The Zimbabwe revenue authority seems very determined to catch businesses they suspect of not paying taxes, or paying the correct taxes.
In the past three weeks, four of my clients who own medium sized businesses have been visited by Zimra audit teams in different parts of Harare. Fortunately for three of them, all was in order and the auditors left satisfied. However, the third business still had some issues to be settled, and the owner had been taking his time to get his books in order. Worse still, when the Zimra team arrived, he tried to explain too much and ended up incriminating himself.
Those who haven’t read my 2012 Simplified Guide to Taxes for SMEs should do so. You can download a copy for free at http://smebusinesslink.com.
In brief, there are basically three tax heads that Zimra are likely to investigate when dealing with SMEs. These are, in order of importance, VAT, PAYE, Customs Duty and Income Tax (Corporate Tax)
Value Added Tax is the biggest source of revenue for Treasury, that is why they introduced the Fiscalised Cash Register system to plug any loopholes in revenue collection. For those SMEs who are VAT registered, you need to ensure that you submit your monthly returns, including input VAT schedules on time every month. VAT returns and payments have to be submitted by the 25th of the next month. Skip one month or delay your payment and you open yourself up for heavy penalties after an investigation.
This is basically taxed on employees (and owners/ directors) salaries. Some business owners make the mistake of pretending not to pay themselves. Zimra knows that you are taking money from the business to pay for your upkeep; there is no way you can survive without pay. So declare the correct amount and pay on time to avoid embarrassing interviews with the audit team.
Zimra has also intensified efforts to prevent smuggling and will want to see invoices and customs duty payment invoices on all imported goods; be they motor vehicles, office equipment or machines. Keep these for six years or else you will pay a heavy penalty if found without them.
This is the tax paid by companies on their taxable profits. You should pay quarterly QPDs in March, June, September and December. Then around this time of the year, when you have finalized your financial accounts for the year (2011), you should them to Zimra for assessment. You may need to pay more or claim a refund, depending on how accurate your estimates were on the QPDs.
Some business owners have made the mistake of hiring cheap consultant who give them incorrect advice, sometimes to please them or even to make them break the law. Zimra takes tax fraud seriously and will punish the company directors, not the tax consultant.
Having a Financial Records and Accounting System is the best way to avoid mistakes and errors when submitting your tax returns. Besides, Zimra may want to see your original records at any time. A good and accurate system, whether manual or computerized, will reduce chances of them raising eyebrows and asking for a thorough investigation, which will cause you a lot of inconvenience.
If you happen to have the Zimra audit team visit you, it is better to seek the advice of a professional accountant or tax consultant, who is better equipped to solve the problems and where necessary, negotiate a better deal on your behalf.
Download 2012 Simplified Tax Guide here (http://smebusinesslink.com) or send me an email if you need more information. The address is firstname.lastname@example.org