Introduction
Businesses and individual tax payers may be liable to pay certain taxes to ZIMRA. Common taxes include Pay As You Earn (PAYE), Value Added Tax (VAT), Capital Gains Tax (CGT), Income Tax, Withholding Tax (WHT), presumptive taxes, excise duty, etc. In this article I give some hints on how to deal with a situation where ZIMRA has raised an assessment and communicated with a tax payer that a certain tax amount is outstanding. Situations normally arise where ZIMRA suspects a taxpayer to have underpaid taxes. The tax authority investigates and raises an assessment of debt against a tax payer and normally demands payment. Below are some of the steps to take or considerations to have in mind when dealing with such situations.
Read and understand the letter from ZIMRA
Tax payers are advised to carefully read the letter from the tax authority. ZIMRA normally communicates the amount it assesses as due, the nature of the tax or tax head, transactions giving rise to the tax liability, period covered, applicable tax laws and other details.
For effective communication it is normal for ZIMRA to include detailed computations of the tax liability. The assessment is usually in sufficient detail to enable the tax payer to understand the source and quantification of the liability.
Understand what ZIMRA wants
A ZIMRA letter may come in the form of a requirement that you arrange to pay the total tax outstanding and submit proof of payment by a certain date. At the bottom of an assessment, it is usual to find a statement written “Any objection to this notice of assessment should be lodged in writing to the Commission within 30 days of this notice”.
Understand the tax obligation
As alluded to above the letter by ZIMRA is normally accompanied by a detailed assessment in sufficient detail. The tax obligation is normally made up of the principal tax obligation and a penalty. Sections of relevant Acts giving rise to the tax assessment are usually quoted by the tax authority. Unless one is familiar with tax laws or the particular situation the tax payer may not have internal capacity to deal with the tax matter.
Do not ignore the communication from ZIMRA
It is common for some tax payers to ignore letters from ZIMRA the same way some people ignore summons or court applications served on them. It is dangerous practice and amounts to waiving the right to defend yourself. Face the situation. Find a solution. Its either you agree with the tax authority or not. You may agree or disagree in full or in part.
Use tax consultant or tax lawyer
Where there is no internal capacity to deal with the tax matter engage professional tax consultants or tax lawyers as they know how to deal with ZIMRA. They normally have the experience or may have handled similar situations before. It takes away the pressure and emotions from the tax payer or Public Officer.
This task requires someone with good understanding of tax laws, tax administration as well as an appreciation of figures. Someone will need to go through both the law and the detailed workings. Where a tax consultant or lawyer is appointed ZIMRA may want the letter of appointment signed by the Public Officer. Engaging a tax advisor may also help you continue with your daily routines for the business while an expert is competently dealing with ZIMRA.
Engage ZIMRA
Admittedly there has been significant shift in approach at ZIMRA over the years with tax payers now being treated more like business partners. Of course, there is still room for improvement like in any situation but the positive improvement is acknowledged. It is in the best interest of the tax payer to engage ZIMRA directly or through the tax advisor. It is ill advised to be hostile towards ZIMRA. I have been to many different ZIMRA offices in the last few months and I have been impressed by some of the positive engagements. Even where we have differed that has been with dignity and mutual respect.
Request an extension
In some situations, before making a final assessment ZIMRA may require the tax payer to submit certain information. This may happen in the case of for example VAT refunds or where ZIMRA simply suspects taxes have not been paid. Where it is not possible to submit the required information within the timeframe specified by ZIMRA request an extension in writing. These days you can scan a letter and email it to ZIMRA and the response is normally swift. Even where you do not agree with an assessment already made and wish to make written submissions advise ZIMRA in writing.
Objection
As already explained above ZIMRA normally affords the tax payer the right to make written objections within 30 days. If a tax payer wishes to exercise this right make sure it is done within the time frame. Many tax payers miss this opportunity as it is written right at the bottom of the assessment.
Written submissions
Where a tax payer does not agree with the ZIMRA assessment it is common to submit written submissions clearly articulating why ZIMRA’s assessment is not correct. It may very well happen that ZIMRA based its assessment on incorrect or incomplete facts, incorrect interpretation of tax laws, used incorrect financial figures or estimates, etc. The written submissions have to be prepared by someone who is quite knowledgeable and articulate either to convince ZIMRA to discharge the taxpayer from the tax obligation, or a portion thereof, or to reduce penalties, depending with the situation.
Request a meeting with ZIMRA
It may be advisable to request a meeting with ZIMRA to understand their assessment more or any information the tax authority may need from the tax payer to make reductions. It is also advisable to include a meeting request in the written submissions so that the tax payer can explain its written submissions to ZIMRA. I have found this to be very useful.
Payment arrangement
Where tax is due a tax payer is encouraged to engage ZIMRA and negotiate a payment that allows settlement of the debt but also the business to continue. I have helped clients secure win-win payment plans with ZIMRA.
Conclusion
Encounters with ZIMRA are common in business as ZIMRA has the mandate to collect taxes. However, a tax payer should able to deal with emergency situations of outstanding taxes.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
