All private limited companies by law have to file annual returns once every year within the required time frame as regulated by the Companies Act.
By filing the annual returns with the Registrar of Companies, the company confirms whether they are still in business or trading, or if it will be in business in the near future. An annual return is a statutory return in terms of the Companies Act and is a summary of the most relevant information pertaining to a company.
The prescribed filing fees for annual returns are legislated, and as such cannot be waived by the Registrar of companies. When a company fails to submit its annual returns for a long time, the Registrar of Companies will assume the company is no longer trading and may start the deregistration of the company.
Once a company has been deregistered, the Registrar of companies removes the company from its active records. Legally, the company will now cease to exist and the company name will become available to the general public for registration.
Once the company is in the deregistration process due to the non-payment of annual returns, it is possible for the deregistration process to be cancelled if all outstanding annual returns are paid up to date.
If however the company is in final deregistration, then the company can apply for reinstatement upon filing of the required documentation. If the application is successful and all reinstatement criteria are met, the Registrar of Companies will change the status of the company to “in reinstatement process”, at a prescribed fee.
To keep your company in good standing with the Registrar of Companies and to avoid any penalties, possible deregistration, or the aggravation of trying to reinstate the company, every company is advised to lodge their annual returns timeously within the stipulated timeframe.
Ways to avoid incurring penalty fees include:
Being aware of your company’s Annual Return Date
Ensuring that your company’s financial statements are prepared well (Know your authorised & issued share capital)
Seeking assistance from a company secretarial firm such as M&J Consultancy so the annual return is taken care of and reminders are sent to the company
To conclude, filing your Annual Returns is of the utmost importance. If you are not sure of the whole process, then get in touch with us for a detailed guide and walkthrough.
Last week on Thursday, the 21st of November 2019, Zimbabwe’s Finance Minister, Professor Mthuli Ncube released the budget statement for the year 2020. The budget statement covered all of Zimbabwe’s key sectors in detail and their expected allocations for the year 2020. To keep you abreast with this development, here are some of the Zimbabwe 2020 Budget Highlights we noted from Professor Mthuli Ncube’s Presentation.
Motoring Benefits were reviewed in relation to engine capacity starting from a minimum 0-1500cc which was proposed to ZWL$54,000.00 and a maximum above 3000cc which was proposed to ZWL$144,000.00
2. Foreign Loans
Interest expense on foreign loans be allowable as a deductible expenses to the extent that the foreign currency exchange rate on loans is determined through the inter-bank market rate with effect from 1 January 2020.
3. Excise Duty
A revision in Excise Duty on Tobacco with effect from 1 December 2019 was proposed, from ZWL$50.00 to ZWL$100.00 per 1000 cigarettes.
Immigrants Rebate which was initially put for returning students who imported cars has been reviewed to a maximum of US$5,000.00, with effect from 1 January 2020.
A youth employment tax credit has been introduced in order to support job creation. The tax credit amounts to ZWL$500 per month per employee. However , this tax credit has the following conditions;
It has a limit of ZWL60,000.00 per year of assessment, the company should be registered for personal lncome tax and compliant for the preceding tax period
Tax credit will only claimed after the additional employee has served 12 consecutive months, excluding trainees, interns and apprentice
Minimum wage payable to the new employees is ZWL$2,000.00 and it does not apply to supervisory grades as well as corporates with turnover exceeding US$1 million
The employees must be below the age of 30 at time of employment , with effect 1 January 2020
6. Salaries and Deductions
The tax-free salary threshold has been increased from ZWL$700 to ZWL$2,000 with effect from 1 January 2020. Taxable income will begin from a gross pay of ZWL$2,000.01 with a highest of ZWL50,000.00 which will be pegged at 40% tax.
Tax-free Bonus has been increased from ZWL$1000 to ZWL$5000 with effect from 1 November 2019.
Taxation of retrenchment packages has also been reviewed from ZWL$10,000.00 to ZWL$50,000.00 or one third of the package, maximum of up to ZWL$80,000.00 with effect 1 January 2020.
7. (Zimbabwe 2020 Budget Highlights #7) Taxation
This is one of the most important of Zimbabwe 2020 Budget Highlights.
