PAYE GUIDE FOR EMPLOYERS.pdf

PAYE GUIDE FOR EMPLOYERS

ZIMBABWE

A GUIDE TO ZIMBABWE TAXATION

TOPIC ITEMS

1. WHAT IS PAYE 2. REMUNERATION

3. EMPLOYERS

4. EMPLOYEES

5. PAYE FRAMEWORK

6. OTHER PAYROLL TAXES

7. RETURNS & IMPORTANT DATES

8. PENALTIES FOR NOT COMPLYING


1. WHAT IS PAYE?

PAYE is tax levied on remuneration paid to an employee by an employer.

PAYE stands for Pay As You Earn, that is to say the tax is paid as and when an employee earns his or her income.

Under the PAYE system, all employers administer the collection of employee tax, but at the end of the tax year, the tax department

would assess the same PAYE to account for income tax variance.


2. REMUNERATION

o Remuneration refers to compensation in any form paid to person for services rendered in the capacity of an employee.

o Remuneration is constituted of the following: Salary, Leave pay, Allowance, Wages, Overtime pay, Bonus, Gratuity, Commission, Fees, Emolument, Pension, Retiring allowance, Stipend or commutation of a pension or an Annuity paid for services rendered.


3. EMPLOYERS

Any person who pays or is liable to pay to any employee any amount by way of remuneration in terms Section 73 of the Income Tax Act [Chapter 23:06] as read with the Thirteenth Schedule to the same Act.

An employer also includes the following representatives:

In the case of a company, the public officer in the case of an association of persons, a member of the associations appointed by its governing board

In the case of a local authority, an officer appointed by the local authority

In the case of a person under legal disability, the trustee

In the case of an employer who is not ordinarily resident in Zimbabwe, an agent of such employer


DUTIES OF EMPLOYERS

1. TO REGISTER WITH ZIMRA

Every person who becomes an employer shall apply to the Commissioner-General of the Zimbabwe Revenue Authority (ZIMRA) for registration as an employer within 14 days of his/her becoming an employer.

A non-resident employer shall appoint a resident representative to secure registration on his behalf and notify the Commissioner-General of ZIMRA of that appointment in writing.

Where a registered employer changes his/her address or ceases to be an employer, he or she is required to notify the Commissioner-General of ZIMRA of those changes within 14 days


DUTIES OF EMPLOYERS

2. EMPLOYERS TO WITHHOLD TAX & REMIT TO ZIMRA

Every employer, whether or not he/she has registered as an employer who becomes liable to pay remuneration to an employee, shall be required to withhold employees tax according to the tax tables which are available on the ZIMRA website.

The registered employer is required to remit employees tax withheld to ZIMRA by the 10th of the following month.


DUTIES OF EMPLOYERS

3. EMPLOYERS TO KEEP RECORDS AND FURNISH RETURNS

Every employer shall maintain a record for each employee showing:

personal details of the employee

the amounts of remuneration paid/payable to each employee

the amount of employees tax withheld and Form P2 available on ZIMRA website

Every employer is required to submit an ITF16 not later than 30 days

after the end of the year of assessment.

# It should be noted that all these records must be retained for a

period of at least six years


DUTIES OF EMPLOYERS

4. EMPLOYERS TO ISSUE EMPLOYEES TAX CERTIFICATES

(P6) FORMS

An employer is required to issue employees with employees tax certificates:

At any other time specified by the Commissioner-Commissioner of ZIMRA after verification of the ITF16

Within 30 days of an employee having left employment

Within 14 days of ceasing to be an employer


4. EMPLOYEES

Means an individual to whom remuneration is paid or payable at an annual rate that is more than the tax free threshold, i.e.

more than US$300 per month.

But excludes:

A non-executive director

An independent contractor or consultant


EMPLOYEES

DECEASED EMPLOYEES

Following the death of an employee, the employer is required to issue a form P6 within 30 days of the date of payment to the executor. The executor is required to submit a tax return to ZIMRA.

CASUAL OR TEMPORARY EMPLOYEES

Where casual labour is employed PAYE must be deducted in accordance with the PAYE tables.

