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 ‘fiscal tax invoice’.
Fiscal Tax invoice
Finance Act Number 7 of 2021 amended the definition of Tax Invoice to a Fiscal Tax Invoice. The effective date for the issuance of Fiscal tax invoices is 1 January 2022. A Fiscal Tax Invoice is a tax invoice printed from a fiscal device used by a registered operator with the words ‘Fiscal Tax Invoice’ being prominent, bearing all the required features as detailed in Section 20 of the VAT Act. Any supplier - who is a registered operator - who supplies taxable goods or services is required to issue the recipient with a fiscal tax invoice within 30 days from the date of such supply. It is unlawful to issue more than one fiscal tax invoice for each taxable supply. If a recipient loses the original fiscal 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 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.
NB Valid Tax Invoices printed from other devices other than fiscal devices and/or without words ‘Fiscal Tax Invoice’ generated before 31st December 2021 are claimable by registered operators up to 31 March 2022.
Features of a valid fiscal tax invoice
- The words ― ‘Fiscal Tax Invoice’ has to be in a prominent place;
- The name, address and registration number of the supplier;
- The name, address and registration number of the recipient , if the recipient is a registered operator;
- An individual serialized number and the date upon which the tax invoice is issued;
- A description of the goods or services supplied;
- The quantity or volume of the goods or services supplied;
- The value of the supply, the amount of tax charged and the consideration for the supply; or
- Where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either the amount of the tax charged, or a statement that it includes a charge in respect of the tax and the rate at which the tax was charged.
- A fiscal tax invoice should also include any other words or phrases employed under the fiscal recording regulations denoting an invoice used to account for taxable supplies
Period within which input tax may be claimed
A VAT input tax claim will only be allowed when 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 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 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.