Business & Tax Tips & Updates with Given Mabande

ATTENTION !- PUBLIC TRANSPORT OPERATORS

The new ZIMRA requirement for Insurance Compnaies is that they are no longer going to issue insurance to public transport vehicles if they do not produce a valid Tax Clearance certificate. Thus all public transporters need to register with ZIMRA first and a get a tax clearance certificate before their insurance premiums are accepted by the insurer. This is becoming effective in January 2025.

It follows that all public transporters now have to register with ZIMRA.

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Recently ZIMRA announced a new tax regime. You want tonleaen more about this and how it impacts you and your business? Like and follow my page.

Hello there, read this tax planning and learn about tax planning as we draw towards the 2025 tax year

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THE GROWING IMPORTANCE OF TAX PLANNING. -
In my previous articles, I discussed about tax concepts in Zimbabwe and the importance of compliance with tax legislation. All businesses seek to maximize profits by minimizing expenditure, and I understand that to some, tax compliance is seen as a burden as it reduces the profits. It is true that tax is a difficult subject and one needs to make sure they understand it in order to fully comply and at the same time, minimize its effect to the business profits. Tax can be minimized by what is called Tax Planning. In this article, I am going to discuss the importance of tax planning and give a few tips on how tax planning can be done to the benefit of a business. The need for tax planning is growing day by day and tax management has become one of the most important function within organizations. This is because there is need to comply in order to avoid the harsh effects of fines and penalties arising from non-compliance but at the same time there is need to minimize the effect of taxation on business profits. This is where tax planning comes into play.
Ok! Let me start by defining what Tax Planning is. Tax planning refers to the activity of arranging of a person’s or business `s financial affairs in such a way that it reduces the tax liability of the tax payer. This is achieved by taking full advantage of all the tax exemptions, deductions, concessions, rebates, reliefs, allowances and other benefits granted by the tax laws so that the incidence of tax is reduced. Exercise in tax planning is based on the law itself and is therefore legal and permanent. So you will note that tax planning requires one to understand the income tax act and all its provisions and then take advantage of those provisions to minimize the tax liability.
Let me hasten to emphasize that tax planning should not be confused with tax evasion and tax avoidance. It will therefore do well for me to define these other two terms so that we note the difference. Tax evasion is a deliberate move by a tax payer to avoid paying tax to the Authorities or minimizing the tax payable. This is very illegal and it attracts serious consequences from the Tax Authorities. Tax evasion can be done through inadequate record keeping, operating without having registered with the revenue authority, overstating expenses, understating income, giving false tax declaration among others. The Zimbabwean tax laws are not lenient with tax evaders and they impose some very heavy penalties and fines so as to discourage people from cheating and defaulting in their tax obligations. Besides fines, a jail term is normally imposed as well over and above restitution process.
Tax avoidance on the other hand is taking advantage of some loopholes in the tax laws and then use them to minimize the tax liability. In some way, is very legal as it violates it
violates only the spirit of the law but not the letter of the law. There is a thin lie between tax avoidance and tax planning. The difference is that tax planning is taking advantages of the provisions of the tax law whilst tax avoidance is taking advantage of the loopholes, lack of clarity, inconsistencies or weaknesses in the tax laws to minimize the tax liability. However, in some circles, tax planning is said to be tax avoidance.
Now let me go back to my issue- the importance of tax planning. To start with, tax there are different types of taxes which can be hard to keep up with especially if you own a business. Tax planning is important for both small and large businesses because it can help them to achieve their business goals. When you have a tax plan as the owner of a business, you can lower the amount of taxable income, gain more control of when taxes are paid and also reduce the rate of tax. Depending on the type of business you have, you can find many different benefits. For example, if you have a business that is international, you can manage the timing of tax bills and can avoid double taxation.
Tax planning techniques or strategies depends on the type of tax such as individual tax, PAYE, Capital Gains Tax, Estate taxes, International Tax and Corporate tax among others. Each tax category will employ different techniques of tax planning. I will dwell mainly on Corporate tax since it is the one affecting all organizations. Corporate tax is tax payable on the profits of a company. The Zimbabwean rate is 24% of the profits plus a 3% aids levy on the tax amount. One way to minimse the tax liability on this type of tax is to claim as much allowable deductions as possible. Allowable deductions are found in Section 15 of the Income Tax Act [Chapter 23:06]. Claiming maximum deductions allows the taxable income to go down and hence a lower tax liability. A tax planner in an organization should know at each beginning of each year which expenses are allowed. There will then be need to ensure some of the expenses an organization are based on the allowable deductions.
In addition to the allowable deduction, the tax planner may also seek to maximize capital allowances. In simple terms, capital allowances are deductions made on taxable amounts for the depreciation of assets. It is the tax man`s language for depreciation. Maximizing capital allowances reduces the taxable amount hence the tax liability. One way to maximize capital allowances is to claim for Special Initial Allowance as per Section 15 (2) c and the fourth schedule. Special initial allowance (SIA) is at the rate of 50%. This follows that in the year an item of property, plant and equipment is bought, tax can be minimized by claiming a SIA hence less tax liability and the high profits expected in the early years of using an asset can be used to recover other costs including the costs of acquiring that asset.
Another strategy for corporate tax planning is deferring incomes and profits. This simply implies that incomes obtained in the current year can be recorded as income for the following year(s). This means the income cannot be taxed in the current year hence the current year tax liability is lowered. Assuming that the income would have been received as cash, the cash can then be used for other activities instead of being used to pay taxes.
Whilst income can be deferred, expenses can be brought forward. Bringing forward expenses simply implies bringing future expenses in the current period. This will increase the expenses chargeable to the income statement hence lowering the taxable income and the liability thereof. It is important to note that income deferring and expenses bringing back requires good accounting skills to ensure tax is not evaded but avoided.
One last simple method of reducing tax liabilities is meeting deadlines for returns. Zimbabwean tax returns such as Value Added Tax (VAT) return and the final Income tax return attracts heavy fines and penalties if not made in time. It is very important for the tax personnel or consultant of a company to ensure all returns are done well in time to avoid these penalties and fines which increase the tax liability.
It is important to note that the tax planning strategies for Corporate tax cannot be exhausted. What is needed is for an organization’s tax personnel or consultant to sit down and understand the organization`s activities in the context of tax. It is from that understanding that tax planning strategies van be devised. Other strategies include making allowable donations to charities, moving business activities to export processing zones, applying for tax holidays and reliefs,

I would like to conclude by saying, tax compliance is important and all business organizations should ensure tax returns and payments are done as accurately as possible. Many small to medium and even large businesses survive on tax evasion. Whilst in the short time it may seem successful, the greatest warning should be that one cannot continue to cheat the system and win. One day it may catch up with you. The better thing to do is to comply. It is better to comply and find means and ways of minimizing the tax liability through tax planning and tax avoidance. Many organisations have taken the issue of tax so serious and have opened tax departments or hired specialized tax consultants to help manage their tax affairs and the tax risk. This is high time you may need to do so if you haven’t started, runaway form the effects of noncompliance.

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Exploring the 2025 Budget.
Hello hello there, I will be giving discussing the tax issues in the 2025 budget in s series of posts. This will cover New Tax laws, Tax planning opportunities, Compliance requirements among others. Like my page and we share a lot.

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