The Intermediated Money Transfer Tax (IMTT) , tax-free threshold has been increased from ZWL$20.00 to ZWL$100.00 and the maximum tax payable per transaction by corporate’s from ZWL$15,000.00 to ZWL$25,000 on transactions with values exceeding ZWL$1 ,250 000.00 with effect from 1 January 2020.
The corporate income tax rate with effect from 1 January 2020 will decrease from 25% to 24%. The Commissioner General has recognized the current macroeconomic environment and will continue to excise discretion to waive interests on taxpayers with a good track record and compliance , among other considerations if the 10% Statutory Margin of error has been surpassed.
The Value Added Tax (VAT) percentage has decreased from 15% to 14.5% with effect from 1 January 2020.
In relation to VAT input tax, it was proposed that imported services in the definition of input tax will be allowed to be claimed by registered operators.
The VAT registration threshold has been increased from ZWL$60,000.00 to ZWL $1 million with effect from 1 January 2020.
(Zimbabwe 2020 Budget Highlights) Conclusion
As noted, these are some of the key highlights around the 2020 budget that may directly affect your business. You can share the other highlights with us and we can have a conversion on it.
In addition to this article covering Zimbabwe 2020 Budget Highlights, you can get a full copy of the National Budget on the Ministry’s website.
A trust is a fiduciary relationship
in which one party, known as a trustor, gives another party, the trustee, the
right to hold title to property or assets for the benefit of a third party, the
A family trust is therefore a relationship
A founder/trustor – who creates the trust and decides what goes into the trust deed
Trustees, who hold title to the trust assets in their own names and deal
with them as instructed in the trust deed
The beneficiaries, who receive the benefits from the trust.
Beneficiaries may include:
who may receive a benefit at the discretion of the trustees;
final beneficiaries, who are
entitled to whatever funds are still left in the trust when it is wound up; and
primary beneficiaries, who are
discretionary beneficiaries given some sort of priority ahead of other
Benefits of Family Trusts
The following are some of the advantages of
setting up a family trust:
Assets held in trust are usually protected from creditors of the beneficiaries, or the trustees personally. A usual situation in Zimbabwe is where the parents have personal liabilities (often related to their business interests), and wish to protect their family home from such liabilities in the event they are unable to meet them. In most circumstances a trust protects those assets from personal liabilities.
Protection Against Property Claims
If you give personal assets to your children during your life or in your will, those assets may, in certain circumstances, become available to their partners under the Property Act. However, if your assets are owned by a trust, or are given to your trust on death, your children can continue to receive the benefit of those assets but the assets do not form part of their personal property, and therefore cannot be subject to claims by your children’s partners.
Protecting Property from/for
Beneficiaries – You may be reluctant to simply give
your assets to your children during your life or on death if you have concerns
about their ability to manage their financial affairs. If you give your assets
to a family trust, then the trust can provide a vulnerable child with income
and/or capital to meet their cash requirements as they arise. This can protect
the long-term value of your family’s assets.
Protecting Assets for Future Generations from Potential Tax Law Changes
Family trusts may provide protection against various forms of wealth tax that may be introduced in the future, such as death duties or inheritance tax.
Reducing or Preventing Claims Against
your Estate – The Courts can effectively rewrite
your Will under the Family Law if it considers that members of your family have
been disadvantaged by its provisions. However, the Court cannot rewrite your
trust for Family Protection purposes.
General Flexibility to Deal with Law
Changes – Modern trust deeds normally allow limited
rights of variations to deal with changes in the law.
Confidentiality – Family trusts are not publicly registered and therefore can be
a divorce, a trust can be used to provide for continued maintenance of the
Protect surviving spouses and/or
beneficiary (ies) against bad influences/investments.
Can be used to benefit special
interests such as charities or educational bursaries, even after death, for an
indefinite amount of time.
Disadvantages of Family Trusts
The following are possible disadvantages of
having a family trust:
Loss of Ownership of Assets
If you transfer your personal assets to a trust, then the trustees of that trust will control the assets. Although you can retain some control by holding the power to appoint and/or remove trustees, or even by being a trustee yourself, it is important to remember that assets you transfer to the trust are no longer your own. If you continue to treat the assets as your own, any trust could be open to challenge as a sham.
