Withholding of amounts payable under contracts with State or Statutory Corporations

IN terms Section 80 of the Income Tax Act (Chapter 23:06), a 10 percent withholding tax is deductible from all amounts payable to all persons who enter into contracts with the State or a statutory body, a quasi-Government institution and taxpayers who are registered with the Zimbabwe Revenue Authority (ZIMRA)?

Who is required withhold the tax?

Any of the following who enters into a contract with one or two persons and is obliged to make a payment to them is required to withhold tax. The State or a statutory body, Quasi-governmental institution Registered taxpayer Circumstances under which withholding tax withheld?

When making a payment to the contractor of an to amount or amounts totalling or aggregating to $1,000 or more over the year of assessment

When the contractor being paid does not have a tax clearance certificate Definition of payment Payment is defined as payment by cash, barter, setoff, crediting a director’s loan accounts, inter-company debits and credits or by any other settlement of obligations whatsoever and in any form. Obligations of the Withholding Payee

To withhold 10% of each amount payable to the payee under the contract concerned

To pay each amount so withheld to the ZIMRA Commissioner General on or before the 10th day of the month following that in which payment was made

To submit returns (Rev 5 Form) of the amounts so withheld

To take all reasonable steps to ensure that the person with whom the contract is concluded, is made aware of these provisions

To issue a certificate to the contractor showing the amount withheld Implications of failure to withhold tax If a statutory body, quasi-governmental institution or registered taxpayer fails to withhold or to pay the Commissioner any amount required to be withheld from a payee it will be liable for:

Payment to the Commissioner, of the amount which should have been withheld.

Penalty of an amount equal to such amount. How is tax withheld accounted for The Commissioner shall retain any amount remitted to him until the income tax payable by the payee concerned for that respective year of assessment has been assessed.

The amount shall be allowed as a credit against the income tax so payable by the payee on submission of a Self-Assessment Return or on issuance of an assessment for taxpayers not on Self-Assessment.

The Commissioner shall refund the excess, where the amount exceeds the Income tax so payable by the payee.