Tax Law and Practice in Zimbabwe. Concepts and Perspectives

 
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CLAINOS CHIDOKO JOSEPH BEMANI PAUL MATUNGAMIRE

This project is dedicated to our families and faculty members who championed our cause for academic wisdom.

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This book looks at tax law and practice in Zimbabwe. It identifies what constitutes gross income; its sources and what could be deemed as a source of income including employment benefits. It also differentiates between capital receipts and revenue receipts in its bid to identify gross income. Exempt income is also spelt out. It further looks at the general deductions from this income in order to determine the taxable income. Guidelines on how the computations of taxable income are done in respect of individuals and businesses or trades are also given. Particular attention is given on the taxation of partnerships, trusts, farmers and miners. Capital gains tax and double taxation relief is also spelt out in this book. The book also looks at the value added tax, which became operative in Zimbabwe in 2004 and broadly deals with the administration of this tax. Customs and duties rules and regulations are included and the book is wound up by looking at the tax administration in general giving the locations, powers of the commissioners and duties and obligations of taxpayers.

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We would like to express our sincere gratitude to members of the Faculty of Commerce and the library staff at Great Zimbabwe University for their support throughout the entire research process. We would also like to acknowledge Mr. T D Jawa and Mr. Musiiwa from Zimbabwe Revenue Authority for their commitment in sparing their time to answer our questions in coming up with this book

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DEDICATION ................................................................................................................ 2 ABSTRACT.................................................................................................................... 3 ACKNOWLEDGEMENTS ............................................................................................. 4 TABLE OF CONTENTS ................................................................................................ 5 1.1 Introduction ........................................................................................................ 9 1.2 Taxable Income ................................................................................................. 10 1.3 Sources of Income ............................................................................................ 10 B Deemed source of income ..................................................................................... 11 .FURTHER SPECIFIC ITEMS TO BE INCLUDED IN GROSS INCOME ................ 14 Introduction ............................................................................................................... 14 .CAPITAL AND REVENUE RECEIPTS.................................................................... 18 3.1 Introduction ...................................................................................................... 18 3.2 Types of Income .............................................................................................. 18 Taxable in the lessor s hands ................................................................................. 20 EXEMPT INCOME ................................................................................................... 22 4.1 Introduction ...................................................................................................... 22 .THE GENERAL DEDUCTION FORMULA ............................................................. 24 5.1 Introduction ...................................................................................................... 24 5.2 Examples of Capital Expenditure ...................................................................... 25 5.3 Examples of Revenue Expenditure ................................................................... 25 5.4 Cases in Which No Deduction Shall be made ................................................... 25 5.5 Allowable Deductions ......................................................................................... 26 .COMPUTATION OF TAXABLE INCOME OF INDIVIDUALS .............................. 36 6.1 Introduction.....................................................................................................36 6.2 Allowable Deductions ...................................................................................... 36 6.3 Tax Credits ...................................................................................................... 36 6.4 Income from Rentals: ........................................................................................ 37 6.5 Individual Tax From Employment ................................................................... 38 .TAX COMPUTATIONS BUSINESS OR TRADING ............................................. 41 7.1 Introduction ......................................................................................................... 41 7.2 Example ............................................................................................................ 41 .PARTNERSHIPS ....................................................................................................... 45 8.1 Introduction ......................................................................................................... 45 8.2 Example............................................................................................................ 45 8.3 Change in Membership ........................................................................................ 47 8.4.Debtors ................................................................................................................ 48 DOUBLE TAXATION RELIEF ................................................................................ 49 9.1 Introduction ......................................................................................................... 49 9.2 Example (1) .....................................................................................................49 DTR ...................................................................................................................... 50 9.3 Example (2) ....................................................................................................... 50 .TAXATION OF TRUSTS ........................................................................................ 52 10.1 Introduction .................................................................................................... 52 5

10.2 What is a Trust? ............................................................................................. 52 10.3 The Taxation of Trusts ..................................................................................... 52 .TAXATION OF FARMERS .................................................................................... 56 11.1 Introduction .................................................................................................... 56 11.2 Livestock Valuation ......................................................................................... 56 11.3 Sales of Livestock Enforced by Drought Conditions ........................................ 59 11.4 Cost of Restocking Herd Depleted by Drought of Epidemic Disease ................ 60 11.5 Crops and Other Stocks Valuation (paragraph 12(6) of Schedule 2) ................. 60 11.6 Disposal of Stock Otherwise than By Way of Sale (paras 12 and 13 of Sch 2).. 61 11.7 Growing Crops: Sales and Other Disposals (Sect 8(1)(g)) ................................ 61 11.8 Capital Allowances ......................................................................................... 61 .TAXATION OF MINERS ........................................................................................ 65 12.1 Introduction .....................................................................................................65 12.2 Allowable Deductions Section 15(2) .............................................................. 65 12.3 Capital Expenditure Allowance- Fifth Schedule .............................................. 66 12.4 Methods of Calculating Capital Redemption Allowances. ................................ 67 12.5 Replacement Election (Paragraph 6 of Fifth Schedule) .................................... 70 12.6 Change of Ownership of A Mine..................................................................... 71 12.7 Income From Sale of Mining Claims : (Section 9).......................................... 71 .CAPITAL GAINS TAX ........................................................................................... 72 13.1 Introduction ...................................................................................................... 72 13.2 Gross Capital Amount ...................................................................................... 72 13.3 Exemptions (Section 10) .................................................................................. 73 13.4 Calculation of The Capital Gain ....................................................................... 73 13.5 Roll Over .......................................................................................................... 75 13.6 Sale Under Suspensive Conditions ..................................................................... 76 VALUE ADDED TAX............................................................................................. 78 14.1 Introduction ....................................................................................................... 78 14.2 Operational Aspects of VAT .............................................................................. 78 14.3 Registration for vat ............................................................................................ 79 14.4 Registration in retrospect...

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