Banks in dilemma over Zimra taxes

Banks in dilemma  over Zimra taxes Mrs Bonyongwe
Mrs Bonyongwe

Mrs Bonyongwe

Golden Sibanda Senior Business Reporter
BANKS are reportedly not clear on how best to treat certain fiscal taxation issues amid fears blunders could create onerous future tax liabilities. One of the areas giving financial institutions sleepless nights is the issue on how to treat bad debts, especially determining circumstances in which they can be deemed irrecoverable. Irrecoverable debts do not form part of taxable income.

Banks say the tax legislation is vague on the issue of ‘satisfying’ the Zimra commissioner beyond reasonable doubt that certain debts are irrecoverable. In a number of cases, Zimra has disallowed debts classified by banks as not recoverable. Zimra chairperson Willia Bonyongwe said approaching Zimra for clarification and registering reservations was no longer a chillingly ominous task for taxpayers, as was the case before, as such the authority was open to discuss any reservations.

However, the bad debts taxation issues have created a complex situation for banks, as they are now compelled to keep as loads of documented evidence to be able to convince Zimra that certain debts can realistically not be recovered. Founder and managing partner at Marianhill Chartered Accountants Manyara Chigunduru told a taxation seminar in Harare recently that a number of banks wrote off certain debts, only for the Zimbabwe Revenue Authority to reinstate them after its audits.

“What is important at the end of the day is for the taxpayer to ensure that they produce enough evidence to convince the taxman that the bad debts are really irrecoverable,” she said.

In some instances, Zimra previously reinstated certain debts written off by banks as bad, after auditing their books, arguing the debts were not allowable deductions. Mrs Chigunduru said another taxation issue giving banks chronic headaches was the issue of transfer pricing, for which Zimra requires every institution to have an effective transfer pricing policy. But banks are reportedly not clear how this should work.

“Most banks have it (transfer pricing policy), but it is one thing having it and another thing to implement the policy and ensure that you are complying with the expectations of Zimra. From Zimra’s point of view and the discussions they have had with some of the banks, it is not clear what it is that Zimra is looking for. There is need for guidance on what the taxman is really looking for,” she said.

Banks are also facing challenges having their fiscal devices, for the insurance products they run, linked to the Zimra server for purposes of accurately determining value added tax they must pay. Mrs Chigunduru also pointed out that banks were grappling with challenges relating to handling of complexities on how to retain 15 percent withholding tax on services provided by foreign suppliers. Local banks are also battling the revenue authority over bank charges raised by offshore banks holding their nostro accounts, which Zimra argues amount to fees paid and therefore subject to tax.

Share This: