remove the waste material; and
l The smelting of the resulting chrome concentrate into pellet or ingot form.
Where chrome concentrate has undergone a smelting process which results into pellets and ingot, the chrome concentrate shall be considered to have been beneficiated and will not be liable to the 20 percent export tax.
The rate of export tax on “un-beneficiated chrome” has also been increased from 15 percent to 20 percent.
Please note that the 20 percent Export Tax should be declared on the VAT Return as Output Tax and should not be claimed as Input Tax.
For further information, please contact your nearest Zimra offices.
Article submitted by Zimra’s Legal and Corporate Services Division. Their contact details are as follows:
Zimbabwe Revenue Authority
Legal and Corporate Services Division
6th Floor, ZB Centre
Corner First Street/Kwame Nkrumah Avenue
P O Box 4360
Harare
Tel: 04 – 790811-4
Fax: 04 – 774087
E-Mail: [email protected]

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