Zim Business Ideas and Network (ZBIN)

Tax and Customs Requirements For New Businesses

by Victor Muchemwa on March 9, 2017

We are always encouraging our members to be formally registered entities that comply with all national and local laws and regulations. One area that we really encourage our members to comply with is the payment of taxes. Others see the payment of taxes as an expense but to us we see it as an investment! Paying taxes and being compliant means that you can qualify for many tenders, many government programmes and also access credit. A bank is likely to give loan to someone who is tax compliant than one who is running away from tax authorities. Running away from tax authorities shows that you are ‘suspect’ and therefore your risk profile is very high!

So be tax compliant and the trick from most people entering the business sector is that make sure you pay tax from day 1. Do not wait to operate for a long period of time before deciding to be tax compliant because if you delay then its going to be difficult to adjust-so adjust from day 1. When we introduce the Diaspora Linkages Partnership programme, the first requirement is are you formally registered? If Yes then here is the bonus question, are you tax compliant? If you answer yes to the bonus question then you automatically qualify to be on our database. Paying tax is the first stage in showing that you are trust worthy but when you are operating below the radar, hiding operations and evidence of your income-then who can trust you with funds that do not belong to you? Chances are very high that you will just run away with investors funds.

Anyway this evening allow us to share with you Tax and Customs Requirements for New Businesses.You can find this information on www.zimra.co.zw.

One of the best ways of ensuring success and continuity in any business is to ensure that all statutory obligations are met in time. This article seeks to alert our valued clients who are about to start new business ventures on some of the basic requirements relating to tax and customs legislation.

Income Tax

All clients, including individuals, companies, partnerships and cooperatives who want to venture into any business venture are required to register with ZIMRA and comply with all obligations as stipulated in the legislation. To register, you are required to have a bank account among other requirements.
Once you have a bank account, you can then approach ZIMRA for registration. You will be required to complete registration forms depending on the nature of your business operations. All clients will be required to complete the REV 1 form, which can be obtained from ZIMRA offices or can be downloaded from this website. Once registered, you will be issued with a Business Partner Number (BP) which acts as the business’ identification number and is used for all transactions with ZIMRA, including remittances of tax. • After commencing operations, you are required to keep records of all your business operations and pay Provisional Tax on the stipulated dates (as shown below). The dates are referred to as Quarterly Payment Dates (QPDs). The Provisional Tax payable is based on the respective percentage of estimated annual tax due. The annual estimated tax due should be revised to update the estimate every quarter. • The form ITF 12B, which is a return for provisional tax payments, has to be completed in respect of these payments. • The payment dates and the percentage of tax due for each tax year are listed below:

QPD	Due Date (on or before)	Installment Due (as a % of the annual tax payable)
1st QPD	25^th March	10%
2nd QPD	25^th June	25%
3rd QPD	25^th September	30%
4th QPD	20^th December	35%

• Some businesses, operators are required to pay Presumptive Taxes and this includes operators of omnibuses, taxi-cabs, driving schools, goods vehicles, hairdressing salons, informal traders, operators of restaurants or bottle stores, small scale miners, cottage industry operators ,operators of commercial waterborne vessels used for the carriage of passengers for profit and fishing rigs.

• A tax return is required after the end of each tax year. The tax year runs from 1 January to 31 December of each year. Clients who have been specified in terms of Section 37A of the Income Tax Act [Chapter 23:06] as being on Self-Assessment are required to furnish Self-Assessment Returns in duplicate by 30th April of the following year. • Operators will also require a Tax Clearance Certificate – form ITF 263 which is issued by ZIMRA once you have met all the stipulated obligations which include submission of tax returns and remittances of tax due. If you do not have this clearance, anyone who pays you any amounts in excess of US$250.00 are required to withhold and remit to ZIMRA 10% of the amounts paid. • There is need to strictly observe the requirements in Section 80 of the Income Tax Act [Chapter 23:06]. It requires that all registered business taxpayers who enter into any contracts which result in an obligation to pay any amounts whose total or aggregate is US$250.00 or more to withhold 10% of each amount payable to payees who fail to furnish valid tax clearance certificates. Value Added Tax (VAT)

Any person who carries on trade in taxable supplies and whose annual taxable turnover exceeds or is likely to exceed US$60 000.00 must apply to register for VAT on Form VAT1. Responsibilities upon registration include:
Keeping accounting records for a period of at least six (6) years after the tax period to which the period relates.
Completing and submitting VAT returns even if you do not owe ZIMRA. ZIMRA will advise you of the frequency of submitting the returns though most clients submit returns either monthly or after every two months.
Calculating and remitting the VAT due to the Commissioner on or before the due date.
With effect from 1st January 2012, the due date for the submission of VAT returns and payment has been extended from the 20th to the 25^th of the month following the end of the tax period.
Issuing tax invoices for any taxable supply whose value is more than US$10.00.
Record transactions electronically. With effect from 1^st of October 2011, all registered operators are also expected to comply with fiscalisation regulations .This is a requirement where registered operators under category “C” and whose annual turnover exceed US$240 000.00 are expected to record transactions electronically.
Advising ZIMRA of any change in business details, including address, addition of/or change of partner, cessation of trade, etc.
Allowing ZIMRA officials to enter your business premises and examine goods and all business records.

