VAT Registration Guide for Farmers in Zimbabwe

Under the Value Added Tax Act [Chapter 23:12]

1. Statutory Context and Legal Definitions

In Zimbabwe, agricultural and farming activities are governed by the Value Added Tax (VAT) Act [Chapter 23:12]. Under Section 2(1) of the Act, farming is explicitly recognized under the definition of a “trade”:

“trade” means… any trade or activity which is carried on continuously or regularly by any person in Zimbabwe… including any trade or activity carried on in the form of a commercial, financial, industrial, mining, farming, fishing or professional concern…

Key Definitions for Farmers

• Farm Land: Land used for agricultural and pastoral activities, excluding communal land, urban council areas, town wards, and state land townships.
• Registered Operator: A person or entity carrying on a trade who is registered or required to register for VAT under Section 23 of the Act.
• Input Tax: VAT charged on goods and services acquired by the farmer for the purpose of making taxable supplies.
• Output Tax: VAT charged by the registered farmer on the supply of taxable goods and services.

2. VAT Registration Requirements and Thresholds

Section 23 of the VAT Act outlines the conditions under which a farmer must or may register with the Zimbabwe Revenue Authority (ZIMRA).

A. Compulsory Registration (Section 23(1))

A farmer is legally obligated to register for VAT if:

1. Trailing 12-Month Test: The total value of taxable supplies made in the preceding 12 months exceeds USD $25,000 (or its equivalent in local currency, ZiG).
2. Prospective Test: At the beginning of any month, there are reasonable grounds to believe that the total value of taxable supplies in the next 12 months will exceed USD $25,000.

B. Voluntary Registration (Section 23(3))

Farmers whose taxable turnover is below USD $25,000 may apply for voluntary registration provided:

• They are actively carrying on a farming trade.
• They maintain proper accounting records.
• They operate a valid business bank account and have a fixed place of business.

3. Classification of Agricultural Supplies

Understanding the classification of farm outputs and inputs is critical, as VAT obligations depend on whether supplies are Standard Rated, Zero-Rated, or Exempt.

                           AGRICULTURAL SUPPLIES
                                    │
       ┌────────────────────────────┼────────────────────────────┐
       ▼                            ▼                            ▼
 Standard-Rated (15.5%)        Zero-Rated (0%)               Exempt (0% VAT)
 ───┬──────────────────        ───┬───────────               ───┬───────────
    ├─ Processed produce          ├─ Direct exports (s. 10)     ├─ Basic/unprocessed
    ├─ Commercial services        ├─ Specified farm inputs         foodstuffs
    └─ Machinery sales            └─ Produce to RBZ             └─ Financial/Lease svcs

1. Standard-Rated Supplies (15.5%)

• Processed or value-added agricultural products (e.g., canned produce, refined oils, processed meat).
• Hiring out farm machinery, equipment, or transport services to third parties.
• Sale of capital assets or farm equipment.

2. Zero-Rated Supplies (0%) (Section 10)

• Exports: Agricultural produce exported outside Zimbabwe (under Section 10(1)(a)).
• Specified Agricultural Inputs: Selected fertilizers, seeds, pesticides, and animal feeds designated as zero-rated under statutory schedules to support production.
• Gold and Specified Metals: Gold supplied to the Reserve Bank of Zimbabwe or registered banks.

Benefit of Zero-Rating: The farmer charges 0% VAT on sales but remains eligible to claim 100% of input tax incurred on production costs.

3. Exempt Supplies (Section 11)

• Certain unprocessed basic foodstuffs (e.g., maize grain, unprocessed milk, raw agricultural produce as specified in VAT regulations/Statutory Instruments).
• Land leases for residential or specific agricultural pursuits (where exempt).

Impact of Exempt Supplies: VAT is not charged on sale, but the farmer cannot claim input tax on expenses directly attributable to making exempt supplies.

4. Input Tax Deduction & Financial Benefits (Section 15)

For commercial farmers, the primary financial advantage of VAT registration is the ability to claim Input Tax Refunds/Deductions under Section 15.

What Farmers Can Claim Input VAT On:

1. Capital Equipment: Tractors, irrigation pipes, harvesters, pumps, center pivots, and solar installations used for farming operations.
2. Operational Inputs: Standard-rated fertilizers, chemicals, diesel/fuel used in farming, fencing material, and electricity.
3. Professional & Operational Services: Veterinary services, soil testing, transport of taxable produce, and repair/maintenance of agricultural machinery.

Calculation Formula

The VAT portion included in standard-rated purchases is calculated using the tax fraction:

Tax Fraction = r / (100 + r)

(Where r is the prevailing standard VAT rate, e.g., 15.5%, giving a tax fraction of 15.5 / 115.5)

5. Compliance Obligations for Registered Farmers

Once registered, a farmer becomes an agent of the State for collecting and remitting VAT. Compliance obligations include:

1. Tax Period & Returns:
   • Submitting monthly VAT returns (Form VAT 7) via ZIMRA’s online portal (TaRMS) by the 25th day of the following month.
   • Paying net VAT (Output Tax minus allowable Input Tax) on or before the due date.
2. Fiscalisation & FDMS Compliance:
   • Farmers must acquire and connect approved Fiscal Devices or Virtual Fiscal Devices (VFDs) compatible with ZIMRA’s Fiscalisation Data Management System (FDMS).
   • Every taxable transaction must generate a valid Fiscal Tax Invoice containing verifiable QR codes/data transmitted to FDMS.
3. Record Keeping (Section 55):
   • Keeping books of accounts, tax invoices, credit notes, export documents (bills of entry, CD1 forms, proof of cross-border delivery), and bank statements for at least 6 years.

6. Summary: Pros & Cons of Registration for Farmers

7. Next Steps for Registration

1. Assess Turnover: Audit trailing 12-month sales or prospective contracts to confirm if the USD $25,000 threshold is met.
2. Prepare Documentation: Gather Certificate of Incorporation / Business Registration, CR6/CR14 (or PBC equivalent), Lease agreement/Title deed to farmland, Director IDs, and active Bank Account details.
3. Register on ZIMRA TaRMS: Apply for VAT registration online through ZIMRA’s Tax and Revenue Management System (TaRMS) portal.
4. Acquire Fiscal Device: Integrate an approved Fiscal Device or Virtual Fiscal Software for electronic invoicing.