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Finance Bill, 2006 (H.B. 11, 2006)
August 04 , 2006
Published in Government Gazette: 4th August, 2006

Read the Finance Act, 2006

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Finance Bill, 2006

MEMORANDUM

This Bill will amend the Finance Act [Chapter 23:04], the Income Tax Act [Chapter 23:06], the Value Added Tax Act [Chapter 23:12], the Capital Gains Tax Act [Chapter 23:01] and the Customs and Excise Act [Chapter 23:02], the General Law Amendment Act [Chapter 8:07] and the African Export-Import Bank (Membership of Zimbabwe and Branch Office Agreement) Act (No. 10 of 2005). In more detail, the individual clauses of the Bill provide as follows:

PART I
PRELIMINARY

Clause 1
This clause sets out the Bill's short title.

PART II
INCOME TAX
Amendments to Chapter I of Finance Act [Chapter 23:04]

Clause 2
Section 14 of the Finance Act prescribes the rates of income tax payable by various classes of taxpayers.
This clause will alter the income "bands" according to which rates of income tax are calculated. The main alteration is to the minimum level of income that will attract income tax. At present this minimum is $84 000 000 a year, and this clause will increase that amount to $240 000 000. The new bands will apply for the period from the 1st September to the 31st December, 2006.

Clause 3
This clause will increase the rate of automated financial transactions tax (the tax payable on cash withdrawals effected through an ATM) from $500 to $10 000 per withdrawal.

Clauses 4 and 12
The Finance (No. 2) Act, 2005, changed the basis on which the carbon tax is charged to owners of vehicles resident in Zimbabwe from a direct tax into a consumption tax payable at the point of importation by oil companies per litre of petroleum products imported by them. Clause 4 seeks to raise the level of that tax from $1 000 per litre of imported petroleum product to $5 000, payable with effect from the 1st August, 2006. This clause (together with clause 12) also seeks to extend the scope of the tax to those persons importing petroleum products for own consumption: such persons have been charged this tax since the 1st January, 2006; accordingly, paragraph (b) of this clause backdates this provision to that date.

Clause 5
The NOCZIM debt redemption levy was introduced by the Finance Act, 2003, with effect from the 1st December, 2003, to assist the State oil procurer in amortising its accumulated debt. This clause seeks to increase this levy from $110 per litre to $25 000 per litre of a petroleum product purchased by an oil company from NOCZIM or imported by an oil company.

Clause 6
This clause will partly replace the Schedule to Chapter I of the Finance Act, which sets out the rates of income tax payable by various classes of taxpayers. As indicated in connection with clause 2 above, the income "bands" will be altered.

Amendments to Income Tax Act [Chapter 23:06]

Clause 7
This clause will amend definitions of the term "year of assessment" in section 2 of the Income Tax Act to take account of the alteration of the tax bands to take effect for the period from the 1st September to the 31st December, 2006.

Clause 8
Section 8(1) of the Income Tax Act defines the term "gross income" for the purposes of the Act. Gross income derivable from employment remuneration includes the value of certain benefits (commonly known as "fringe benefits") afforded to employees. The Finance (No. 2) Act, 2005, introduced a formula to calculate the cost to the employer of an advantage or benefit accruing to an employee from the sale or disposal to that employee of a company motor vehicle, with a view to ensuring that the employee was not unfairly disadvantaged by inflation. This clause seeks to clarify and refine that formula.

Clause 9
Section 72 of the Income Tax Act deals with the payment of provisional tax. The Finance (No. 2) Act, 2004, replaced section 72 with a new section that made everyone whose taxable income includes amounts that are not subject to employees' tax (PAYE) pay provisional tax in quarterly instalments over the calendar year in the year of assessment in which the income accrued (instead of paying provisional in the following year of assessment). This clause will require provisional taxpayers to submit Quarterly Payment Date Corporate Tax Return Forms together with their quarterly payments in order to verify the basis on which provisional taxpayers calculate the amount of tax due on their forecast income.

Clause 10
The Third Schedule to the Income Tax Act lists amounts that are exempt from income tax.
Paragraphs 4(v) and 10(1)(n) of the Third Schedule to Income Tax Act exempts from tax amounts of up to $72 000 000 accruing to persons aged 59 years and above by way of rental income and interest from discounted securities. The effect of this clause is to lower the qualifying age for these exemptions from 59 to 55 years, and to increase exempted figure to $144 000 000.

Clause 11
This clause will add an additional paragraph to the Twenty-Sixth Schedule ("Presumptive Tax") to the Income Tax Act, the effect of which is to put drivers or operators of taxicabs and omnibuses under a legal obligation to carry in their vehicles tax clearance certificates in proof of payment of the presumptive tax payable by them, and to produce these certificates on demand by law enforcement officers.

PART III
VALUE ADDED TAX

Clause 14
This clause seeks to amend section 6 of the Value Added Tax Act by excluding from the scope of that Act the supply of second-hand motor vehicles that are subject to special excise duty on sales or disposals of second-hand motor vehicles referred to in section 172B of the Customs and Excise Act. The latter duty was introduced by Finance (No. 2) Act, 2005.