It is impossible to average or forecast these for the year. However, PAYE has to be deducted per daily, weekly or monthly table, depending on the payment period.


EMPLOYEES

NEW EMPLOYEES Remuneration for new employees who start work during the year are subject to PAYE in the normal way using the PAYE tables.

The employee is required to submit a tax return at the end of the year ITF1 /(P6 form).

EMPLOYEES WHO CHANGE EMPLOYMENT When an employee leaves the service of the employer the latter is obliged to furnish the employee with a form P6 within 30 days of the employee leaving the employ.

The employee is required to submit a tax return at the end of the year


PAYE FRAMEWORK

CALCULATION OF PAYE

Gross income xxx

Less: exempt income (Sect 14 a.r.w 3rd Sch Income Tax Act) (xxx)

Income xxx

Less: Allowable deductions (Sect 15 of Income Tax Act) (xxx)

Taxable income xxx

Apply tax rates @ sliding scales

Gross tax (calculated using tax tables) xxx

Less: Credits (xxx)

xxx

Add: 3% Aids levy xxx

Less: PAYE withheld during the year (xxx)

Tax payable / (refundable) xxx


PAYE FRAMEWORK

GROSS INCOME

Gross income is constituted of remuneration as discussed above

and also includes benefits paid to an employee.

Benefit are amount paid in cash or kind to an employee by employer or amounts received by an employee as a result of his employment over and above his or her salary.

Benefits are generally valued in relation to the cost to the employer of providing such benefit to the employee. Examples of benefits include housing, motoring, school fees etc


GROSS INCOME

Salary advances

Advances against salary, bonus, commission etc. are

remuneration and PAYE must be deducted in the month in

which they are paid.

Salary arrears

Arrears of salary, wages etc. becomes taxable on the date

on which the decision to pay the arrears is made.


TAXATION OF BENEFITS

All benefits which accrue to an employee, with the exception of medical aid and medical expenses paid on

behalf of the employee by the Employer, are taxable.

Benefits are generally valued in relation to the cost to the employer of providing such benefit to the employee

except for housing benefits and furniture benefit which

are valued in relation to the value to an employee.



Motoring benefit Where an employee is given free use of a vehicle by his employer, the benefit it taxable the deemed benefit is in relation to the engine capacity.

Where the car is used for less than a year the benefit is apportioned on time basis.

Deemed costs to the employer per annum

Engine Capacity Deemed cost($)

Less than 1500 cc 3600

1500 -2000 cc 4800

2000 3000 cc 7200 3000 cc and above 9600



Housing benefit

Where an employer is provided with a house by his employer, the benefit is taxable. The benefit is valued accordance to market rentals for a house within a municipal area.

Where such house is outside municipal area the benefit is calculated as 7% of cost of construction or 12.5% of employees salary.

Furniture benefit

Where an employee is given a house that is fully furnished, a furniture benefit arises and is taxable.

The benefit is valued as 8% of the cost of furniture.



Loan Benefit

Low or interest free loans to employees exceeding $100

other than loans for educational or technical training or

medical expenses for the employee, spouse or children are

taxable.

Low interest loans means loans whose interest rate is less

than LIBOR plus 5%. LIBOR stands for London Interbank

Offered Rate. Libor rates are found on ZIMRA website.



Disposal or Sale of Motor Vehicle to an Employee at Less Than Market Value

The disposal or sale of a motor vehicle to an employee at

less than market value during or on termination of

employment gives rise to a benefit, subject to PAYE.

Taxable amount is (Market Value Selling Price)

No benefit arise where the employee was 55 years or older

at the beginning of the year of assessment.



Retrenchment Benefits

A Severance Pay or Retrenchment Package is a payment

made to the Employee by the Employer on the agreed

premature termination of a contract of employment,

normally as a result of restructuring or workforce

streamlining due to operational hardships or reorganisation.

One third of the package is exempt subject to a minimum

exemption of $10 000 & maximum exemption of $20 000



Retrenchment Benefits

Retrenchment package excludes Pension or Cash In Lieu of Leave.

The retrenchment scheme must be approved by the

Minister of Labour for it to qualify for an exemption.

