By Nyasha Nigel Machiri, Baker Tilly Chartered Accountants, Zimbabwe
The government of Zimbabwe on 31 January 2020 backdated a tax holiday for Huawei Technologies Co., Ltd, a leading global provider of information and communications technology infrastructure and smart devices.
The tax holiday, enacted through Statutory Instrument 24 and 25 of 2020, follows value-added tax (VAT) and income tax concessions offered to the technology company in 2019.
VAT charged to and paid by Huawei Technologies or its agents or contractors in respect of goods and services purchased or supplied pursuant to the terms of a Framework Agreement between the government of Zimbabwe and the Export-Import Bank of China is refundable.
However, the goods or services must be purchased using funds provided by the Export-Import Bank of China solely towards the implementation of infrastructure modernisation projects of two local companies, NetOne Cellular (Private) Limited and TelOne (Private) Limited.
In the same way, the receipts and accruals of Huawei Technologies Co., Ltd. are exempt from income tax.
The receipts and accruals must also be from the implementation of the above-mentioned projects by the identified companies. This exemption also extends to non-resident tax on fees and capital gains tax.
Previously, the tax concessions were backdated to 25 August 2014. The tax holiday has further been backdated to 30 December 2009.
However, it is not clear whether Huawei Technologies will get VAT refunds from as far back as 2009 or not.
The Zimbabwean VAT legislation stipulates that no refund shall be granted unless an application is received by the tax authority within a period of three years from the date when such tax was paid (Section 45A (4) of the VAT refers).
Given the fact that tax minimisation is a desirable goal for every entity, this presents a big win for Huawei Technologies Co., Ltd.
Informative. Are we offering the same tax incentives to other investors? I would think this can work as an incentive to woo even local investors into critical sectors such as renewable energy.