Deduction of input tax

Value Added Tax (VAT) is an invoice based tax. The tax invoice generated on both cash and credit transactions is the source document. Registered operators are allowed to deduct the VAT incurred on business expenses (input tax) from the VAT collected on the supplies made by the business. The VAT claim should be according to the currency tendered in the dual system.

It is important to note that the deductions are only permissible when one holds a valid tax invoice.

What is a tax invoice?

In section 2 of the VAT Act (Chapter 23:12) “tax invoice” or “fiscal tax invoice”, means a document issued by a registered operator, or printed by a fiscalised electronic register or fiscal memory device used by a registered operator, when they make a sale.

Mandatory features of a tax invoice

The VAT Act (Chapter 23:12) in section 20 (4) prescribes the features that should be contained on a tax invoice. The following details should be reflected on tax invoice for it to be considered valid:

The words “tax invoice” should be in a prominent place;

The name, address and VAT registration number of the supplier;

The name and address of the recipient and if recipient is a registered operator, the VAT registration number of the recipient;

An individual serialised number and the date upon which the tax invoice is issued;

A description of the goods or services supplied;

The quantity or volume of the goods or services supplied;

Price and VAT charged

Please note:

It is important to have the VAT invoice correctly reflecting the transaction currency for the price and VAT charged.

Claiming of a VAT refund

In terms of Section 15(2) of the VAT Act, no deduction of input tax shall be made unless a valid tax invoice or debit note or credit note in relation to that supply has been provided in accordance with Section 20(4) of the VAT Act, Section 4(a) of the Finance Act and section 38 (6) of the VAT Act.

Where input tax is claimed using a tax invoice that does not meet the specifications listed in section 20(4) of the VAT Act, the input tax claim shall be disallowed in full. In circumstances where a refund is processed based on an invalid invoice, a penalty of the amount equal to the refund will be charged in terms of Section 39(2) of the same Act. Please note that an additional tax will be imposed where the registered operator fails to comply with the requirements of the VAT Act with the intention to obtain an undue refund. This is in terms of Section 66 (1). Such tax shall be an amount equal to the amount of undue refund

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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 Zimra. 

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