A tax deduction directive must be applied for by the

Employer to Zimra.



Application of a Tax Deduction Directive

On termination of employment an employer determines the respective retrenchment package and applies to ZIMRA for a tax deduction directive in form NP4.




The following information, in respect of the employee receiving the retrenchment package, should be carefully and accurately filled by the employer onto the application form:

First name and surname National identity number (which acts as the taxpayer identification number, TIN)

Tax year (the period in which the retrenchment accrued or is paid) Nature of benefit Amount of benefit (based on the open market value of the benefit or property offered as retrenchment)

Salary and allowance per annum




The application form should be signed by both the employer or his representative and the employee. Where the employee is unable to sign the application form, the employer should indicate this to ZIMRA and may sign on behalf of the employee. The completed application form should then be submitted to ZIMRA for processing.

On receipt of the application from the employer, ZIMRA will check the correctness and accuracy of the information on the form and its accompanying attachments before issuing the directive



Other benefits

The provision of domestic workers including gardeners.

The provision of security services

The provision of clothing with the exception of protective clothing

Fuel Coupons- Taxable in the hands of employees if given to employees who are not enjoying a taxable motoring benefit.

School fees benefit- where the employer pays school fees for the employees children, the cost of the fees payable becomes taxable in the hands of the employee.


EXEMPTIONS

Bonus or any performance related award, in respect of the first US $1000.

Retrenchment package, in respect of a third of such package to a minimum of US$10 000 and a maximum of

US $20 000. (i.e. the ceiling of retrenchment package is

US $60 000)

The value of medical treatment or of travelling to obtain such treatment which is provided by an employer for an

employee or the dependant of an employee, whether

provided in kind, by direct payment, by refund or in any

other manner whatsoever.


EXEMPTIONS

An amount accruing by way of a benefit in respect of the injury, sickness or death of a person which is paid to the person or his dependants or deceased estate; or from a benefit fund; or in terms of a policy of insurance covering accident, sickness or death; or by a medical aid society.

The amount of any contributions paid to a medical aid society by an employer on behalf of his employee.

A pension received by an elderly person from the Consolidated Revenue Fund or any approved pension fund.

The benefit of a motor vehicle sold to an elderly employee by his or her employer.

#Note A person is considered elderly if he or she have turned 55 years prior to 1 January of the tax year concerned.


EXEMPTIONS

Any amount received by way of an entertainment allowance to the extent that it is expended on the

business of the employer.

A scholarship paid to a student, as long as it is not payment for services rendered.

Compensation for injury at work paid by an employer


ALLOWABLE DEDUCTIONS

These are expenses suffered by an employee which the Commissioner would allow to reduce a taxpayers taxable income.

To be allowed as deductions are membership subscriptions to trade, business or professional associations and pension contributions.



Subscriptions

Subscriptions to trade, business and professional associations are allowed.

Examples are subscriptions to CIS, ACCA etc.

Subscriptions by students are however not allowed.



Pensions contributions

Contribution to a Pension Fund max $5400

Contribution to a Retirement Annuity Fund- max $2700

Private sector- Contribution to NSSA is 3.5% of gross salary to maximum of $700 per month. Maximum contribution is $24.5 per

month.

Arrears pension contribution maximum allowable contribution is 8% of the persons annual salary or $1800, whichever is greater.

The aggregate maximum for all pension contribution is $5400 p.a.


CREDITS

Any individual earning income from employment, trade or investments which is taxable can claim tax credits which may reduce their chargeable tax.

Credits are designed for specific categories of taxpayer to address special social welfare needs such as expenses towards improvement or maintenance of health and/or the control of permanent physical, mental and visual disability.

Categories of credits are as follows: Blind person Elderly person Disability credit Medical expenses Contribution to a Medical Aid


CREDITS

Blind persons credit The credit for this category is US$900.00 per annum spread over 12 months. To qualify, the person claiming the credit must have medical proof supplied by a specialist medical practitioner, specifying the degree of his blindness. The taxpayer or his/her employer should then apply for a directive at the nearest ZIMRA office for consideration. Any portion of the deductible credit which is not applied to reduce the chargeable tax for a married person can also be allowed as a deduction from the chargeable tax which his or her spouse is chargeable. This means that spouses can benefit from each others concessions. In that case, both spouses should complete and submit separate returns for the relevant tax year so that the transfer of the credit can be facilitated, each person claiming the portion not claimed by the other.


