THE Zimbabwe Revenue Authority (Zimra) says a new law will shortly be introduced compelling companies transacting in United States dollars to receipt in foreign currency.
Zimra said failure to adhere to the new policy will result in all transactions being deemed foreign currency income and all tax being paid in forex, including for goods and services paid in local currency. The announcement was made on Thursday at a Zimra virtual conference as the taxman tries to capitalise on the return of the greenback in March.
According to the Reserve Bank of Zimbabwe (RBZ), foreign currency deposits stood at US$1,1 billion as of last week from US$840 million in January.
Speaking on the penalties that Zimra will enforce on companies that do not pay forex for foreign currency transactions, Zimra head of technical services Mischeck Govha
said the proposed punitive law would be backdated to the start of this month.
“We have come up with a new law which, you know, is going to be effective with the new statutory instrument which is going to be promulgated at any time and it will start with effect from August (1). If you are not going to do a proper declaration in relation to your income as an operator, whether it be VAT or income tax, according to the Income Tax or Finance Act Section 4, we are going to deem everything to be forex and, you are going to be paying in forex and I think that is going to be very vital,” Govha said.
“We are simply saying, do the correct declaration on the amounts which you have received and have been tendered, but if you don’t do what is correct then everything will be looked at as though you have tendered in forex and that is the new law that will be coming. So, it is a self-audit exercise which you need to make sure you have done and done correctly.”
He said Zimra had embarked on what they have termed a “voluntary declaration” through letters sent to operators to declare what currency they transact in and receive.
“After we get back these letters, we are then going to audit using the declaration letter that you (firms) have given us. After the audit, we will apply that section (of the new law) where we are saying what currency have you used? Have you balanced it out? If there is any discrepancy at the end of the day, you will have to pay in forex as everything will be deemed in forex,” govha said.
The announcement of the new law comes as Finance minister Mthuli Ncube, in the Midterm Budget Review statement last month, announced that the 2% tax on monetary transactions would now also include foreign currency transfers.
The move by Zimra comes at a time the government is attempting to shore up its revenue base as international financial institutions have refused to assist the country with a bailout package until substantive reforms are implemented.
Zimra commissioner-general Faith Mazani said: “statutory Instrument 185 of 2020 was aligned with the provision of section 4(a) of the Finance Act which requires that tax be paid in the currency of transaction. In line with sI 185 of 2020, Zimra issued Public Notice Number 40 of 2020 addressing certain business malpractices. I would like to articulate some of them and these include some businesses that are not recording some transactions being tendered for in foreign currency.
“Where transactions are being recorded, part or all transactions tendered is not being declared in foreign currency. transactions in foreign currency are being written in manual registers, operators are receiving foreign currency from their customers and issuing them as Rtgs or Zimbabwean dollar receipts. Foreign currency tendered is not being banked or some of it.”
She said parallel or manual invoicing is being used for recording transactions involving foreign currency and such invoices are not declared for tax purposes.
RBZ governor John Mangudya announced at the same meeting that the central bank was working on introducing point-of-sale machines to businesses where nostro bank cards will be used to make it easier for tax purposes.