LAW TO AVOID DOUBLE TAXATION:

LEGAL provisions to support an agreement between Zimbabwe and South Africa to avoid double taxation have been gazetted, but legal experts say that an official statement has must be made on when the regulations will come into effect.

The provisions under statutory instrument 40 /2016 gazetted last week, lay out the framework for avoidance of double taxation and prevention of evasion of taxes on incomes in the two countries.

When the double taxation regulations come into force the new agreement will replace the outdated pact between the two countries, signed in 1965.

Enforcement of the law is governed by article 28 of the bilateral agreement, and will depend on when the countries complete legal procedures to bring it into force.

According to law experts Bureau Veritas, an official notice will therefore be needed to publicise the date on which the agreement enters into force. South Africa is Zimbabwe’s biggest trading partner with value of trade between them reaching $4,2 billion last year.

Avoidance of double taxation is an agreement concluded between one country and another jurisdiction, to relieve double taxation of income that is earned in one jurisdiction by a resident of the other jurisdiction.

A delegation from the South African Revenue Service and SA’s national treasury paid a three-day visit to Zimbabwe from July 3 to July 5, 2012 to discuss the avoidance of double taxation between Zimbabwe and South Africa.

During the discussions Zimbabwe was represented by officials from the Ministries of Finance and Foreign Affairs and officials from the Zimbabwe Revenue Authority.

The countries then signed a memorandum of understating on avoidance of double taxation and prevention of fiscal evasion last year, which entails reduced rates of tax dividends, interest, royalties and technical fees earned on firms or individuals of the either state.

Permanent secretary in the Ministry of Finance William Manungo said the underlying principle for the agreement was to create a favourable environment for investment in both countries and cooperation in tax administration between the two States.

He said the agreement was meant to clarify, standardise and guarantee fiscal treatment of tax payers who engage in business in the two countries to protect taxpayers against double taxation of the same income.

“It is important to note that imposition of similar taxes in the two countries on income earned by the same taxpayers has detrimental effects on the exchange of goods and services as well as the movement of capital and persons across national borders,” said Mr Manungo soon after the countries signed the pact last year.