Zimbabwe exempts rice from Value Added Tax, retailers welcome the move

ZIMBABWE – Zimbabwean retailers have welcomed the government’s directive of scrapping Value Added Tax (VAT) on pre-packed rice.

The traders have been pushing for an exemption from paying the tax on rice packages of 25 kilogrammes or less, arguing that the decision was undermining the “Zimbabwe is Open for Business” mantra.

Confederation of Zimbabwe Retailers (CZR) President Denford Mutashu, welcomed the removal of VAT saying, “The confirmation of the VAT position for rice shows that Government is indeed committed to establishing a private sector-led economy in line with the open for business policy.”

He added that the directive would save many jobs, prevent informalisation and de-industrialisation of the economy.

The move is a review of the 14.5 percent VAT charged on repacked rice, a requirement that traders argued was repealed in 2017, but which tax authorities disputed.

Zimbabwe’s rice consumption per capita rate was 4.21 kg in 2017

Faostat

The challenge stemmed from confusion over interpretation of the law regarding packages where it was applicable or whether rice was tax liable at all following a number of policy changes since 2004.

In 2004 the VAT on rice was 15 percent, in 2008 it was zero rated, in 2016 it was exempted, in 2017 VAT was restored at 15 percent for two weeks from February 1 to 15.

In the same year bulk rice was exempted from VAT again, leaving the small packs to continue attracting a VAT at 14.5 percent, as per demands by tax authorities which the retailers argue was not applicable.

While the taxman did not collect the VAT since 2017, it recently sent a backdated payment request for repacked rice transactions since then, which retailers argued would affect viability.

But the Government has jumped in to end confusion over the tax status of repacked or prepacked rice, by issuing statutory instrument (SI)125 of 2021.

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Despite the issued directive, CZR President, Mutashu, has raised concerns pertaining to the ambiguity still larking pertaining to the SI26A of 2017.

Mr Mutashu hopes that the Ministry of Finance and Economic Development, would issue another SI, effective 2017, confirming the actual status.

Zimbabwe consumes about 200 000 tonnes of rice per annum. According to Faostat, the country’s rice consumption per capita reached 4.21 kg in 2017. When compared to its peers in Botswana with 12.7 kg, 36.0 kg in Mozambique and 24.6 kg in South Africa, it is far below, but marginally higher than 2.14 kg in Zambia.

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