PAYE

Every business person who becomes an employer is required to apply to the Commissioner General for registration within 14 days of becoming an employer.
The employer will be given the relevant tax deduction tables and informed of his/her obligations as an employer. Some of the obligations include:
Calculation and deduction of PAYE in accordance with the tax deduction tables
Remittance of PAYE to ZIMRA within 10 days after the end of the month during which the amount was withheld. Please note that with effect from 1st September 2010, the remittance of PAYE was moved from within 10 days after the end of the month during which the amount was withheld.
Keeping accounting records for a period of at least six (6) years.
Submission of the ITF 16 return which contains details on annual earnings, deductions, credits and PAYE for each employee within 30 days after the end of the year.
You will note that failure to withhold any amounts which you are required to withhold renders you liable to the amounts due as well as penalties and interest. Observing these basic requirements will assist you in running your business professionally and helps avoid the anxiety and stress associated with noncompliance and having to pay arrears, interest, fines and penalties.

PAYE tables are available on this website

Customs and Excise • In the event that you intend to import goods, you are still required to have registered with ZIMRA so that you have the BP number that will identify you as an importer. You will need a clearing agent approved and registered with ZIMRA to handle your importations or you may register with ZIMRA to do your own clearances. • For exports, you will also need an agent to handle the exports or register on your own with ZIMRA. • You are required to keep reasonable and proper records and books of accounts for all transactions and maintain records of all the bills of entry, bills of lading, rail notes, invoices and all other documents required to be accounted for in terms of the Customs and Excise Act. Retain all records for at least six (6) years.

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How do companies compete?

by Victor Muchemwa on March 5, 2017

Imagine yourself helping a friend who has found commercial space at Makoni Shopping Centre. This friend would like to open a new pub at this popular business centre in Chitungwiza.

There are more than 30 bottle stores and pubs at this busy centre. So the question to ask is how are you going to compete with 30 or more competitors selling the same product? Is he going to reduce the price of beer? This is not feasible as the price of beer from the major beer price, Delta is the same. Selling at a lower price in order to attract customers is not feasible at all. So what are the options available to him? In the past a few club owners had DSTV sports that helped them to attract revellers interested in watching their favourite soccer teams in action. This competitive advantage over rivals did not last long as everyone soon followed. So given the few options available to gain a competitive advantage over competitors, what can this friend do to compete against others?

He can spruce up the place so that it looks fresh-one strategy to compete against others maybe service-the quality of service that he gives to clients.

He may consider hosting sporting tournaments such as Pool at his bar, this may help attract

Introduce Mbira Concerts, few pubs host Mbira Music and yet it is popular and does not require a lot of capital to attract bands. A case in mind is that of the hugely Mbira dze Dzimbahwe in Budiriro or the former Beer Engineer Mbira group-Samaita who used to fill the venue before relocation to USA.

If you ask me to go and open a pub at Makoni Shopping Centre, I would think again because there are just too many pubs/bottlestores at the place making profitability a challenge. This has led business people to look elsewhere for entertainment business and one such place is Tanza Centre.

The example above was just giving you an example of the decision making that an Entrepreneur goes through when deciding to set up a business-competition analysis! How you are going to compete will either break or make your business.

In 1985, Harvard Business School professor Michael Porter wrote Competitive Advantage. He outlined the three primary ways companies achieve a sustainable advantage. They are cost leadership, differentiation, and focus.

Cost leadership means you provide reasonable value at a lower price. Companies do this by continuously improving operational efficiency. That means usually pay their workers less. Some compensate by offering intangible benefits such as stock options, benefits, or promotional opportunities. Others take advantage of unskilled labour surpluses.

Differentiation means you deliver benefits better than anyone else. A company can achieve differentiation by providing a unique or high-quality product. Another method is to deliver it faster. A third is to market in a way that reaches customers better. A company with a differentiation strategy can charge a premium price. That means it usually has a higher profit margin.

Focus means you understand and service your target market better than anyone else. You can use either a cost leadership or differentiation strategy. The key is to focus it on one specific target market. Often it’s a tiny niche that larger companies don’t serve. For example, community banks use a focus strategy to gain sustainable competitive advantage. They target local small or high net worth individuals. Their target audience enjoys the personal touch that big banks may not be able to give. They are willing to pay a little more in fees for this service. These banks are using a differentiation form of the focus strategy.

So we have given you 3 strategies for competing, going back to my friend at Makoni Centre, he cannot use the cost strategy because of the reasons I explained before. This leaves him with differentiation or focus. Focus remains a viable option if he focuses on Mbira Music Lovers.

We can also analyse how ZBIN was formed. We realised there was no platform for business discussions on Social Media especially Facebook. All Zimbabwean business pages were formed for adverts. A total of 10 groups existed at the time when we formed ZBIN. We decided to focus on business discussions and business exchange of ideas. This became our focus and identity. We do host a couple of limited adverts but this area is not our key strength, we have concentrated on what we do best-business discussions!

So you too can analyse your current business set up. Remember that you cannot do everything-rather concentrate on what you are good at, what provides you with a competitive advantage sustainably.