Marvelous Tapera 
THE Value Added Tax (VAT) laws provide for refund of excessive input tax i.e. input tax plus adjustments that exceed output tax, plus adjustments in any tax period as long as the claim is made within six years of the end of the relevant tax period.
The refund should exceed the prescribed amount of ZWL$7 800 and carried forward to the next period if less than this amount.
Besides normal VAT refunds, other refunds may arise from additional tax, penalty or interest paid in excess of that required by the law or when an operator has been refunded less than the amount properly refundable to him.
A refund cannot be granted if the Zimra commissioner is of the view that the refund will result in unjust enrichment to the registered operator.
This applies mainly to amounts erroneously collected from the operator’s customers, which may be difficult to be channelled back to such customers. VAT refunds may also arise upon cancellation of the VAT registration and this shall be refunded in full. A refund can be used to prepay taxes or offset against other taxes due to Zimra.
It may be set off against any amount of tax, interest or penalty levied under any Act of Parliament administered by the commissioner; namely against VAT due, income tax, PAYE, capital gains tax, customs duty, excise duty and other withholding taxes, etc. due by the registered operator. An operator must write a letter instructing the commissioner to effect the set-off.
The commissioner has the powers to withhold the refund on the pretext of an outstanding return for any tax period, until such a return has been furnished. The decision by the commissioner to deny a refund must be communicated to an operator through VAT 12, which must be delivered to the registered operator.
Under the current inflationary environment, one of the last things a business may need is unexpected delays in planned cash inflows. This is the case currently for some businesses owing to delayed tax refunds, particularly VAT refunds from Zimra. Processing of VAT refunds by the authority is taking long and there are concerns by the business community regarding Zimra’s delay of the verification process.
On the other hand, Zimra is wary of fraudulent claims and have sought to verify the genuineness of the claims, and would not authorise a refund until this verification, inspection or audit process is completed. This process, compounded by the effects of Covid-19, is unfortunately taking longer than expected.
Taxpayers who are aggrieved with this delay are permitted in terms of the VAT laws to charge interest where the commissioner does not within 30 days after the date on which the operator’s return for a tax period was submitted to Zimra to refund any amount refundable.
The return submitted however, must not be defective or incomplete. In addition, the operator must not have any other returns outstanding or tax due.
Interest can also be paid if the reason for delay is due to non-supply of information or banking details by the operator. Some of the delays can be shortened by the proactive action of the taxpayer, so as to shorten the verification process, among which would include:
Proof that expenditure was incurred in the production of taxable supplies. An operator has to provide solid evidence that an input tax credit relates to a purchase that was for furtherance of business.
It must therefore, eliminate input tax claims on purchases that can be considered to be used to provide entertainment, hospitality, membership in social clubs or other expenditures incurred on passenger vehicles.
Supporting the claims. VAT claims can only be made against a fiscal tax invoice, which must be held by the operator at the time of submitting the relevant VAT return.
These must be ready upon inspection by Zimra. Additionally, the operator may also consider submitting them to Zimra, particularly invoices with high valued together with the relevant VAT return.
Zimra will also not refund if it is satisfied that the correct output VAT has been accounted for. In this case, reconciliations of the VAT returns and financial accounting information for each period before one applies for refund is unavoidable.
When a return has a VAT refund, there is no point in delaying its submission to Zimra. The return must be quickly finalised and submitted well in advance of the due date. This gives Zimra ample time to undertake its verification process.
Understanding what Zimra wants in the verification process is very critical and can considerable reduce misunderstand and delays.
Last but not least, taxpayers with refunds should consider setting off their refunds against taxes due to Zimra and must consider making an application for such set-offs well in advance. However, only refunds that have been audited or verified can be refunded.
In conclusion cash management is central to business success. Prudent businesses would do well to not overlook the importance of improving internal controls and reviews before lodging refund claims.
On the other hand, Zimra should not be frivolous in its refund process. Delaying a genuine refund is about affecting future tax remittances. It is therefore wise for Zimra to apply KYCs and risk-based audits in its VAT refund process to avoid disadvantaging genuine and compliant taxpayers.
Meanwhile, Matrix Tax School invites you to take part in the upcoming course Accounting for Tax in Financial Statements from June 1 to 31, 2022.
Tapera is the founder of Tax Matrix (Pvt) Ltd and the CEO of Matrix Tax School. He writes in his personal capacity.