CREDITS

Elderly Person`s Credit

The credit for this category is US$900.00 per annum

spread over 12 months

To qualify, the person claiming the credit must be aged 55

years or above prior to the commencement of the period of

assessment. Where the assessment period is less than 12

months, the amount (credit) shall be reduced

proportionately.

The tax return should be accompanied by proof of the

taxpayers age in the form of a birth certificate or national identification card showing the date of birth.


CREDITS

Mentally or Physically Disabled Persons Credit The credit for this category is US$900.00 per annum spread over 12 months

To qualify, the person claiming the credit must have medical proof supplied by a specialist medical practitioner, of permanent substantial disability (which excludes blindness, for which a separate credit is available). Temporary disability such as is caused by injury due to an accident or illness for which rehabilitation or cure can reverse the condition does not qualify as disability for purposes of the credit.

Mentally disabled persons who cannot personally attend to the requirements stated above can be assisted by a representative and in the case of applications by their employer.

Any portion of the deductible credit which is not applied to reduce the chargeable tax for a married person can also be allowed as a deduction from the chargeable tax which his or her spouse is chargeable. This means that spouses can benefit from each others concessions.

In that case, both spouses should complete and submit separate returns for the relevant tax year so that the transfer of the credit can be facilitated, each person claiming the portion not claimed by the other.

To claim the disability credit, the taxpayer must have been ordinarily resident in Zimbabwe in the period of assessment


CREDITS

Medical expenses The credit for this category is a total of 50% for medical expenses'' paid for. These should be expenses incurred by the taxpayer and paid by him for services rendered to

him/her, his/her spouse and minor children, including legally adopted minor children and cannot be extended to anyone else. A credit will not be allowed to the extent that the taxpayer is entitled to a refund or payment from any source whatsoever in connection with the expense (for example a credit is not allowed where a refund is awarded by a medical aid society).

These medical expenses include expenses paid for the following: Services rendered by a medical or dental practitioner Drugs and medicines supplied on the prescription of a medical or dental practitioner Accommodation on admission, maintenance, nursing and treatment, including blood transfusions,

X-ray and laboratory examinations and medical tests in a hospital, maternity-home, nursing-home, sanatorium, surgery, clinic or similar institution

Transportation by ambulance, including an air ambulance Medical aid contributions to a medical aid society in respect of the taxpayer or his/her spouse or

any minor children.

Expenses incurred in purchasing an invalid appliance.

In submitting a tax return, the taxpayer should attach evidence of the expenses claimed in their original forms.

To claim the medical expenses credit, the taxpayer must have been ordinarily resident in Zimbabwe in the period of assessment.


CREDITS

Credit for the Cost of Purchasing Invalid Appliances The credit for this category is 50% of the total cost of the appliance used by the taxpayer, his/her spouse or any of his/her children including legally adopted children in respect of any of the following appliances: a wheelchair , any artificial limb, leg callipers or crutch ; or any special fitting for the modification or adaptation of a motor vehicle,

bed, bathroom or toilet to enable its use by a person suffering from a physical defect or disability; or spectacles or contact lenses

The taxpayer should complete a return and attach evidence of such purchase and proof of the cost thereof. #Please note that this credit is open to residents of Zimbabwe only.


OTHER PAYROLL TAXES

Zimdef

Standard Development Levy

Manpower development Levy

National Employment Council (NEC)


ZIMDEF

ZIMDEF contributions are employer contributions only, based on cost to the employer of the

employment of staff. The payment is based on 1%

of the total wage bill inclusive of allowances,

bonuses, benefits, employer contribution on behalf

of employees to NSSA, Medical Aid, NEC and

Pension.

Zimdef contributions are governed by the Manpower Planning and Development Act Chapter (28:02).


ZIMDEF

NEC ZIMDEF contributions are raised primarily to sponsor the training of artisans through the apprenticeship and other schemes.

