2 per cent tax extended to forex transactions. Earlier this year, Government legalised the use of the United States to transact alongside the local currency in a move aimed to unburden the public in doing transactions following the emergence of Covid-19. Treasury has extended the Intermediated Money Transfer Tax, more commonly known as the 2 percent tax, to foreign currency transactions.
Announcing new revenue measures in the Mid-Term Budget Review yesterday, Finance and Economic Development Professor Minister Mthuli Ncube said the move to add hard currency transactions on IMMT was due to the preferred use of hard currency by most businesses, which was compromising the tax head.
“Current legislation exempts the transfer of money into and from Nostro foreign currency accounts from intermediated money transfer tax.
“Following the legalised use of foreign currency in domestic trade, there has been an upsurge in electronic transfers of foreign currency for transaction purposes. “The current exemption has, thus, created an unfair advantage for taxpayers transacting in foreign currency, thereby raising equity considerations,” said the Finance Minister.
“Furthermore, the preference for foreign currency by most business has undermined the revenue-generating capacity for IMTT. “I, therefore, propose to extend Intermediated Money Transfer Tax to cover foreign currency transactions, with effect from 1 August 2020.
“For the avoidance of doubt, transactions for organisations accredited in terms of the Privileges and Immunities Act (Chapter 3:03) remain exempt from IMTT.” The Intermediated Money Transfer Tax came into effect on October 13, 2018, after it was gazetted in Statutory Instrument 205 of 2018.
Last November, the Government increased the minimum taxable amounts for IMTT to $100 from $20 per transaction for individuals as it sought to ease the burden on low-income earners.
Funds collected from the tax have been used to fund emergency programmes as well as other critical social programmes. Prof Ncube said the tax had managed to force other sectors, which generally escaped paying tax, from making a contribution to the fiscus.
“In order to cushion low-income earners and high volume businesses, I propose to review the tax-free threshold from the current $20 to $100 and the maximum tax payable per transaction by corporates from the current $15 000 to $25 000 on transactions with values exceeding $1 250 000, with effect from 1 January 2020,” he said at the time.
Currently, funds generated from the tax head have been going towards mitigating the effects of the Covid-19 pandemic. “Resources from the 2 per cent Intermediated Money Transfer Tax (IMTT) were also ring-fenced and channelled towards Covid-19 related mitigatory expenditures,” said Professor Ncube yesterday.
Source – The Herald
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