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(No.2) Bill, 2006 - Memorandum
The Herald (Zimbabwe)
December 01, 2006
(No. 2) Act, 2006
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(No.2) Bill, 2006
This clause sets out the Bill’s short title.
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 $20 000 a year, and this clause will increase that amount to
$100 000. The new bands will apply for the period from the 1st January,
This clause will increase the rate of automated financial transaction
tax (the tax payable on cash withdrawals effected through an ATM)
from $10 to $50 per withdrawal.
This clause will increase the tax based on the presumed income of
certain businesses (“presumptive tax”). The businesses
in question are operators of taxicabs, omnibuses, goods vehicles
and driving schools.
The Finance (No.2) Act, 2005, changed 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 5 seeks to raise the level of that tax from $5 per litre
of imported petroleum product to $15, payable with effect from the
1st January 2005.
The NOCZIM debt redemption levy was introduced by the Finance Act,
2003, with effect from 1st December, 2003. This clause seeks to
increase this levy from $25 per litre to $55 per litre of petroleum
product purchased by an oil company from NOCZIM or imported by an
This clause will partly replace the Schedule to Chapter 1 of the
Finance Act, which sets out the rates of income tax payable by various
classes of taxpayers. Under the new Schedule the credits allowable
to elderly, blind and mentally or physically disabled taxpayers
will be increased. As indicated in connection with clause 2 above,
the income “bands” will be altered.
8, 9, 12, 13 and 22
These clauses will effect the required amendments to the Income
Tax Act to empower the Commissioner to introduce the self-assessment
system over a period of time. The system places greater responsibility
on taxpayers and frees revenue officers to focus more on auditing
compliance with the Act.
The new section 37B inserted
by clause 13 in the Income Tax Act empowers the Commissioner-General
to issue rulings to taxpayers who request them, subject to the conditions
set out in the new Thirty-Third Schedule.
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,
such as the value of motor vehicles. For the purposes of taxation
motor vehicles have a specified deemed value. In paragraph (a),
the deemed motor vehicle benefit, which varies according to the
engine capacity of the vehicle, has been increased, from $9 000
to $100 000 for vehicles with the lowest engine capacity (i.e. below
1500cc) and from $24 000 to $260 000 for vehicles with the highest
engine capacity (i.e. above 3000cc).
Section 15 of the Income Tax Act sets out amounts that are to be
deducted from taxpayers’ income for the purpose of determining
their taxable income.
Paragraph (a) of this
clause will increase the deductible amount of donations approved
by the Minister responsible for Health to the State or a fund for
equipping, constructing, maintaining and stocking hospitals operated
by the state, a local authority or a religious organization from
$100 000 000 to $500 000 000.
Paragraph (b) of this
clause will increase the deductible amount of donations for research
and development to a research institution approved by the Minister
responsible for higher or tertiary education from $100 000 000 to
$500 000 000.
Paragraph (c) of this
clause will increase the deductible amount of donations approved
by the Minister responsible for education to the State or a fund
for equipping, constructing, maintaining and stocking schools operated
by the State, a local authority or a religious organization from
$100 000 000 to $500 000 000.
Paragraph (d) of this
clause will increase from $5 000 000 to $10 000 000 the deduction
of any expenditure not exceeding this amount incurred for attending
not more than one convention or trade mission in any one year of
Section 72 of the Income Tax Act deals with the payment of provisional
tax, which is paid in quarterly installments over the calendar year
in the year of assessment in which the income accrued. The amendment
sought by this clause will adjust the proportions of provisional
tax payable in each quarter from 10%, 40%, 40%, and 10% to 10%,
25%, 30% and 35%.
Section 80 of the Income Tax Act provides that if persons who enter
into contracts with the Government or statutory bodies have not
submitted income tax returns for the most recent year of assessment,
the Government or the statutory body concerned is obliged to withhold
10% of all payments due to them under the contracts and pay the
withheld amounts to the Commissioner-General. These amounts are
then to be set off against the income tax due by the contractors
when their tax liability is finally assessed. This clause will amend
the definition of “contract” to increase from $5 000
to $500 000 the threshold of a contract on or above which the Government
or the statutory body concerned is obliged to withhold the 10%.
17, 38 and 39
The amendment sought by these clauses will permit the electronic
submission of tax returns and related documentation subject to certain
safeguards against fraud and other abuses, thereby greatly expediting
and facilitating tax administration.
Section 90 of the Income Tax Act empowers the Minister to make regulations
for the purposes of the Income Tax Act. The amendment sought by
this clause will enable the Minister to prescribe fees for certain
services provided to members of the public by the Commissioner.
The Third Schedule to the Income Tax Act lists amounts that are
exempted from income tax.
Paragraph 4(o) of the
Schedule exempts bonuses and performance-related awards paid to
employees, up to a maximum amount of $20 000. Paragraph (a)(i) of
this clause will increase that amount to $100 000.
