TAX LAW & PRACTICE(CUAC

212)

PROG: BSCAC
LEVEL: 2.1
YEAR : 2023
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(b): Repairs
Repairs to assets used for the purposes of trade are
allowable deductions.
Restores an asset to its original position.
Should be distinguished from improvements.
An improvement creates a new asset which results in an
increase in the income generating capacity.
Improvements are amounts of a capital nature.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(d): Lease premiums
The allowable deduction is determined as follows:
=Premium/ lease period or 10 years. whichever is the
lesser period
Use 10 years, if lease period is silent.
If there is an option to renew the lease, consider initial
period.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(d): Lease premiums
If property is used for both business and private
purposes,
The premium is apportioned and;
Only the business element is allowed as a deduction.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(d): Lease premiums
Example:
Bath entered into a lease agreement with Towel for a
period of 14 years. Towel was required to pay a premium
of $1 450 in addition to annual rental of $4 120.
Calculate the allowable deduction for Towel in the
current year.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Lease Improvements Section 15(2)(e)
Granted to a lessee where he has effected lease
improvements under a lease agreement.
Calculation: value of improvements /Remaining Lease
period.
The remaining lease period is counted from;
The date the improvements are used for the purposes of
trade.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Lease Improvements Section 15(2)(e)
Maximum remaining lease period is deemed to be 10
years.
Consider initial period only if;
The agreement is subject to renewal.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Lease Improvements Section 15(2)(e)
Apportion if the property is used both for business and
private.

Stop deductions in the following year if;

The lessee acquires the property.

 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Lease Improvements Section 15(2)(e)
•Example
•Mr Huni owns a vacant piece of land measuring 2 000 square
metres. He entered into a 20 year lease agreement with Mr Moto
from 1 February 2021. They agreed that Moto should construct
lease improvements [warehouse] to the value of $11 500.
Construction started on 1 April and it took Moto 4 months to
complete the construction. The improvements were used by
Moto for business purposes as from 1 September 2021.
•Calculate the allowable deductions for Mr Moto for 2021
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Bad Debts: Section 15(2)(g)
Irrecoverable debts should meet the following criteria:
The debt should be due and payable to the taxpayer.
The debt should have been included in the gross income
of the taxpayer, i.e it should relate to trading stocks.
It must be proved by the taxpayer that the debt is
irrecoverable.
Recovered debts should be brought into gross income if
they had been granted as a deduction.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Bad Debts: Section 15(2)(g)
Claims made by the taxpayer, must be supported by a
statement showing the:
Name of the debtor and the amount of the debt.
Date of each debt;
Nature of each debt;
Reason why it was considered to have become bad during the
period covered by the accounts;
Year of assessment in which it was included in the taxpayer’s
income.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Bad Debts: Section 15(2)(g)
Example
• Honeycomb Ltd,a Supermarket, has an expenditure figure of
$30 000 for bad debts in its accounts. The amount is broken
down as follows:
$
• Insolvent debtor 18 000
• Loan to employee who died 2 000
• 5% provision 5 000
• Acquired together with a subsidiary 5 000
• Total 30 000
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Pension and RAF contributions: Section 15(2)(h)
• Summary on restrictions(6th Schedule):
Contributions to 1 Pension fund (plus NSSA) – Paragraph
15 restriction ZWL$1500,000
Contributions to 1 Retirement annuity fund – Paragraph
16 restriction ZWL$1500,000
Contributions to 2 or more Pension funds – Paragraph
18(2) restriction ZWL$1500,000
Contributions to 2 or more Retirement annuity funds –
Paragraph 18(2) proviso restriction ZWL$1200,000
Contributions to Pension fund(s) and Retirement annuity
fund(s) – Paragraph 18(2) restriction ZWL$1500,000
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Pension and RAF contributions: Section 15(2)(h)
• Summary on restrictions(6th Schedule):
Contributions to NSSA 3.5% of gross salary of up to a
salary ceiling of US$700/month
Aggregate maximum deductions to all of the above per
employee ZWL$1500,000/annum.
NB: Contributions to a Retirement Annuity Fund by
employer are not allowable.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Medical aid Societies: Section 15(2)(j)
The amount of any contributions paid to a Medical Aid
Society by an employer;
In respect of his employees or their dependants;
Is an allowable deduction in the hands of the employer.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Experiments and Research: Section 15(2)(m) and (n)
Revenue expenditure incurred by taxpayer on
experiments and research which are related to his/her
trade.
Joint-expenditure (by 2 or more taxpayers) is
apportioned.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Scientific Experiments and Research: Section 15(2)(o)
Expenditure on scientific research and experiments
related to the taxpayer’s trade.
The deduction is double the amount incurred.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Educational Grant, Bursary or Scholarship: Section
15(2)(p)
The course should be related to the taxpayer’s trade.