ZIMDEF contributions are payable by the 15th day of the subsequent month. Late payments will incur penalty interest.


STANDARDS DEVELOPMENT LEVY

Standards Development Levy contributions are calculated in the same way as ZIMDEF except that the

value of company contributions of pension, NEC,

medical aid on behalf of employees is excluded.

It is levied at a rate of 0.5% of gross wage bill.

The authority for charging this levy on employers stems from the STANDARDS DEVELOPMENT FUND ACT,

Chapter 14:19

Section 8 of that statute provides that the objects for which the Fund is established shall be the development

and promotion of standardization and quality control of

commodities and services.


NATIONAL EMPLOYMENT COUNCIL

(NEC)

This deduction is levied on employees whose employer is a member of a regulating board in the industry of the employer.


RETURNS

P2 Form- return for the remittance of PAYE (due by the 10th day of the month following the month of deduction)

ITF 16 form- return for employee payroll details (due within 30 days after the end of the year of assessment)

P6 form(Tax certificate)


P6 FORMS

Every employer shall furnish an employee wit a tax certificate at the end of every year for assessment, unless the employer is on Final Deduction System (FDS).

The employer is required to issue Forms P6 as follows:-

within 30 days from the end of the relevant year for all employees in service or

within 30 days of terminating employment services for those employees who have left service in the respective tax year or

at any other time specified by the Commissioner.


P6 FORMS

Employers who are on FDS should furnish tax certificates only to the following categories of employees. Terminated employment during the year of assessment.

Changed employment during the year.

Worked part-time at the same time being fully employed by another employer.

Started employment during the course of the year.

Received pension.

Received income which is not subject to PAYE.

Are executors of deceased estates


P6 FORMS

The Form P6 shall contain the following information; Name and Address of Employer

Business Partner Number

Tax Year

Serial Number

Details of the Employee

Total Remuneration Earned

Deductions and Credits

Amounts of Employees Tax Withheld

A form P6 is used to verify whether PAYE was correctly calculated taking into account all earnings, benefits,

allowances and credits due to the employer.


ITF 16

ITF 16 is a return for payroll details. Every employer should remit the return within 30 days after the end of

the year of assessment.

The following forms part of the additional information required:

Schedule of monthly PAYE remittances.

Schedule for motor vehicles used for private business

Schedule of loans disbursed to employees, and respective interest rates charged, if any.

Receipts for medical expenses, if any, taken into account in granting medical credits


P2 FORM

Is a return for the remittance of PAYE. It is a form that accompanies the actual payment to ZIMRA. PAYE is due

on or before the 10th day of the month following the

month of collection. An employer is expected to complete

a P2 form, attach deposit slips and submit the returns to

ZIMRA.

Note that, even if you deposit the amount of PAYE in ZIMRA account before the due date, but fails to remit the

P2 form in time, you may be penalised.


PENALTIES

Late payment of PAYE attract a penalty of 100% of tax liability. The employer is liable for both the tax liability & penalty.

Interest is charged at a rate of 10% from the due date to the date immediately before the date of payment.

Late remittance of returns attracts a civil penalty of $30 for each day the return remains outstanding.


TAX TABLES

2015 Annual tax tables


INCOME BAND $ TAXABLE INCOME $

TAX RATE %

0 3 600 3 600 0

3 600- 18 000 14 400 20

18 001 36 000 18 000 25

36 001 60 000 24 000 30

60 001 120 000 60 000 35

120 001 180 000 60 000 40

180 001 - 240 000 60 000 45

240 000 - Above - 50

TAX TABLES

Monthly, fortnightly and weekly tax tables can be obtained at ZIMRA website.


REFERENCES

Income Tax Act, Chapter 23:06

Finance Act, Chapter 23:04

www.zimra.co.zw


TILL NEXT TIME

P NYATANGA (Author: A Guide to Zimbabwe Taxation)

Email: [email protected]

Facebook: http://www.facebook.com/aguidetozimbabwetaxation

Cell +263 77 3625 247


Documents

PAYE GUIDE FOR EMPLOYERS.pdf