Paragraph 4(p) of the
Schedule exempts up to $4 500 000 of terminal benefits given to
employees on their retrenchment. Paragraph (a)(ii) of this clause
will increase that amount to $16 000 000.
Paragraphs (a)(iii) and
(b) of this clause increases from $12 000 to $112 000 the tax exempt
amount of income accruing to persons aged over 59 years by way of
rental income or interest from deposits with financial institutions
or from discounted securities.
Paragraph (b) reinstates
the similar exemption of retirement pensions accruing to persons
aged over 59 years that was removed by the Finance Act, 2000. Unlike
the previous exemption, however, the whole of a pension qualifies
for the exemption, without limit.
The Fourth Schedule to the Income Tax Act specifies certain amounts
of expenditure of a capital nature which are allowed to be deducted
from gross income. This clause increases the maximum specified amounts
allowed in respect of the construction of staff housing and for
the purchase of passenger motor vehicles.
The Sixth Schedule to the Income Tax Act sets out the limits to
contributions to pension and benefit funds that can be deducted
from tax in the hands of an employee and an employer. This clause
will increase the specified maximum amounts of deduction to account
The definition of “remuneration” in paragraph 1(1) of
the Thirteenth Schedule (“Employees’ Tax”) of
the income Tax Act excludes from its scope for employee tax purposes
fees received by non-working or non-executive directors of companies.
At present, tax on such fees is payable only upon assessment. The
effect of this amendment is to tax such fees at source, in the same
way as ordinary employees’ remuneration.
24, 25, 26, 27 and 28
These clauses amend the 15th, 16th, 17th, 18th and 19th Schedules
to the Income Tax Act which respectively provide for the manner
of paying the Resident Shareholders’ Tax, the Non-Residents’
Tax on Interest, the Non-Residents’ Tax on Fees, the Non-Residents’
Tax on Remittances and the Non-Residents’ Tax on Royalties.
The effect of these amendments is to require payment of these taxes
to be made to the Commissioner within 15 days of the date when the
dividends, interest, fees, remittances or royalties, as the case
may be, are paid, instead of within 30 days at present.
The Schedule to Chapter II of the Finance Act prescribes the rates
of stamp duty payable on cheques from $10 to $100.
The effect of this clause, which amends the Chapter of the Finances
Act concerned with the rate of estate duty, is to exclude from the
dutiable amount the first $100 000 000 of the value of the estate.
This clause will amend section 21of the Capital Gains Tax Act by
extending the facility allowed to a taxpayer of “rolling over”
the proceeds of the sale of a principal private residence to a taxpayer
who sells a residential stand in order to purchase another stand
for his or her own residential purposes.
This clause will amend section 23 of the Capital Gains Tax Act,
which applies certain provisions of the Income Tax to the Capital
Gains Tax Act, by applying the new Part VIIIA of the Income Tax
Act discussed under clause 16 above.
This clause will amend the schedule to Chapter IV of the Finances
Act, which sets out the general rate of value added tax. The effect
of the amendment is to increase the general rate of value added
tax from 15% to 17,5%. The new rate will come into operation on
the 1st January 2007.
Section 28 (“Returns and payment of tax”) of the Value
Added Tax Act provides that VAT collected should be remitted to
ZIMRA by the last day of the first month following the end of the
tax period relating to the registered operator. In order to improve
the accounting for VAT collected, this clause seeks to change the
payment date for VAT remittances from the last to the twentieth
day of the first month after the tax period relating to the registered
operator, with effect from the 1st January 2007.
Under section 32 (“Objections to certain decisions are assessments”)
of the Value Added Tax Act it is provided that if the Commissioner
does not respond to an objection within 6 months, the objection
is deemed to have been disallowed, whereupon the objector may appeal
against the Commissioner’s deemed disallowance. This clause
will reduce that period to three months.
41, 42, 43 and 44
These clauses amend various Acts. The Global Trade Act and Mines
and Minerals Act are sought to be amended to impose more rigorous
penalties for such offences as illegal gold dealing and illegal
prospecting. The amendments to the Pension and Provident Funds Act
are backdated to the 10th November, 2006, in order to validate certain
civil penalties imposed in terms of the Pensions and Provident Funds
(Amendment) Regulations, 2006. Clause 39 saves in force the amendments
to the Bank Use Promotion and Suppression of Money Laundering Act
that were first made by the Presidential Powers (Temporary Measures)
(Currency Revaluation) Regulations, 2006, which will expire at the
end of January.
46 and 47
Clause 40 saves in force section 11 of the Presidential Powers (Temporary
Measures) (Currency Revaluation) Regulations, 2006, which, as mentioned
above, will expire at the end of January. Clause 41 provides for
the saving of anything done in the valid exercise of any power under
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