Newsletter No. 3 of 2015
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The document analyzes section 35(2) of the Revenue Authority Act, which outlines penalties for late submission of tax returns. Key points include: - Taxpayers who fail to submit returns by the due date are liable for a civil penalty of $30 per day, up to 181 days. They are also guilty of an offense liable to fines or imprisonment. - The penalties are intended to encourage on-time filing. Examples show how the penalties are calculated based on the number of late days. - An appendix provides a comprehensive calendar of registration dates, payment due dates, filing deadlines and penalties for various common tax forms like income tax, VAT and capital gains tax. It is meant to help taxpayers navigate
Newsletter No. 3 of 2015
- 1. No. 3 of 2015 Useful old news explained - Taxpayers’ obligations, penalties and interest. 1. A preview of section 35(2) of the Revenue Authority Act In this issue of our newsletter, we analyse and expand section 35(2) of the Revenue Authority Act (Civil penalty for late submission of returns) regulations. The regulation came into effect through Statutory Instrument 97 of 2013. In terms of the regulation any person who fails to submit a return on the fixed date or within any extension of that date as granted by the Commissioner-General in terms of the Income Tax Act (Chapter 23:06), Value Added Tax Act (Chapter 23:12) and the Capital Gains Tax Act (Chapter 23:01) shall be: Liable for a civil penalty of not more than $30 for each day a person remains in default, not exceeding a period of 181 days. Guilty of an offence and liable, on conviction, to a fine not exceeding level fourteen or to imprisonment for a period not exceeding 5 years or to both such fine and such imprisonment. The civil penalty of $30 for each day a return is not submitted, up to 181 days shall constitute a debt due to the Authority by the person against whom it is levied, and shall at any time after it becomes due, be recoverable in a court of competent jurisdiction by proceedings instituted in the name of the Authority. For the avoidance of doubt, it is declared that payment by any person of any penalty shall not relieve such person of any criminal liability incurred through his or her failure to make a return in terms of the Income Tax Act (Chapter 23:06), Value Added Tax Act (Chapter 23:12) and the Capital Gains Tax Act (Chapter 23:01), nor shall the fact of any criminal liability having been imposed upon him or her relieve him or her from any obligation to pay any penalty. Statutory instrument 97 of 2013 provides us with the following information in tabular form: Civil Penalty loading model for late submissions of returns Days delayed Remission granted Penalty Chargeable 0-10 days 100% 0 (Written warning) 11-20 days 75% 25% 21-30 days 50% 50% 31-60 days 25% 75% 61-181 days 0% 100%
- 2. List of returns required Item No. Form List of return 1 ITF1 Return on income: Individual from Employment 2 ITF1A Return on income: Individual from Trade 3 ITF12 Return on Income: Company 4 ITF12C Self assessment: Individual and Company 5 ITF16 Reconciliation of payroll details (Pay As You Earn) 6 Rev5 Return for remittance of withholding taxes and presumptive taxes 7 CGT1 Return for Capital Gains Taxes 8 VAT7 Return for remittance of Value Added Taxes 2. Tax Matrix Practical Solutions Our analysis of S.I 97, from a practical point of view requires taxpayers to navigate a number of Acts before they can know the date(s) for submission of the applicable return(s). As Tax Matrix, we are duty bound to provide you with practical solutions and in Appendix 1, we provide you with a comprehensive calendar showing dates of submission of various returns, payment of taxes due, registrations and such other relevant information. Civil penalty loading model for late submission of returns explained The information in the table in layman’s terms means that if your return is delayed for less than 10 days no penalty will be charged though the taxpayer will receive a written warning. If your penalty is delayed by 13 days a portion of the $30 is charged as a penalty for each day a return remains outstanding or is not submitted. The penalty on the 13 days is cumulative from the first day of delay, notwithstanding the fact that if a taxpayer had delayed by not more than 10 days he or she would only have gotten a written warning. See examples below. Examples: 1. Submission of return 6 days after the fixed date of submission. Penalty due to Authority = $0.00 but a written warning is issued. 2. Submission of return 13 days after fixed date of submission. Penalty due to Authority = $30 x 25% x 13 days = $97.50 3. Submission of return after 181 days = $30 x 100% x 181 days = $5430
