Deferment Of Value-Added Tax: Minimum Threshold Raised From US$ 500k To US$1 million

Finance Minister Mthuli Ncube has announced that the minimum threshold for deferment of Value-Added Tax (VAT) has been raised from US$500 000 to US$1 million.

The government sanctioned temporary postponement of paying VAT on the importation of specified goods of a capital nature imported by companies in the manufacturing, agriculture, mining, aviation transport and health sectors.

In his 2023 national Budget presentation, Ncube noted that the facility was being abused. He said:

Whereas the VAT deferment facility was put in place to mitigate the cash flow impact on business, the benevolence has, however, been abused by most of the beneficiaries through non-payment after the due date.

I, therefore, propose to review the minimum threshold for the deferment facility from the current US$ 500 000 to US$ 1 million, with effect from 1 January 2023, in order to mitigate revenue loss to the Fiscus.

Tax Returns and Corporate Tax

On the prescribed period for submission of Tax Returns and Payment of Corporate Income Tax, Ncube said:

Specified taxpayers are compelled to submit self-assessment returns not later than four months after the end of the tax year or year of assessment which begins in January and ends in December.

This legislative requirement does not, however, cater for circumstances where taxpayers have approved financial periods that end on a date other than end of a year of assessment.

I, therefore, propose to compel taxpayers with a year of assessment other than the tax year to submit self-assessment returns no later than four months after the year of assessment approved by the Commissioner.

As a consequence of the proposed measures, quarterly payment dates for such taxpayers will be aligned to the approved year of assessment.

Tax Debts: Interest on Tax Debts

Ncube told Parliament that the Bank Policy Rate was reviewed to 200%, with effect from 24 June 2022 to curb speculative borrowing and to stabilise the exchange rate.

He said interest on outstanding tax remains at 25%. Ncube added:

Tax revenue has, thus, become a cheaper source of working capital, hence, some companies no longer prioritise remittance of tax, to the detriment of the Fiscus.

In order to limit accumulation of tax debts, I, propose to align the interest rate on local currency tax debts from 25% to the Bank Policy Rate, with effect from 1 December 2023.

The interest rate on foreign currency tax debts will, however, remain at 10% per annum.

Preserving the Value of Tax Debts

Ncube also said some taxpayers were deliberately delaying payment of tax obligations in order to benefit from the loss of value.

He said while charging higher interest on outstanding taxes remains an option, additional measures were necessary to induce compliance. Said the minister:

I, therefore, propose that all outstanding tax debts be converted to the foreign currency equivalent at the time the debt is incurred.

Payment of outstanding tax will, however, be made in local currency using the prevailing interbank exchange rate at the time of payment.

Interest on Delayed Remittances of Tax Revenue to the Consolidated Revenue Fund

Mr Speaker Sir, financial institutions are a critical conduit for the real-time remittance of tax payments to the Consolidated Revenue Fund (CRF).

However, a number of financial institutions are delaying remittance of tax payments to the CRF, thereby depriving the Fiscus of resources to fund critical Government expenditure.

Some of the financial institutions are also utilising the funds as a cheap source of overnight liquidity support.

I, therefore, propose to compel financial institutions to remit tax collections to the CRF within 48 hours of receipt from taxpayers.

Where financial institutions fail to meet the prescribed timeline for remittance, interest will be chargeable at a rate of 15% and the Bank Policy Rate, currently pegged at 200%, on local and foreign currency remittances, respectively.

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