Farmers, buyers, sellers and contractors should take note of the correct treatment of withholding taxes on selling of tobacco. It is important to charge tax where appropriate to ensure a smooth selling season and avoid inconveniencing farmers.
- Withholding tax on contracts
The Income Tax legislation specifies that withholding tax is supposed to be withheld on amounts payable to all persons who enter into contracts with the specified entities, the definition of contract was amended to exclude a contract for the purchase of auction or contract tobacco in terms of which tobacco levy may be required to be withheld in terms of section 36A. With effect from January 1, 2018, the definition of contract was amended by excluding “any contract for the purchase of auction or contract tobacco”. This therefore means that a contract for the purchase of auction or contract tobacco in terms of which tobacco levy may be required to be withheld is not subject to 10 percent withholding tax.
Money Transfer Tax
Intermediated Money Transfer Tax (IMTT) is a tax collected in terms of Section 36G, as read with the Thirtieth Schedule of the Income Tax Act [Chapter 23:06]. IMTT is tax chargeable on transfer of money physically, electronically or by any other means.
The transactions on which the tax (IMTT) is payable excludes the following transactions that have a bearing on the tobacco and cotton farmers:
2.1. The transfer of funds for the purchase of auction or contract tobacco from buyers or contractors to auction floors.
2.2. The transfer of funds by contractors and auction floors to growers of tobacco for deliveries of tobacco.
2.3. The transfer of funds to buyers to enable them to purchase cotton or cotton seed from growers or contracted growers.
- Tax obligations of farmers
Although the law exempts farmers from the withholding taxes mentioned above, the farmers in the business of farming are advised they have statutory obligations as listed below:
3.1 Registering for Income Tax, PAYE and VAT;
3.2 Keeping accurate records of transactions;
3.3 Retaining records for up to 6 years;
3.4 Remitting taxes by the due dates;
3.5 Submitting tax returns by the due dates;
3.6 Furnishing information as requested by the Commissioner General (CG)
- Return submission
and payment of taxes
Clients are reminded of the following due dates:
4.1 Employees’ Tax or Pay as You Earn (PAYE), Withholding Taxes/Royalties and IMTT — on or before 10th of the following month.
4.2 VAT — on or before 25 of the following month.
4.3 Tobacco Levy — within 48 hours from the date of sale of the auction and contract tobacco.
All payments for taxes should be remitted on time through banks. Please be reminded that where transactions have been dealt with in foreign currency, taxes shall also be remitted in foreign currency. Refer to the following link on Zimra website for Zimra Bank Accounts details: https://www.zimra.co.zw/profile/2037-zimra-bank-accounts.
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