Value Added Tax (VAT) is one of Zimbabwe’s most reliable and consistent sources of government revenue. Within the VAT system, one of the most critical concepts is the time of supply — the point at which VAT becomes due and payable. VAT is administered on a transactional basis therefore, knowing the correct time of supply is central to ensuring accurate reporting and effective cash-flow management.
A misunderstanding of the time of supply rules can result in disputes with ZIMRA, exposing businesses to VAT liability, civil penalties, and interest. A clear understanding of the timing rules is essential for compliance, planning, and safeguarding a company’s tax position.
Legislative Framework
Under the VAT Act, the general rule is that VAT becomes due at the earlier of—
- the date an invoice is issued; or
- the date any payment is received.
This ensures VAT is brought into the correct tax period once a taxable event occurs. Correctly identifying the time of supply allows businesses to:
- File VAT returns in the appropriate tax month;
- Meet VAT payment deadlines;
- Issue compliant fiscal invoices; and
- Reduce exposure to compliance risk.
Specific Scenarios
The VAT Act recognizes that business arrangements vary in complexity and therefore provides specific timing rules for certain transactions.
- Supplies of fixed property: For the sale of fixed property or any real right therein, the supply is deemed to occur on the earlier of the date of registration of transfer in the deeds registry or the date payment is made.
- Instalment credit or lay-by arrangements: Where goods are sold under instalment or lay-by terms, the supply is treated as having taken place at the earlier of delivery of the goods or any payment is made for such a supply.
Related Party Transactions
Transactions between related entities, such as companies within the same group, often do not involve direct cash payments or market-value pricing. The VAT Act provides that where goods or rights capable of assignment, cession, or surrender are deemed supplied, the time of supply arises at the time of the removal of the goods, the time when they are made available to the recipient and at the time the services are performed, even if no payment has been made.
Businesses should:
- Establish a fair market value for each related-party transaction;
- Properly document such dealings; and
- Ensure VAT is recognised in the correct accounting period.
Failure to do so may lead to reassessments, penalties, and reputational risks.
Imported Services
For imported services, the time of supply is deemed to occur earlier of the date payment is made to the foreign supplier or the date the invoice is issued. Businesses that procure management, consultancy, or technical services from abroad must self-assess VAT under the reverse charge mechanism. Correct timing prevents under-declaration or late payment.
Conclusion
Identifying the correct time of supply is fundamental to VAT compliance. Mistakes in timing can lead to understated VAT, late submissions, and penalties. For businesses engaged in complex or cross-border transactions, clarity around timing promotes:
- Accurate record-keeping
- Efficient reporting
- Full compliance with statutory obligations
How Baker Tilly Can Assist
Baker Tilly assists clients in:
- Determining the correct time of supply
- Managing cross-border transactions
- Analysing contracts to determine timing implications
Our tax specialists also provide guidance on:
- Structuring transactions for tax efficiency
- Understanding VAT implications of various deals
- Ensuring VAT is properly accounted for in each reporting period
Reference
- Value Added Tax Act [Chapter 23:12]
Tax Consultant at Baker Tilly
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