Clauses 15 and 16
The amendment of section 13 of the Value Added Tax Act introduced by the Finance (No. 2) Act, 2005, appeared to suggest that all registered operators are required to pay VAT in foreign currency in respect of the importation of services. These amendments make it clear that what is intended is the payment of VAT in foreign currency only if the VAT itself was paid in foreign currency.

PART IV
CAPITAL GAINS TAX

Clause 17
This clause lowers the age threshold for the exemption from capital gains tax of amounts earned by way of sales of principal private residences by elderly persons from 59 to 55 years.

Clause 18
This clause corrects an error that was made in the Finance (No. 2) Act, 2005, with respect to the rate of capital gains tax payable on listed securities and other kinds of securities.

Clauses 19 and 20
The effect of these proposed amendments to the Capital Gains Tax Act is to exclude from the scope of that Act donations of immovable property by any company or group of companies to an approved employee housing trust fund (see the definition of that term to be inserted in section 2(1) of that Act).

PART V
CUSTOMS AND EXCISE

Clause 21
This clause will add an additional section to Part XXIIA ("Special Excise Duty on Sales of Second-Hand Motor Vehicles") of the Customs and Excise Act, the effect of which is to make it explicit who is liable for the special excise duty on sales of second-hand motor vehicles, and impose certain obligations on motor dealers selling such vehicles to keep records and make returns to the Zimbabwe Revenue Authority.

Clause 22
The proposed amendment to section 235 ("Making of regulations") of the Customs and Excise Act will empower the Zimbabwe Revenue Authority to designate parking places at ports of entry and regulate the conditions for the parking of vehicles therein.

PART VI
AMENDMENT OF OTHER ACTS

Clause 23
Prior to the enactment of the Finance (No. 2) Act, 2005, the common law was that the in duplum rule does not apply to fiscal debts. The Finance (No. 2) Act, 2005, amended the General Law Amendment Act to enshrine that rule specifically, and suspended the operation of the in duplum rule while a notice was in force giving a taxpayer concerned 21 days to make good his or her indebtedness. This provision has proved difficult to administer in practice; accordingly, it is substituted by another provision which simply restates the common law position.

Clause 24
In 2005 the African Export-Import Bank (Membership of Zimbabwe and Branch Office Agreement) Act was passed to give effect to the Branch Office Agreement between the Government of Zimbabwe and the African Export-Import Bank. The Branch Office Agreement specifically exempts the African Export-Import Bank from indirect taxes such as VAT on purchase of items. However, there is a provision in one of the introductory sections of the Act which appears to override this concession, contrary to the Branch Office Agreement. This amendment proposes to remove that provision. The amendment also assigns a Chapter number to this Act.


Finance Bill, 2006


Arrangement of Sections

PART I
PRELIMINARY
1. Short title.

PART II
INCOME TAX

Amendments to Chapter 1 of Finance Act [Chapter 23:04]
2. Amendment of section 14 of Cap. 23:04.
3. Amendment of section 22B of Cap. 23:04.
4. Amendment of section 22E of Cap. 23:04.
5. Amendment of section 22H of Cap. 23:04.
6. Amendment of Schedule to Chapter I of Cap. 23:04.

Amendments to Income Tax Act [Chapter 23:06]
7. Amendment of section 2 of Cap. 23:06.
8. Amendment of section 8 of Cap. 23:06.
9. Amendment of section 72 of Cap. 23:06.
10. Amendment of Third Schedule to Cap. 23:06.
11. Amendment of Twenty-Sixth Schedule to Cap. 23:06.
12. Amendment of Twenty-Eighth Schedule to Cap. 23:06.
13. Treatment of pension contributions for the purposes of the Sixth Schedule to Cap. 23:06.

PART III
VALUE ADDED TAX
14. Amendment of section 6 of Cap. 23:12.
15. Amendment of section 13 of Cap. 23:12.
16. Amendment of section 38 of Cap. 23:12.

PART IV
CAPITAL GAINS TAX

Amendments to Finance Act [Chapter 23:04]
17. Amendment of section 10 of Cap. 23:04.
18. Amendment of section 39 of Cap. 23:04.

Amendments to Capital Gains Tax Act [Chapter 23:01]
19. Amendment of section 2 of Cap. 23:01.
20. Amendment of section 8 of Cap. 23:01.

PART V
CUSTOMS AND EXCISE
21. New section inserted after section 172B of Cap. 23:02.
22. Amendment of section 235 of Cap. 23:02.

PART VI
AMENDMENT OF OTHER ACTS
23. Amendment of section 11A of Cap. 8:07.
24. Amendment of Act No. 10 of 2005.


PRESENTED BY THE MINISTER OF FINANCE

BILL

To make further provision for the revenues and public funds of Zimbabwe and to provide for matters connected therewith or incidental thereto.

ENACTED by the President and the Parliament of Zimbabwe.

PART I
PRELIMINARY

1 Short title
This Act may be cited as the Finance Act, 2006.

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