The beneficiary should not be the taxpayer, his spouse

or near relative, or near relative of spouse.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Educational Grant, Bursary or Scholarship: Section
15(2)(p)
If the taxpayer is a company, the beneficiary should not
be;
A near relative of the individual controlling the
company, or
His spouse or near relative of the spouse unless
The director works full time for the company and
controls not more than 5% of the share votes.
NB: A cousin is not a near relative.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Voluntary Payments to Former Employees and/or their
dependants15(2)(q)
Should have left employment due to:
(i) Old age
(ii) Injury (infirmity) or disability
(iii) Sickness
(iv) Death,
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Voluntary Payments to Former Employees and/or their
dependants15(2)(q)
The maximum deductions are:
(i)Ex-employee ZWL$`250,000/annum
(ii)Ex-partner ZWL$100,000/annum
(iii)Dependents of former employee or partner
ZWL$100,000/annum
Persons whose employment was of a domestic or private
nature are excluded.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Donations 15(2)(r)
A deduction is granted on donations made to:
National Scholarship Fund
National Bursary Fund
Charitable Trust Funds administered by Ministries of
Health and Child Welfare, Public Service, Labour and
Social Services.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Donations 15(2)(r)
A deduction is granted on donations made to:
Schools run by the government, local authorities and
churches as approved by the Minister responsible for
education to a maximum of ZWL$50,000,000/annum.
Hospitals and clinics run by the government, local
authorities and church organizations, to a maximum of
ZWL$8,000,000/annum.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Donations 15(2)(r)
A deduction is granted on donations made to:
Research Institutions, up to a maximum of ZWL$50,000
000/annum.
Anti-retroviral drugs to institutions approved by the
minister up to a maximum of ZWL$50,000,000/annum.
An amount paid by the taxpayer to the Public Private
Partnership Fund up to ZWL$25,000,000/annum.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Donations 15(2)(r)
A deduction is granted on donations made to:
An amount paid to a local authority with the approval of
the minister responsible for local government, for the
purposes of the maintenance of infrastructure up to
ZWL$25,000,000/annum.
The Destitute, Homeless Persons Rehabilitation Fund up
to maximum of ZWL$25,000,000/annum.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Subscriptions 15(2)(s)
Subscriptions paid by a taxpayer in respect of his
continued membership to any business, trade, technical
or professional association
e.g ACCA, ZNCC, ZCTU, NEC.
Entrance fees and subscriptions as a student are not
allowed as a deduction
Subscriptions to sporting, social or recreational clubs
are not allowable as a deduction.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Pre-production Expenses 15(2)(t)
Expenses incurred before trading commenced provided:
The expenses were incurred 18 months or less before
business operations commenced.
The expenses are normal business expenses i.e.
excluding purchase of capital assets.
Such expenses are claimed in the year in which the
business is commenced.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Opening Stock 15(2)(u)
Donated stock and inherited stock 15(2)(v)
Donated stock-value restricted to value in the
hands of the donor.

Inherited Stock-value restricted to value in the estate.

 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(w) Conventions And Trade Missions
Attendance to trade mission or convention approved by
the Commissioner and also;
In connection with the taxpayer’s trade.
The maximum deduction is limited to a maximum of
ZWL$1800,000/annum.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(w) Conventions And Trade Missions
If the person attending is a member of a partnership
and the partnership bears the expense,
The limit of ZWL$1800,000 is applicable to one visit by
each partner.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(2)(w) Conventions And Trade Missions
Example
Mr Mangure is a corporate affairs manager with Angletton
Investments (Pvt) Ltd, during 2021 year, he attended a
seminar in Germany the cost to the employer was
ZWL$8600,000 he also attended the 2021 Zimbabwe
International Trade Fair (ZITF) at a cost of ZWL$3700,000.

What is the amount deductible in the hands of

Angletton Investments (Pvt) Ltd in respect of the
expenses for trade fairs?
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (aa) and 15(2)(bb) Legal Costs On Income
Tax Appeals
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (gg) Export Market Development
A double deduction on expenditure wholly or
exclusively for the purpose of seeking opportunities for
the export of goods or for creating or increasing the
demand for such exports.
The expenditure may include:
Research into foreign markets
Research into the packaging or presentation of goods
outside Zimbabwe.
Advertising in foreign lands
Participation in trade fairs
Bringing prospective buyers to Zimbabwe
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (gg) Export Market Development
Providing samples of goods to persons outside
Zimbabwe.
Investigating or preparing information, designs or
estimates for the purpose of submitting tenders for the
sale of goods outside Zimbabwe.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (gg) Export Market Development
Example
• McBowells Ltd is a company engaged in the manufacture of blankets for local and
export market; the company incurred the following marketing expenses in 2020
tax year.
$
• Newspaper advertisements 1 200
• Erecting billboards in major roads in Harare CBD 12 000
• Cost of samples sent to Malawi 3 000
• Payment for a right to advertise in bays of sports stadiums 15 000
• Research expenses in exploring Botswana market 23 000
Show the amount deductible in the hands of the company.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (gg) Export Market Development
• Solution $
• Newspaper adverts 1 200
• Billboards (capital nature) -
• Samples (3 000*2) # 6 000
• Right to advertise in bays (capital nature) -
• Market research expenses (23 000*2) # 46 000
• Total deductible expenses
53 200
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15 (2) (hh) Tobacco Levy
The amount of any tobacco levy paid in the year of
assessment.
Section 15(2)(kk) Maintenance On Behalf Of Local
Government
Expenditure approved by the Minister responsible for
local government on the maintenance of buildings,
roads, bridges, water works, sanitation works, public
works and any other utility, amenity or item of
infrastructure.
Maximum is ZWL$25,000,000.
 SPECIFIC ALLOWABLE DEDUCTIONS(S15(2))
Section 15(3) Assessed Losses
 Business losses are carried forward and are claimed in
future as an expense when the business makes a profit.

They are carried forward up to a maximum of 6 years.

Mining losses are carried forward indefinitely.

If a person earns income from trade and investment
and income from employment, any allowable
deductions shall be claimed in respect of the income
to which they relate.