Taxation of Income from Trade and Investment Activities - General Framework - Zimbabwean Taxation

When calculating taxable income or tax liability of a corporation or of an individual on his trade or investment income, the following framework should be adopted. Important sections of the Income Tax Act when computing the tax liability are Section 8 (which discusses Gross Income), Section 15 (which discusses deduction), and section 16 (which discusses prohibited deductions). 

The framework will also depend on the information provided on a question. If an accounting profit is given, then starting with the accounting profit, adjust for prohibited deductions, exemptions, and additional allowable deductions. The below framework is based on the assumption that the taxable income is calculated from scratch.

Computation of Taxation Income

GROSS INCOME - sec 8

Sale of goods or service                                                                              xxx

Closing Inventory -sec 8(1)(h)                                                                    xxx

Subsidies  - sect 8(1)(m)                                                                             xxx

Donations Received                                                                                    xxx

Rental Income                                                                                             xxx

Royalties   Received                                                                                   xxx

Dividends Received                                                                                   xxx

Interest Received                                                                                       xxx

Exchange Gains - sec 8(2)                                                                        xxx

                                                                                                                  XXX

Less EXEMPTIONS

Interest Received from financial institutions                        xxx

Dividends Received                                                              xxx           (xxx)

                                                                                                                 XXX

Less ALLOWABLE DEDUCTIONS - Sec 15

Opening stocks - sec 15(2)(u)                                              xxx

Purchases of goods or services -sec 15(2)(v)                       xxx

Legal costs - sec 15 (2)(aa)                                                  xxx

Assessed losses - sec 15(3)                                                  xxx

Capital Allowances - 4th schedule                                      xxx

Salaries and Expenses                                                         xxx

Transport expenses                                                              xxx

Donations paid - 15(2)(r)                                                    xxx

Joint research experiments - sec 15(2)(n)                           xxx

Education grants, Bursaries - sec 15(2)(p)                         xxx

Exchange losses                                                                 xxx

Repairs - sec 15(2)(b)                                                        xxx

Bad debts - sec 15(2)(g)                                                    xxx

Other allowable expenses                                                 xxx              xxx

TAXABLE INCOME                                                                          XXX

                   

Advert

Nitty-Gritty Offers Exceptional Educational Services for Prospective Accountants😁.

Subscribe to Nitty-Gritty Private College's YouTube Channel for more resources on the following courses:

1. Taxation in Zimbabwe

2. Financial Accounting and Financial Reporting

3. Management Accounting

4. Strategic Management

5. Audit

6. Financial Management

7. Advanced Excel

Call/WhatsApp: 🤙 +263 78 637 6813

Email: joseeagler@gmail.com

Compiled by: Sir Josef'