Fiscal Updates 2019: with Bill Revisions 11 004

07 February 2020

Fiscal-Updates-2019-with-bill-revisions

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FINANCE ACT

Finance (No.1) Act, 2019 gazetted on 22 February 2019 incorporates the amendments made by the National Assembly on 20th December 2018 and the version passed by the Senate on 30th January 2019. The Act amends the Finance Act [Chapter 23:04], the Income Tax Act [Chapter 23:06], the Value Added Tax Act [Chapter 23:12], the Customs and Excise Act [Chapter 23 :02] and the Revenue Authority Act [Chapter 23:11].

The opportunity is also taken to amend other Acts having fiscal, financial or investment implications. These amendments will give effect to certain fiscal measures mentioned by the Minister of Finance and Economic Development in the National Budget Statement delivered on the 22nd November, 2018, and make modifications to improve revenue collection and administration.

MONETRARY POLICY AND EXCHANGE CONTROL

On 22 February 2019, the President also gazetted two Statutory Instruments (SI 32 and SI 33). These had the effect of introducing a local electronic currency being the “RTGS Dollar”. These were introduced under temporary powers and accordingly will require confirmation by Parliament before they expire. The Value of the RTGS dollar on inception was valued at 1:1 with existing RTGS balances other than nostro balances. Its subsequent value will be determined with reference to the Interbank Foreign Exchange Market established by of an Exchange Control Directive to Authorised Dealers RU28/2019. The regulations provided for accounting to be carried out in RTGS Dollars. All amounts reflected in any statute wish were reflected in United States Dollars are now reflected at RTGS Dollars.

The main tax effect of this is that Zimbabwe has introduced a form of domestic currency. The provisions in the existing tax statutes which prescribe that certain taxes shall be paid in foreign currency become relevant once again. The effective rates of tax can increase particularly for foreign currency earners (individuals and business) who would now be re-cording and taxing such income at a higher value than the previous 1:1 basis.

It is expected (and necessary) that ZIMRA will introduce guidance on application of these developments in practice.