You could possible choose the wrong trustees
You could expect problems if the trustees are fighting heirs/inheritors for control. This shows how important it is to have at least one independent trustee
Input tax is the tax paid on purchases by a registered VAT operator on goods or services acquired for use, consumption or supply in the production of taxable supplies including imports made for use, consumption or supply in the production of taxable supplies. Only persons who are registered for VAT, known as registered operators are permitted to claim input tax. They may either offset it against output VAT or recover it as a refund from the ZIMRA. Taxable supplies are supplied which are charged 15% VAT, known as standard-rated supplies and those charged to tax at 0% rate are called zero-rated supplies.
The third category of supplies is called exempt supplies and individual supplying 100% exempt supplies does not charge VAT on sales nor claim input tax. An operator making both taxable and exempt supplies (non-taxable supplies) during an accounting period can claim input tax in proportion to the taxable element only as fully explained below.
Theoretically, it is easy to account for input tax when an operator only makes taxable supplies or exempt supplies. In practice, an operator will make purely taxable supplies or purely exempt supplies only in exceptional circumstances. Such a mixture of supplies gives rise to one of the most problematic areas in any VAT system, namely the question of apportionment of input tax.
Apportionment refers to the fact that only a portion of input tax that was paid is claimable – the portion not claimable will be added to the expense which will be deductible for income tax purposes under Income Tax. Where input tax is solely attributable to taxable supplies, a trader is entitled to deduct it in full from the output tax due on his taxable supplies.
On the contrary, where input tax is wholly attributable to exempt supplies, none of it is claimable. This means that the use to which input is put is important. Where this is not possible, the input tax becomes residual input tax which must be allocated by way of apportionment.
In the event that input tax being incurred is for mixed purposes, claimable portion is calculated according to the apportionment percentage by using an approved method by the Commissioner of the Zimbabwe Revenue Authority (ZIMRA).
The only approved method which may be used to apportion input tax in terms of the Act without prior written approval from the Commissioner is the turnover-based method. The turnover-based method should be applied as follows:
= Taxable supplies
exclusive of VAT x total input tax
Total supplies (taxable plus non-taxable
supplies exclusive of VAT)
When computing the income
or turnover certain elements should be considered such as the cash value of
goods supplied under an installment credit agreement, supplies of capital goods
or services which have been used for trade purposes and the value of any goods
or services supplied for which input tax deduction is always prohibited, for
example, income from sale of passenger motor vehicle are excluded.
A registered operator who wants to use some other method which is not the turnover based should seek the prior approval of the Commissioner. The Commissioner would need to be satisfied that such other method fairly and reasonably represents the extent to which goods or services are used or are to be used by the registered operator in making taxable supplies.
In other words, the method must suit the special circumstances of individual registered businesses or reflect the use made by the taxable person of the relevant goods or services in making taxable supplies. The courts have held that in order for a method to be regarded as fair and reasonable it should be “sensible”, “sane”, and “not asking for too much”..
For example, what may be considered a fair and reasonable basis for apportioning the rent could be the floor space. “Taxable floor space” for this purpose means areas of the building used for making taxable supplies of building space to customers. Meanwhile, taxpayers are warned that methods which are not turnover based should be used or applied with caution because they often change with time.
The use of multiple methods notwithstanding the behavior pattern of the applicable expenses should also be avoided. Furthermore, the method so selected should be based on the information that is in possession of the taxpayer without having to resort to hiring expensive third parties, such as valuators.
The Act provides for de minimis apportionment rules. This means if the proportion of an input tax claim exceeds a given amount or ratio the registered person would be allowed full or 100 percent input tax or refund. The main purpose of this rule is to simplify VAT administration and compliance for tax officers and taxpayers.
The VAT Act makes provision for such rule and provides that where the goods or services so acquired are used at least 90 percent for the purposes of making taxable supplies, the full input tax credit may be granted. This indicates that input tax should be apportioned when the intended use of goods and services in the course of making taxable supplies is less than 90% of the total intended use of such goods and services.
There are tax implications for not apportioning input tax where goods or services are acquired for use, consumption or supply in the making of mixed supplies. ZIMRA will disallow the undue input tax and levy penalties and interest.
One thing about Marketing is that it is the most evolving field. This means if you aren’t into trends or can’t look around and monitor what’s happening around you, you will be left behind.
