Marvelous Tapera 
THE agriculture sector largely influences the economic, social and political lives of the majority of people in Zimbabwe. It is also the source of sustenance for most rural Zimbabweans.
At commercial level, the sector produces export crops such as tobacco, cotton and horticulture products which bring in foreign currency and improves the balance of payment. It is one of the biggest employer in Zimbabwe and also the key to the success of downstream industries, among them the manufacturing industry.
To resonate with this thinking, there are a number of fiscal incentives afforded to farmers by the tax statutes as more fully explained below.
Farmers just like any other businesses are entitled to write off their capital expenditure against their income over a period of 4 years. In addition, they also enjoy 100 percent deduction in the year in which they incur expenditure on soil erosion prevention (e.g growing of trees, contour rigs etc.), water conservation works (e.g dams, weirs embankments), clearing of land, sinking of boreholes and wells (other than borehole equipment), aerial and geophysical surveys and fencing. Such expenditure would ordinarily be treated as capital expenditure deductible against the income of the farmer over a number of years.
In other words, the farmer is allowed these deductions in one go in the year the expenditure is incurred, whether or not the work is completed.
However, it is a requirement that the construction or the work is done by the farmer himself/herself and where these are acquired together with the farm the expenditure is disqualified. In the event that these items are disposed of, the farmer would not suffer income tax on recoupment but capital gains tax remains payable if the item is an immovable property.
Companies in the agriculture sector are also entitled to import capital equipment duty free in terms of SI 6 of 2016. To qualify, the farmer should apply to the ministry of Agriculture for a recommendation letter that will be submitted to the ministry of Finance.
However, the capital equipment should not be sold or disposed of within five years from the date from which it entered under rebate, otherwise, both VAT and excise duty become due and payable. The duty rebate can save the farmer some money which he/she can then channel towards other farming projects.
Specific reliefs also apply to livestock and timber farmers. With regard to livestock farmers, they are entitled to enforced sale relief arising from forced sale of their livestock due to stress of epidemic disease, drought or impending farm acquisition. Any taxable income from such a sale, upon the farmer making an election, is taxable over three years in equal installments.
The election is however, irrevocable. If the same farmer wishes to re-stock the herd, he/she is entitled to a restocking allowance which is an amount equal to 50 percent of the purchase cost subject to the farming not exceeding the carrying capacity of the land upon restocking.
The allowance is in addition to the cost of purchase of the livestock which is also an allowable deduction. In addition, the farmer may also elect to equally spread income from other farming operations over three years, in the event that such income is less than enforced sale taxable income. The election is also irrevocable. Timber farmers can elect to carry forward the cost of planting the timber until the timber has reached maturity.
They can also claim an allowance of five percent of cost of planting annually until the timber has reached maturity. Such concessions save them from losing the benefit of assessed loss which currently has six-year lifespan. Orchards and vineyard farmers are also entitled to defer the deduction of operating expenses (general and statutory deductions plus planting and farm upkeep expenses) until a farm becomes productive. The operating expenditure is deductible when production commences equally over the estimated productive life of the orchard or vineyard. The farmer should submit to the commissioner, in the year the farm becomes productive, the estimated number of years the farm is to be productive.
Meanwhile, tobacco and cotton farmers are exempt from producing a tax clearance certificate for purposes of 10 percent withholding tax on contracts. This is a tax advantage to them over other taxpayers who may be required to produce their tax clearances in the absence of which, 10 percent withholding tax is deductible on their payments.
In recent years, the government enacted an anchor company incentive. This is a company that provides inputs, agronomic advice and marketing opportunities to a group of outgrower farmers and small or medium enterprises.
Outgrower farmer means a farmer who is a party to a scheme or contract where under an anchor company supplies inputs, agronomic advice and marketing opportunities in return for the farmer selling or delivering the contract or scheme produce to the anchor company or other person designated by the scheme or contract.
The incentive entitles the anchor company to a deduction of expenditure of technical and support services incurred in assisting outgrower farmers plus 50 percent of such expenditure. However, the incentive is currently awaiting proper regularisation from the taxman to be beneficial to the anchor companies.
Last but not least, farming inputs and equipment are subject to VAT at zero percent. These inputs include animal feed, animal remedy, fertiliser, plants, seeds and pesticides. The zero rating of inputs reduces cost of production for the farmer thereby boosting agriculture.
This article touched on some of the tax incentives which farmers can take advantage of and it is imperative for the farmer to be aware of these and many others, in order to conduct their farming business in the most cost effective manner.
● Tapera is the founder of Tax Matrix (Pvt) Ltd and the chief executive of Matrix Tax School. He writes in his personal capacity. Meanwhile, Matrix Tax School will be hosting its “Managing VAT Compliance-Practical Considerations” Webinar Seminar on March 17, 2021.
