Marvelous Tapera 
The Value Added Tax system is premised on documentation such as tax invoices, credit and debit notes.
There are, however, instances wherein some VAT transactions can be accounted for without the need for such documentation because there are no third parties involved in the transactions.
These include where there is a decrease or increase in use of capital goods or change in use of supplies or capital goods necessitating VAT adjustments. These are often overlooked by registered operators when completing VAT returns.
A VAT adjustment is required whenever an operator acquires any goods or services for his business and claims input tax, but subsequently uses such goods or services for own use private or whenever there is diversion of use.
The first category of VAT adjustments is whenever there is a change in use of goods or services, for example goods that were acquired with the intention of producing taxable supplies are taken by the owners of the business for personal consumption.
A change in use adjustment can also arise whenever goods that were acquired with the intention of producing taxable supplies are subsequently used to produce exempt supplies.
In both cases, the registered operator mush account for VAT output in its return.
This has the effect of reversing input tax previously claimed on those goods or services.
The second category of VAT adjustments is in respect of decrease or increase in use of capital goods
As a general rule, acquisitions or importation of capital goods for use in the production of taxable supplies qualifies for input tax credit subject to meeting certain conditions such as: VAT should have been incurred, an operator should be have a valid tax invoice, the claim should be made within 12 months of date on invoice etc.
If the capital goods are used to produce exempt supplies input tax claim is denied. The withdrawal or decrease in use of capital goods in the production of taxable supplies may necessitate clawing back of input tax previously claimed by the operator.
The reversal of such input tax should be entered on the VAT return. The reverse can also occur, that is there is an increase in use of capital goods in the production of taxable supplies the registered operator will qualify for additional claim whenever such event occurs.
The legislation however, has de minimis rules and for this reason no VAT adjustment is required for increase or decrease in use of capital goods not exceeding 10 percent.
Additionally, an adjustment will not be required where the cost of the capital goods has an insignificant value. VAT adjustment for change in use of goods or services is required whenever such event occurs or in the tax period in which such change occurs.
Whereas decrease or increase in use of capital goods is a year-end adjustment, such an adjustment is affected by comparing the extent of use of capital goods in the previous year and that of the current year based on the last day of each year of assessment.
Notwithstanding all that has been said above, no VAT adjustment is required whenever the change in use of goods or services or decrease or increase in use of capital goods is triggered by the government policy.
This provision was enacted in 2018 and has since back dated to January 1, 2017.
An adjustment is not required where change in use occurs as a result of one ceasing to be a registered operator.
The law deems a supply to have been made in respect of fixed assets and stock held by the taxpayer on date of the taxpayer ceasing to be a registered operator.
Another situation which does not require an adjustment is the transfer by an operator of his goods or services to an independent branch or main business of the registered operator located outside Zimbabwe
In conclusion, VAT adjustment lacks paper trail and often omitted whenever one is completing the VAT return.
Such adjustments are recognised in terms of our law and if not properly accounted for can either disadvantage a taxpayer through forgoing tax savings or create a tax risk in the form of penalties and interests.
● Tapera is the founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity. Matrix Tax School (Pvt) Limited hosts a webinar short course in Managing Tax Practice (Basic Theory & Practice) every Wednesday and Saturday.