If we were in 1919, 100 years ago, a simple Newspaper advert would have been enough to keep your salespeople busy.
50 Years ago, in 1969, a simple television ad would help your business expand, helping you hire a dozen employees and get ahead of your industry.
10 years ago, in 2009, getting a website and spamming it with keywords related to what you are selling would have been more than enough to get you ahead and help you win.
There is one fact that still astounds me to date and it is the fact that marketing has changed more over the last 10 years than it did in the last 100 years combined.
Consider Africa, Zimbabwe to be specific. The internet research organization, internetworldstats.com places Zimbabwe’s Internet penetration rate as of December 2018 at 39.3 %. This means out of the total 17 million Zimbabwean’s existent today, about 7 million have access to the internet.
What’s awesome is not the fact that the above people have access to the internet, it’s the fact that ZBC does not hit those kinds of numbers, prove me wrong!
If we are going to drill down on the above, there are some interesting stats that you will learn.
Hackernoon, one of the best Research organizations and sites says the average person spends 6 hours a day staring at their smartphone. This amounts to an average of 180 hours a month. What this effectively means is that the average person now spends most of his/her free time staring at their smartphone.
You are probably wondering what they will be doing? Well, Social Media, Mobile Gaming, Reading the Bible, YouTube Etc.
Now, this gets more interesting because if we drill down the numbers we’ll learn that a third of the time spend online by Zimbabweans and Africans, in General, is spent on Social Media and browsing Social Media Sites.
Why are these numbers necessary?
I wanted you to get an appreciation of how much people are addicted to Digital Media, Social Media, and the internet in general.
The power of this is, you can show these people ads anytime whenever you want.
You can show them your ads as they browse the internet.
You can show them your ads as they watch videos on Youtube.
You can show them your ads as they play Games on their Phone.
You can show them your ads as they read the news online on websites like the One for the Herald and Newsday
You can show them your ads as they browse through their timeline on Facebook.
You can show them your ads as they Prepare to respond to a Facebook Message.
You can show them your ads on the lock screen of their phone.
You can show them your ads when they search on Google.
In short, you can show them your ads, anywhere, at any time as long as they are holding a mobile phone.
So what is Digital Marketing then? It’s the art of showcasing your products and services to people whilst they are relaxed and in the middle of doing what they love the most.
There is much to say when it comes to Digital Marketing and I’m going to make this a 3 month-long weekly series where we are going to cover the complete A-Z of Digital Marketing.
If you want to stay updated and not miss out, just be sure to subscribe to our Growthpoint Newsletter to receive our updates.
In Income tax computation, expenditure is deducted if it has been incurred in the production of income for the purpose of trade. Expenditure on acquisition or construction of fixed assets known as Property, Plant, and Equipment (PPE) is not deducted but claimed against taxable income in the form of capital allowances over the useful life of the assets.
Capital allowances can be claimed by all persons deriving income from trade and investments namely sole traders, independent contractors, non -executive directors, partners, companies, and trusts with taxable income irrespective of the type of business undertaken. However, miners and petroleum operators have their own method of claiming capital expenditure.
Capital allowances allow the taxpayer to obtain relief on capital expenditure by deducting it against pre-tax income. If an asset is constructed or acquired in one tax year then put into use in the following year, capital allowances are only claimed in the year the asset has been put into use.
Capital expenditure includes the cost of acquiring or construction of the asset and all costs related in acquiring the asset such as initial set up, installation, programming, travel cost to purchase the asset, freight charges, transit insurance, irrecoverable VAT, borrowing cost, foreign exchange losses in respect of the asset.
There are two methods of claiming capital expenditure namely Special Initial Allowance (SIA) and Wear & Tear (W & T). SIA is a capital allowance granted upon election on constructed buildings, additions, alterations or improvement to the said buildings and movable purchased.
The act provides for 90 percent de minimis use rule, meaning that property used for at least 90 percent in the production of income for purposes of trade to be granted SIA.
The current rate for SIA is 25 percent for annum for big business and 50 percent for SMEs in the first year. After the first year, accelerated wear & tear is 25 percent per annum for the next three years in the case of big business and 25 percent per annum for the next two years for SMEs.
SIA is never apportioned, either taxpayer qualifies or does not qualify for SIA at all and it is also computed based on cost. Assets under a finance lease also qualify for SIA in the hands of the lessee.
