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Why it is Mission-critical for your Businesses to Conduct Tax Health Checks Frequently


The tax environment is ever changing and regulations are constantly evolving. Owing to this, businesses need to keep up by thoroughly assessing their tax structures, tax positions and tax compliances on an on-going basis, to ensure that the overall tax positions are backed by adequate support, compliances are monitored, and matters that are under litigation are dealt with appropriately.

What is a tax health check?

A tax heath check is a systematic review of your business’ records and accounting systems with a view to identify any areas of risk in relation to the collection or recording and reporting of data used to produce reports to any Government revenue office (ZIMRA) as well as to assess opportunities that have not been taken advantage of, for example incorrect reporting or not utilising alternatives available through the tax system leading to too much tax being paid. In effect, it gives confidence in the level of risk the business has in relation to taxation.

Tax health checks provide an assurance that tax implications for a certain period, an area of compliance, or a specific transaction are identified, duly addressed, and in following through, appropriate action are taken for risk mitigation. Conducting such health checks on a periodic basis will help in managing tax risks, ensure appropriate compliance, and result in better preparedness for litigation matters and strengthen tax positions.

The Key Focus Areas for a simple tax health check

Tax Audit Risk

A tax audit is an inspection of the correctness of the tax accounting with the aim of identifying and hedging potential tax risks arising from violation of different requirements. Furthermore, a tax audit is an efficient tool for optimising the tax liability, offering real options for improving economic results. An analysis of risks inherent in the different tax areas, including but not limited to, corporate income tax, value added tax, wage accounting, is done to check for compliance with statutory registrations.  A regular tax health check will expose all non-compliance issues before the organisation has been flagged for an audit by ZIMRA and penalties imposed on them.

Corporate Governance

This is also a critical area in conducting a health check. Corporate governance is the system by which companies are directed and controlled. Everything from communication to leadership and strategic decision-making. Primarily, however, it involves the board of directors, how the board conducts itself and how it governs the company. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate structure is in place.

It takes an external party to be impartial in analysis of processes and note the loopholes than those in the system. This is why organisations find it easier and efficient to outsource such activities to firms that specialise in this.

The Small to Medium Sized Business: is there a case for a tax health check?

Compliance issues are universally applicable regardless of the size of a business and as an owner of a small business, it is even more important that you are found compliant by ZIMRA. This is because non-compliance has far reaching effects. Multiple researches on SMEs is Zimbabwe have found that most enterprises in this bracket are non-compliant, and with a sizeable number of them forming the back-bone of the country, this poses a serious challenge to the economy. A regular occurrence in SMEs is that of lack of adherence to corporate governance procedures leading to inefficiencies, unethical practices, tarnishing of corporate image when such issues are exposed, legal penalties, and disregard of procedures especially in situations where the founding owners are part of the board. Absence of regular checks therefore expose these enterprises to overtaxation.

Access to such vital information in a small business may not be readily available. This is what companies such as ourselves are passionate about. We identify issues through understanding of management activities and industry-specific activities, assess accurate classification and tax treatment, perform a comprehensive review and analysis of major accounts and transactions, provide in-depth review of issue-specific laws and regulations and quantification of potential tax effect.

We also develop appropriate solutions to minimize possible tax exposures and risks, assist with requests for rulings or interpretations by tax authorities on issues in question or dispute to minimize risks of uncertain tax liabilities from a possible challenge by the tax authorities. This is in addition to performing comprehensive reviews of tax reconciliation to ensure all opportunities to reduce tax liability or to obtain refund of overpaid tax have been explored. Further, we identify areas where tax exemptions or reductions may be utilized to reduce future tax liability and through all this process offer sound business advice to ease your way of doing business.

It is one thing to conduct a successful health check for an organisation but the important thing is also to then put forward ways in which such businesses can plan for tax payments such as Quarterly Payment Dates (QPDS) in line with the ZIMRA calendar.

In summation, having constant and thorough tax health checks should not be optional for any business it is therefore worth the consideration that small businesses outsource such services to the experts who understand this so you focus on what you can do best.

