Value Added Tax (VAT) is invoice-based and is accounted for on both cash and credit transactions. The VAT payable is the difference between output tax and input tax. Output tax is the tax charged on taxable supplies made while input tax is the tax incurred by the registered operator on the acquisition of taxable supplies of goods and services.
Who may charge VAT and claim for input tax?
Only registered operators are required to charge VAT and are entitled to claim input tax on purchases of goods and services which are for use in making taxable supplies. In order to claim the input tax, a registered operator must be in possession of a valid ‘tax invoice’ or ‘fiscal tax invoice’.
Any supplier - who is a registered operator - who supplies taxable goods or services is required to issue the recipient with a tax invoice or fiscal tax invoice within 30 days from the date of such supply. It is unlawful to issue more than one tax invoice for each taxable supply. If a recipient loses the original tax invoice, the supplier may provide a copy clearly marked “copy”.
Why input tax may be disallowed
In some cases clients claim input tax using invoices, which do not contain all the necessary features of a tax invoice or a fiscal tax invoice. This results in such invoices being disallowed for input tax purposes. It is, therefore, vital that our valued clients should check and ensure that the invoices being issued by their suppliers contain all the salient features as listed below.
Features of a valid tax invoice or fiscal tax invoice
Period within which input tax may be claimed
A VAT input tax claim will only be allowed when a tax invoice or a fiscal tax invoice containing all the above stated features has been provided within the period the registered operator is required to furnish a return or 12 months from the date of invoice, whichever is the longer period.
Statutory requirement to maintain records
It should be stated that invoice records and any other business records should be kept for a minimum period of six years and the Commissioner General of ZIMRA may request such records for any verifications
Requirement to carefully check VAT returns
Clients are expected to carefully check their VAT returns and input tax claims to ensure that valid tax invoices or fiscal tax invoices contain all the salient features to avoid unnecessary disallowances of input tax claims and incurring of penalties and interest chargeable in respect of claims for undue refunds. This will also enable them to make successful input tax claims and facilitate the efficiency in processing VAT refunds.
It is an offence for an unregistered operator to charge VAT in respect of any supplies made. Anyone involved in such unlawful activity will be prosecuted for such an offence. In the event that clients suspect that they are dealing with a suspicious supplier, they are free to contact the Police or their nearest ZIMRA offices for verification or to report such malpractices.