Wear and tear is granted in all cases where SIA has never been granted. It is computed on the cost of immovable assets purchased or constructed by the taxpayer, additions, alterations, and improvements made to immovable properties and on movable property including on computer software acquired or developed. The following are rates for wear and tear on;
Commercial buildings – 2.5% per annum
Immovable property – 5 %per annum
Movable property and computer software -10% on written down values.
Wear and tear is apportioned in the case of movable property used partly for business and private by the owners of the business.
Accelerating capital allowances allow taxpayers to minimize their tax liabilities, making SIA a favorable method to claim wherever possible. However, it is not beneficial for taxpayer with assessed losses which are about to expire to elect SIA because it will result in increased assessed losses which may not be recovered.
Therefore, capital allowances are incentives on capital expenditure which taxpayers must take advantage of, but it is difficult to claim these when an individual is not a registered taxpayer or has no internal system for tracking capital expenditure.
In working with many businesses in Zimbabwe and helping them with their registration to kickstart them into the market, one of the frequently asked questions we get asked by our clients is which type of company to register and the benefits of each.
In case you are not familiar with the Company Registration Process in Zimbabwe, when registering a company, you have the option to register two types of companies namely a Private Limited Company famously abbreviated to Pvt Ltd or a Public Business Corporation referred to as a PBC.
There are some distinctions to these two types of organization the biggest one being that a PBC can have a minimum of one member whilst a Private Limited Company must have a minimum of two directors. There are more distinctions to these two types of organizations than the one I stated above but I will cover those in a more detailed article later on.
If you are thinking of registering a company and wondering which is the best way to go, here are 10 Reasons why you should consider registering your company as a Private Limited Organization in Zimbabwe.
1. Legitimacy and Brand Awareness
What is the first thing that comes to your mind when you see a company named XYZ with the (Pvt) Ltd? You automatically respect it right? Registering your company as a Private Limited Organization in Zimbabwe gives it an edge and makes it stand out largely due to positive perception in both the minds of your customers, partners and suppliers alike.
2. Easy Registration
If you want to start your business and some of your shareholders are not in Zimbabwe, then it’s easy for you to achieve that if you register your business as a Private Limited Organization. They will only need certified scans of documentation to go through the process making things simpler and easier for you. It will be a big advantage and you/or your partners won’t have to go through the hassle of funding transportation costs just to submit some papers.
3. Separate Liabilities from Owners
A Registered company has its own separate legal persona. Many a time we have encountered terrible situations where a person loses their assets and being left broke just because they were operating a business without having their company registered.
When your company is registered as a Private Limited Company, debts which affect the company will not personally affect you.
If you are a foreign National looking to register a company in Zimbabwe, then you can easily register your company as a Private Limited Organization in Zimbabwe without any restrictions.
5. Investment Incentives
A Private Limited Organization can easily take control of the investment incentives offered by the government and the regulatory board called Zimbabwe Investment Authority.
6. Easy to Raise Capital
Capital is the lifeblood of any business. If you have your company registered as a Private Limited Organization, it’s easy for you to raise capital for the organization by selling equity. Should the investment go wrong, your other businesses and your person will NOT be affected since the company would be standing as its own legal persona.
7. Easy to Scale the Business
Should you wish to raise capital, you can do that by selling off shares to outside investors if your company is registered as a Private Limited.
8. You can easily Establish a Subsidiary Company
The great Warren Buffet said Never Put all your eggs in one basket. If you want to establish a subsidiary company, you can easily do that by registering a private limited organization and setting your main company as a Corporate Shareholder within the newly registered company.
9. Easy to Meet
With Private Limited Organizations, there are no restrictions as to where the shareholders can meet and where a board meeting can be held. This makes planning easy, simple and cost-effective, particularly for new companies.
10. Easy to avoid Conflicts
The owners will have a clear understanding that their investment in the company is not by any preregistration verbal or written promises. If a dispute arises, share allocation will determine who has the most decision making power.
From the above, I hope you have gotten an understanding of why you should register your company as a Private Limited Organization in Zimbabwe. If you have any questions that you might need clarification, feel free to ask our team via the comments section or LiveChat, myself, or our team will be happy to assist you.