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Registering a Company in Zimbabwe: Key Things You Need to Know

Every new business owner needs to know this

So you have written a business plan, validated the business case, and you are beaming with excitement to get your venture rolling. The next crucial step is to take a minute to pause and ask yourself: “Do I have all areas covered? Do I all the necessary documentation needed to become a legal entity in the country?”

New business owners often find themselves unaware or, more over, not having the necessary documents needed to become a legal entity and because of the dread of bureaucratic processes in making their operations legal, they resort to operating unregistered.

To help, we have researched and come up with a business starter pack that each new owner needs to know in order to get the required documents for their company.

STEP 1: Register your company

Contrary to the view that this is a long and tedious process, choosing the right registrar can make your life easier. What are the key considerations you need to make at this point?

Start with the name

This is the first step in the registration process. Many times, choosing the right name is equally important as running the business itself. Your name has to be unique, easy to remember, precise, and a reflective of your business. A name is important for it is that which a business will build its brand on. The requirement at registration is that registrants submit a list of at least four names in order of preference, for checks against a list of already registered companies. Names are approved when not similar to an existing company.

You have managed to figure out a list of names that are unique and would like to adopt, the next step is to understand what sort of business you are. This is often influenced by whether you need to create a Private Limited or PBC.

What is your business specialty?

It is important for a business to specify which area it ventures in by giving a brief summary of products and services including corporate objectives. Some business owners may not know what exactly they would like to start with; the provision being that you can register your business as a general trading business. That way you can broaden your scope when you need to do so. When you have completed this section you are required to provide information of your location

Where will your business be located?

Information to be supplied is that of the business’ physical address and contact information. New business owners often worry that they do not have physical premises because, well, sometimes the owner are the business. In such cases, it is permissible to use your residential address if the title deeds are in your name. If not, a signed affidavit from the owner suffices.

Who owns and manages the business?

Director’s information is mandatory and should be provided as you are registering the business. This includes full name, national identification number, and residential address of each director

Shareholders

These are the owners of the business who have invested capital into it to make it a viable entity. As such there is need to state who owns what percentage stake of the business. All share percentages total to 100 percent.

Submitting the application

Just as is, this is all the information needed to submit to the registrar who will facilitate the registration process for you. As M&J Consultants this is where we plug in to do all the heavy lifting for you. We handle all processes at the Companies Registry for you and in five days or less, your company will be registered.

Now that the first step towards legalizing your business is done, next is to think about how you will be transacting. At this point, you will need an account with a reputable bank.

Corporate Account

To apply for a bank account one needs the official company registration documents, supporting documentation (proof of residence for al director), the deposit fee (varies according to bank), and a bank advice note which instructs the bank to open an account for your now registered company.

After the bank account is opened, you are just one step away from running legally, pending other certifications and permutations which can be requirements in specific industries. The final step needed in getting the legal documentation of your new venture is a Tax Clearance Certificate which is issued out by the Zimbabwe Revenue Authority (ZIMRA).

Tax Clearance

This is a written confirmation that a company’s tax affairs are in order and up to date.

Importance of tax clearance

  • It is a compliance issue and businesses need to adhere to it
  • A tax clearance is necessary when bidding for tenders
  • Needed when applying for licences issued by the local authorities
  • It inspires confidence in business counterparts and encourages them to do business with you

When all these documents have been put in place, your business is now considered a legal entity. This process is often misconstrued to be long and bureaucratic, but that is usually because of lack of information. Having the right registrar can smooth the process and make it hustle free.

At M& J consultants we have wide spread experience and knowledge across many industries and understand that registering a business is not simply about the paperwork. Our approach is different because we move with you each step of the way. We help you unpack your enterprise vision, so you know which type of business is best suited for your market, how to come up with a unique name which your brand is anchored on, and any business related advice you might need as you start your venture. That’s not all…we are still here to hold your hand because as a new business, we want you to focus on your core business of meeting your bottom-line. Leave the worrying about conducting tax health checks, filling tax returns, VAT registrations and any other accounting services to us because we understand it better.

Starting and making your business legal and compliant to company regulations is no longer as tedious as before. Choosing the right partner to help you can ensure all processes are complete and you are up and running in less than five days. So, what are you waiting for?