In carrying out trade, business operators may engage in various transactions and agree on various methods of payments. Such payment arrangements may entail cash or other means other than cash. An example is barter transactions made between or amongst operators.
Barter transactions refer to transactions where goods or services are exchanged between trading parties as payment for the supply of goods or services rendered. Such transactions have Value Added Tax (VAT) implications which should be correctly addressed.
VAT Implications of barter transactions
VAT is generally charged on the consideration made in relation to the supplies by any registered operator of goods or services made in the course or furtherance of any trade carried out. The definition of the word “consideration” under the VAT Act , includes any payment made or to be made, any deposit on any returnable container and tax, whether in money or otherwise whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of any goods or services. From the foregoing, it clearly shows that barter transactions constitute a number of consideration and any goods or services supplied under such arrangements should be subjected to VAT.
How are such goods and services valued for VAT purposes?
In terms of the VAT Act, in cases where goods or services are supplied through means other than cash, (including barter transactions) the value to be placed in computing VAT is the open market value of the goods or services. The open market price is normally the price which unconnected or unrelated parties would charge for such goods or services under the same circumstances.
A registered operator X Ltd provides a machine repair service to an unregistered operator Y Ltd, a conveyor belt manufacturer and charges $230. As payment for the services rendered, company Y Ltd gives $230 (open market value of the transaction) worth of conveyer belts to Company X Ltd for use in driving their workshop.
Comment and treatment:
This is a typical example of a barter transaction of which Company X Ltd should account for output tax on the value of $230.
If both companies were registered operators, they should account for output tax in respect of the considerations charged for the product or service supplied.
Tax Amnesty 2018
Any person who has unpaid tax, duty or penalty and interest by 1 December 2017 is eligible to apply for tax amnesty. This applies to tax, duty or penalty and interest already known by ZIMRA and recorded on its systems or that which a person had not declared to ZIMRA but should have been paid by 1 December 2017. The tax, duty or penalty and interest should have been due and payable before 1 December 2017.
In order to encourage taxpayers to come forward and volunteer disclosure of omitted income and other tax compliance obligations, the Commissioner General will grant full remission of penalties as part of an ongoing program notwithstanding the expiry of the amnesty on 30 June 2018.
How and where do you apply for the tax amnesty?
Persons who wish to apply for the amnesty must:
Complete the application Form TA01 in full. The form is obtainable from the ZIMRA website www.zimra.co.zw.
Declare outstanding taxes or duties that are on returns or assessments captured on ZIMRA systems by 1 December 2017 or outstanding taxes and duties not declared to ZIMRA but unpaid by 1 December 2017.
Ensure the form is completed legibly in indelible ink.
Submit the application to their nearest ZIMRA office or send scanned copies using the following email addresses:
(a) LCO & MCO [email protected] for clients in Large &
Medium Client Offices
(b) Region1 [email protected] for clients in Region 1 (c) Region2 [email protected] for clients in Region 2 (d) Region3 [email protected] for clients in Region 3 (e) Customs customs [email protected] for clients with applying
Applications for tax amnesty should be submitted from now until 30th June 2018
Reminder for VAT Payment Date
Our valued clients are hereby reminded that the VAT for the month of May 2018 is due on or before the 25th of June 2018.
Disclaimer This article was compiled by the Zimbabwe Revenue Authority for information purposes only. ZIMRA shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority. To contact ZIMRA: WhatsApp line : +263 782 729 862 Visit our website : www. zimra.co.zw Follow us on Twitter : @Zimra_11 Like us on Facebook : www.facebook.com/ZIMRA.11