- 3. Appendix 1 - Comprehensive Calendar Form Tax Head Type of income levied Relevant Act Registration Tax Payment Date Penalty levied on non-payment Filing of returns Penalty levied on failure to file returns P2 P.A.Y.E Chargeable on employment income Income Tax Act Within 14 days of becoming an employer Within 10 days of the end of every month 100% penalty on tax due and 10% interest per annum on tax due P2 not a return but a remittance advice. Does not attract penalties ITF16 P.A.Y.E Chargeable on employment income1 Income Tax Act Within 14 days of becoming an employer Not applicable Not applicable Within 30 days after the end of the tax year Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted. ITF1 Employees tax for non-FDS2 employees Chargeable on employment income Income Tax Act Employer to register within 14 days of becoming employer Not Applicable Not applicable Within 30 days of date of the Commissioner General’s public notice Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted. ITF1A Individual Tax Chargeable on trade and investment income Income Tax Act As soon as a taxpayer has earned trade and investment income 3 Not applicable Not applicable Within 30 days of date of the Commissioner General’s public notice Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted. ITF12 Corporate Tax Chargeable on trade and investment income Income Tax Act Within 30 days of incorporation or registration under any other law Not applicable Not applicable Within 30 days of date of the Commissioner General’s public notice Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted. ITF12B Provisional tax Chargeable on trade and investment income Income Tax Act See details on ITF1A and ITF12 above 25 March 25 June 25 September 20 December 10% interest per annum on understated QPD or a QPD paid late4 Not a return a remittance advice Does not attract penalties ITF12C Self-assessment5 Chargeable on income from trade and investment Income Tax Act Within 30 days of incorporation or registration under any other law 3 Not applicable Not applicable 30 April of the year following the tax year s37A(1) Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted.
- 4. CGT1 Capital Gains Tax Chargeable on gains from sale of chargeable assets Capital Gains Tax Act See note no. 6 Within 30 days of transfer of ownership of title. s26 CGT Act 15% of tax due plus interest at 10% per annum on tax due See ITF1A and ITF12 above7 Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted. VAT7 Value Added Tax Chargeable on consumption of goods and services Value Added Tax Act When turnover of taxable supplies exceeds or is likely to exceed US$60 000 in any period of 12 months 25th of the month following the end of the tax period 100% penalty on tax due plus 10% interest per annum on tax due 25th of the month following the end of the tax period Up to a maximum of $30 per day, up to 181 days for each day a return is not submitted.
- 5. Notes to Comprehensive Calendar (Appendix 1) 1. Total of earnings recorded on ITF16 should agree with total staff cost or earnings reported in the Financial Statement, otherwise, any difference might be deemed to be an understatement of PAYE or over deduction of staff cost in the Financial Statement. 2. FDS means Final Deduction System and is in accordance with the Commissioner General’s directive (see paragraph 20A of the 13th Schedule of the Income Tax Act) 3. Section 42 of the Income Tax Act (Chapter 23:06) requires a company to submit its memorandum and articles of association within 30 days of its incorporation or registration under any law. With regards to unincorporated persons e.g. sole traders, partners, non-executive directors etc, the Act is silent on registration date. In our view, unincorporated persons should register as soon as they receive income which is subject to provisional tax. 4. Section 72(11) of the Income Tax Act (Chapter 23:06) refers that when the QPD is understated by not more than 10% or through an increase in rates of tax or for any other sufficient cause, the Commissioner has the power to waive the whole or part of the interest on the understated QPD. 5. This includes taxpayers that are registered under category C for VAT (Valued Added Tax), taxpayers registered under the Banking Act or under the Insurance Act or such other taxpayers specified in a notice published by the Commissioner General to be on self-assessment. 6. Registration is done concurrently with registration for the purpose of Income Tax (See registration for ITF1A and ITF12). 7. A return should only be filed when there is a sale or disposal of the specified asset in the year of assessment. NB: Certificates for dormant companies, withholding taxes and presumptive taxes obligations, penalties and interest will be discussed in detail in the next issue of our newsletter. Thus, they have not been included in Appendix 1 of this issue. For further information regarding this tax update, kindly contact Marvellous Tapera on + 263 772 349 740 or mtapera@taxmatrix.co.zw/ Nonhlanhla Nyathi on +263 773 852 622 or nnyathi@taxmatrix.co.zw