New Finance Bill to hold firms’ directors accountable

The Chronicle

Natasha Chamba, Business Reporter
DIRECTORS of abandoned or closed companies are now accountable for tax debts of such companies following the crafting of the new Finance (No.3) Bill of 2018.

Government has in the past raised concern over companies that are closed but later resurrected through formation of a new company or companies taking over the business of such wound up operation to evade paying outstanding tax debts from the former entity.

According to the new Finance (No.3) Bill of 2018, section 77 of the Income Tax Act has been amended by the insertion of subsection (8) that makes directors of abandoned or wound up companies accountable for such companies’ tax debts.

“(8) (a) If, in Zimbabwe or in its country of formation, incorporation or registration, a company or entity is wound up voluntarily, or otherwise in circumstances that give rise to a reasonable suspicion that it was deliberately put into liquidation to avoid any tax liability or:

“(b) If the whole or a substantial part of the business and property wherever situated is transferred to another company or entity which will be or has been formed, incorporated or registered under any law then the directors of the old company or entity (whether or not either of them become directors or act in a similar capacity in relation to the new company or entity) shall be jointly and severally liable for the amount of any tax due and payable by the old company or entity.

A director is defined under the 33rd Schedule to the Income Tax Act [Chapter 23:06] as a person, by whatever name he or she may be called, who controls or governs that company and includes any person occupying the position of director or alternate director of a body corporate.

This piece of legislation was once highlighted in the Finance Bill of 2017 but was not enacted into law.

The wounding up of companies has been an issue of concern to the Zimbabwe Revenue Authority and has been cited as one of the reasons for the ballooning tax debt.

Zimra is owed close to $4 billion by both the private and public sector companies.

— @queentauruszw.