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Tax Break Opportunities in Zimbabwe

March 22, 2014 Leave a comment

Like many other developing countries, Zimbabwe offers a number of tax and customs incentives in the form of <strong>tax holidays, reduced tax rates, and accelerated depreciation</strong>. Revenue incentives in Zimbabwe apply equally to both domestic and foreign investors and the major goals of incentives in place are:
<ol style=”list-style-type:lower-alpha;”>
    <li>Income generation</li>
    <li>Export promotion</li>
    <li>Employment creation and skills transfer</li>
    <li>Small business development</li>
    <li>Industrial development</li>
    <li>Revenue inflows</li>
</ol>
The incentives are given by sector, type of activity, form of organization, and geographical location of investment as follows:
<h3>
<h3><strong> </strong></h3>
Tourism Sector</h3>
<ol style=”list-style-type:lower-alpha;”>
    <li>Operators of tourist facilities in approved Toursit Development Zones enjoy preferential treatment.</li>
    <li>Taxable Income is taxed at 0% for the first 5 years</li>
    <li>Taxed at 25% after the 5 year tax holiday</li>
</ol>
<strong> </strong>

<strong>Preferential Zones- Growth Point Areas</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Preferencial area are areas declared to be growth point areas</li>
    <li> Promotes equitable development of the country’s provinces.</li>
    <li>Taxable Income of person engaged in new <strong>manufacturing project in growth point area is taxed at a special rate of 10%.</strong></li>
    <li>Taxable Income of person engaged in <strong>new project providing infrastructure in growth point area is taxed at 15%.</strong></li>
    <li>Can also claim Special Initial Allowance on construction of commercial buildings</li>
    <li>Qualifies for a further deduction of an Investment allowance equal to 15% of the cost of new commercial or buildings, or staff housing erected, additions or alterations to existing commercial or industrial buildings or staff housing and new or unused articles, implements and machinery used in a growth point area.</li>
</ol>
 

 <strong>Manufacturing Companies</strong>
<ol>
    <li>Taxable income from manufacturing or processing<strong> company which exports 50% or more of its output taxed at a special rate of 20%.</strong></li>
<strong></strong></ol>
 <strong>Build Own Operate and Transfer (BOOT) and BOT Arrangements</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Contractors may enter into contracts with state or Statutory Corporation under which he undertakes to construct infrastructure for the state or statutory corporation</li>
    <li>This will be in consideration for the right to operate or control for a specified period after which the contractor will transfer ownership or control of the item to the state or statutory corporation</li>
    <li>Enjoys tax holiday for first 5 years</li>
    <li>Taxed at 15% for the second five years</li>
</ol>
<strong> </strong>

<strong>Industrial Park Developer</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Special provisions have been made for industrial park developers.</li>
    <li>These are persons who own and maintain industrial parks, that is, approved premises or an area in which any person other than the industrial park developer, carry on business of manufacturing or processing goods or components of goods for export from Zimbabwe.</li>
    <li><strong>Enjoys a tax holiday for the first 5 years.</strong></li>
    <li>Thereafter taxed at a tax rate of 25%.</li>
    <li>Not liable to tax from dividends paid to residents or non-residents.</li>
    <li>Also exempt from withholding tax on interest and fees payable to non-residents</li>
    <li>Disposal of specified assets forming part of the or connected to the industrial park is exempt from Capital Gains Tax</li>
</ol>
 

<strong>Mining Companies</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Mining companies enjoy a special flat tax rate of 15% when compared to the standard rate of tax of 30%.</li>
    <li>All capital expenditure on exploration, development, and operating incurred wholly and exclusively for mining operations is allowed in full</li>
    <li>There is no restriction on carryover of tax losses; these can be carried forward for an indefinite period.</li>
    <li>Special Initial Allowance on capital equipment is allowed at a rate of 100%</li>
    <li>Taxable income of a holder of special mining lease is taxed at a special rate of 15%.</li>
</ol>
 

<strong>Exporters Incentives</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Export Market Development Expenditure: This is a double deduction available to operators.</li>
    <li>This is in respect of non capital expenditure incurred wholly or exclusively for purposes of seeking opportunities for the export of goods from Zimbabwe or for creating or increasing the demand of such exports</li>
</ol>
 <strong>Farmers Special Deductions:</strong>
<ol style=”list-style-type:lower-alpha;”>
    <li>Farmers are allowed special deductions over and above the normal deductions.</li>
    <li>Examples include expenditure on fencing, clearing and stamping land, sinking boreholes and wells and on aerial and geophysical surveys</li>
</ol>
These incentives are another reason why investing in Zimbabwe is worth thinking about. Imagine taking a tax holiday for 5 years!! That would be great.

<em>Inforation taken from Zimra website. Author does not assume any legal liability or responsibility for the incompleteness of the information or any loss, damage or legal consequences that may arise due to information contained on this website.</em>

Categories: General

Duty Calculation for Passenger vehicles

January 19, 2014 Leave a comment

What is the rate of duty charged on importation of passenger type motor vehicles?

