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Did you know that with effect from the 1st of January 2015 the period of deferment of Value Added Tax (VAT) was increased to 180 days depending on the value of the equipment imported?

VAT is normally payable on the importation of goods or removal of goods from bond. Under those circumstances, goods can only be released after VAT has been paid in full.  However, Section 12A of the VAT Act [Chapter 23:12] provides for the deferment of VAT subject to such conditions as may be prescribed.

Where a person produces proof to the satisfaction of the Commissioner General that he or she has importedgoods of a capital nature for his or her own use, the Commissioner shall authorise a deferment of payment of tax on such goods for a period not  exceeding 180 days from the date on which the goods are deemed to have been imported.

What is deferment of VAT?
Deferment of VAT is an officially sanctioned temporary postponement of paying VAT on importation of specified goods of a capital nature. The goods should have been imported for own use by the importer and the VAT amount to be deferred should be at least $4,800.

The deferment is staggered in relation with the value of the goods imported, i.e. the higher the value the longer the period granted.
–    The maximum period of deferment is now up to 180 days from the date of the deemed importation.
–    It is granted on application to the Commissioner General of the Zimbabwe Revenue Authority (ZIMRA).

What are goods of a capital nature?
Goods of a capital nature in this context refer to specific prescribed plant, machinery or equipment used exclusively for:

–    Mining purposes on a registered mining location as defined in the Mines and Minerals Act [Chapter 21:05]; or
–    Manufacturing or industrial purposes in, on or in connection with a factory (including spare parts required for the purpose of maintaining or refurbishing such plant, equipment or machinery);
–    Agricultural purposes (including spare parts required for the purpose of maintaining of refurbishing such plant, equipment or machinery);
–    The aviation industry (including spare parts required for the purpose of maintaining or refurbishing aircraft and such plant, equipment or machinery);
–    Note that goods of a capital nature do not cover motor vehicles intended or adapted for use on roads or capable of being so used.
–    The goods are prescribed by the Minister of Finance and Economic Development in consultation with the Minister responsible for the particular industry.

Who qualifies for deferment?
–    Any person who produces proof to the satisfaction of the Commissioner General of ZIMRA that he or she has imported goods of a capital nature for his or her own use
–    This includes companies and partnerships.

It is important to note that this dispensation is available only when the importer’s tax records and affairs are up to date. It should also be noted that Customs Duties and Surtaxes applicable to the goods remain payable.

How does one apply for deferment of VAT?
–    The application should be made in writing to the ZIMRA Commissioner General quoting the applicant’s business partner (BP) number and submitted to the  nearest ZIMRA office
–    The goods for which deferment is applied and the applicable industry in which the applicant operates should be specified in the application.
–    The application should be accompanied by copies of the invoices as proof of titlement to the goods imported and their value.
–    The period for which the deferment is required should be specified but should not exceed three months (180 days).
–    The application should also carry a declaration that the goods are for own use and will not be disposed of even after the deferment period without notifying the Commissioner General of ZIMRA.

What happens if one fails to settle the deferred VAT debt?
–    Deferred debts which are not settled on the due date may result in the deferment facility being stopped or withdrawn.
–    Deferred VAT debts may also be subject to interest and penalty charges.

What happens if the goods are sold during or after deferment period?
Where goods that were admitted under deferment of VAT are sold, re-exported or disposed of before or after expiry of the deferment period instead of being used for the declared use, the importer will be required to pay, in addition to any tax for which he or she is liable on such disposal, the outstanding deferred amount, a penalty and interest at prevailing rates.

Reminder for payment of tax
Our valued clients are reminded that VAT for the month of February 2016 is due on or before 25th March 2016.

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 the Zimbabwe Revenue Authority.

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