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The Zimbabwean 2025 national budget introduced many changes to tax laws. Some of the changes show a preemptive approach to revenue management. Among these changes, is the introduction of new reporting requirements for Tenders by procuring entities within the government and quasi-government institutions. In addition, a new rule affecting bidders for tenders was also introduced.
These changes are expected to positively impact tax administration and revenue collection efforts. From January 2025, all government and quasi-government entities are required to procure goods and services via the public tender system (https://egp.praz.org.zw/Indexes/login) in Zimbabwe and must submit tax returns to the Zimbabwe Revenue Authority (ZIMRA).
The affected tenders are those within the following limits;
- Construction works: USD20 000 – USD5 000 000
- Goods: USD10 000 – USD300 000
- Consultancy & Non consultancy services: USD5 000 – USD1 000 000
From the Public Procurement and Disposal of Public Assets Chapter 22:23 Regulations
All businesses making supplies within the limits above should take note that their details will be submitted to ZIMRA in comprehensive Tax Returns. Such information includes names of winning bidders, their contact details, taxpayer registration numbers, value of contracts and payment details.
The Tender Returns will provide the Commissioner of Taxes with valuable information for tax collection. This access to bidding companies’ information will enable faster third-party income verification. Investors who deal with government-related entities are therefore encouraged to comply with their tax obligations, as ZIMRA will now have verification information at their fingertips.
Since government and quasi-government institutions are required to procure via public tenders, access to tender values and winning bidders' details will help ZIMRA to ensure that all public expenditures are tax-productive. This means that any direct taxes arising from the circulation of these funds can be easily followed through. While we are uncertain about the comparative level of contribution of government procurement to gross domestic product, it is assumed that public expenditure through tenders constitutes a significant part of gross domestic product. Hence, efficient tax accounting of these funds can help the fiscus.
Under normal circumstances, quoting prices inclusive of VAT is reserved for registered operators; all other traders are not allowed to quote and charge prices inclusive of VAT. From January 2025, all bidders not yet registered for VAT must quote a price inclusive of VAT if the tender value is US$25,000 and above - VAT Act S70 (2).
On this new concession, there will be exceptions for those who are ordinarily exempt from VAT registration. An example of such a trader deals sorely in exempt supplies like medical services.
In conclusion, doing business with the government of Zimbabwe and quasi-government entities will now demand enhanced tax compliance by any trader/investor. Where an unregistered trader (for VAT) quotes in excess of US$25 000 on any government tender, they must be prepared to comply with the VAT Act with regards to charging, collecting and remitting any VAT on the transaction.
Reference/ Citation
From the Public Procurement and Disposal of Public Assets Chapter 22:23 Regulations