Duty to be paid on importation of motor vehicles into Zimbabwe is based on the Cost, Insurance and Freight (CIF) value plus other incidental charges and expenses incurred in the purchase of the vehicle and its subsequent transportation up to the first point of entry into Zimbabwe? This CIF value and the other charges constitute what is known as the Value for Duty Purposes (VDP). Such other charges include, inter alia, and where applicable:

  • Port handling charges, e.g. at Durban Port, Walvis Bay, Beira, Dar es Salaam;
  • Storage charges; and
  • Any other special handling fees, if not already included in the CIF Value.

The charges that are levied are Customs Duty, Surtax and Value Added Tax (VAT). Surtax is only charged on passenger type motor vehicles that are more than five (5) years old at the time of importation. Please note that both Customs Duty and Surtax (where applicable) are calculated on the Value for Duty Purposes (VDP). Value Added Tax is calculated on the total of VDP plus the calculated Customs Duty payable. This value is known as the Value for Tax Purposes (VTP).

Below is a table showing examples of how to calculate duty payable on the most commonly imported motor vehicle types using arbitrary CIF values:

**NB: All values are in USD

Year of Manufacture/Type of vehicle

 

Engine Capacity/Payload

CIF Value

$

Other Charges

$

VDP

$

Duty

$

Surtax

$

VTP

$

 

 

VAT

$

Total amount payable

$

2009

Sedan/ Station Wagon

1495cc

6 000

_

6 000

@25% = 1 500

_

7 500

@ 15%

=1 125

 

2 625

2005

Sedan/Station Wagon

1495cc

4 000

1 200

5 200

@ 25% = 1 300

@ 25% = 1 300

6 500

@ 15%

= 975

 

3 575

2001

Sedan/Station Wagon

1800cc

5 000

900

5 900

@ 40% = 2 360

@ 25% = 1 475

8 260

@ 15%

= 1 239

 

5 074

2008

Sedan/ Station Wagon

3000cc

10 000

600

10 600

@ 40%

= 4 240

_

14 840

@ 15%

= 2 226

6 466

2004

Pick -up truck

Payload of up to 800kg

3 000

1 000

4 000

@25%

=1 000

 

-

5 000

@ 15%

= 750

1 750

2005

Pick -up truck

Payload more than 800kg but not exceeding 1400kg

4 000

1 200

5 200

@20%

= 1 040

 

-

5 340

@ 15%

= 936

1 976

2002

Pick- up truck

Payload more than 1400 kg but with a gross vehicle mass of less than 5 tonnes

7 000

1 500

8 500

@40%

= 3 400

 

-

11 900

@15%

= 1 785

5 185

 

 

Duty is calculated on the Value for Duty Purposes.

1.            What is the Value for Duty Purposes (VDP)?

This is the value which forms the basis for the calculation of duty and includes the cost of the vehicle and any other charges or expenses incidental to the purchase of the vehicle and its transportation up to the place of importation. The following is a list of charges that are included in the calculation for duty purposes:

  • selling commission,
  • brokerage,
  • storage,
  • handling,
  • documentation,
  • port charges,
  • freight and insurance.

2.            What is surtax?

Surtax is levied at the rate of 25% of Value for Duty Purposes on motor vehicles which are more than five years old.

3.            How is Value Added Tax (VAT) calculated?

Value Added Tax is charged at a rate of 15% on the Value for Tax Purposes (VTP) which is Value for Duty Purposes (VDP) plus customs duty payable.

4.            How is valuation of the motor vehicle done?

Physical Examination of the vehicle is carried out. ZIMRA reserves the right to accept or decline the declared value. Reassessment of the value may be done where necessary.

7. What factors are considered in the valuation of a motor vehicle?

The condition of the vehicle, mileage, year of manufacture are some of the factors used in the valuation of a motor vehicle.

8. Can an individual engage a clearing agent to clear their motor vehicle?

Yes. Clients may only engage registered clearing agents as ZIMRA only deals with bona fide clients and registered clearing agents. A list of registered clearing agents is available here

Example

Vehicle: Nissan Terrano, year 1998, engine capacity 3270cc with a CIF value of USD2720 from Japan.

Answer

The mentioned vehicle attracts duty of 40% and surtax of 25% (since it is more than 5 years old). These 2 charges are levied on what is called the Value for Duty Purposes (VDP) which consists of the CIF Value plus any other costs incurred up to the point of importation into Zimbabwe. If the value of $2 720 is accepted, then it becomes the VDP. VAT is also payable at 15% and this is calculated on the Value for Tax Purposes (VTP) which is the VDP plus the duty payable. That is to say:

VDP    = 2720.00

Duty = (40% of 2720) = 1088

Surtax = (25% of 2720) = 680.00

VAT      = 15% X (2720 + 1088) = 571.20

Total Payable  = 2339.20

 

Source: Zimra Website

For more information please contact zimra

Categories: General
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