PUBLIC NOTICES

NOTICE TO OUR VALUED CLIENTS
PUBLIC NOTICE ON WITHOLDING OF AMOUNTS PAYABLE UNDER CONTRACTS IN TERMS OF SECTION 80 OF THE INCOME TAX ACT [CHAPTER 23:06]

NEW PROCEDURE FOR ISSUING TAX CLEARANCE CERTIFICATES [ITF 263]

This public notice is meant to give guidance to all traders on the new procedure regarding the issuance of tax clearance certificates [ITF 263] as from 1st January 2010. 

All registered business operators - including Government, Quasi-Government and Statutory Corporations - who enter into any contracts which result in an obligation to pay any amounts totalling or aggregating US$250.00 or more are required to withhold 10% of each amount payable to payees without a valid tax clearance certificates.
 
Tax Clearance Certificates [ITF 263] will be issued only to clients who are fully paid up and whose Income Tax, Value Added Tax and PAYE returns are up to date. Where the registered operator has furnished a valid tax clearance confirming that his/her tax position is satisfactory, there is no need for the payer to withhold the 10%.

ZIMRA will no longer issue tax clearance certificates with a specific instruction to deduct 10% Withholding Tax to clients whose tax position is not satisfactory. Registered taxpayers [payers] are therefore directed with effect from 1st January 2010 to withhold 10% on each amount payable to a payee as long as the payee does not furnish a valid tax clearance certificate.

The tax clearance certificate will be valid from date of issue to 30 June of each year and 1st of July of each year to 31st of December of each year.

The amount remitted to ZIMRA is retained until such time that the payee has been assessed for the respective tax year at which time the amount is allowed as a credit against any tax due. Any excess is refunded to the payee.

The payer’s obligations are as follows:

1. The amount deducted should be remitted to ZIMRA on or before the 10th day of the month following the month in which the payment was made.
2. The person from whom the amount has been withheld must be furnished with a certificate showing full details including the amount withheld.
3. The payer should retain a copy of the tax clearance certificates furnished by registered clients.
4. The payer is liable for the amount that he/she has failed to withhold and is also liable for a penalty equal to the amount that was not withheld, that is 100% of the amount. Interest is also payable on the outstanding amount.

Exceptions to the requirement to withhold 10% include the following transactions:

1. Amounts paid in terms of employment contracts.
2. Sales effected in any shop in the ordinary course of the business of the shop and any other consumer contracts for the sale or supply of goods or services or both in which the seller or supplier is dealing in the course of business and the purchaser or user is not. This caters for sales by retailers or wholesalers to consumers.
3. Payments for the supply of farm produce and livestock to farmers are also exempt from the need for the amount to be withheld. There is therefore no need to ask for tax clearances in such cases. Payments for farm produce to persons who buy for resale such as traders, retailers and wholesalers are still subject to the withholding amount requirements.

For further details please refer to Section 80 of the Income Tax Act [Chapter 23:06] or visit your nearest ZIMRA Office.