Harare – The Zimbabwe Revenue Authority (ZIMRA) is cracking down on churches and religious organisations generating income from the sale of merchandise, clarifying that profits from such activities are subject to taxation.
This follows a recent notice published by ZIMRA, outlining upcoming stakeholder engagement sessions aimed at improving tax compliance within the religious sector. The notice specifically targets income derived from trading activities, including the sale of church literature, music, and branded merchandise such as apparel, anointing oils, and artefacts. These sales, ZIMRA clarifies, may also attract Value Added Tax (VAT), depending on sales thresholds.
The move by ZIMRA follows reports of non-compliance by some religious organisations engaged in substantial fundraising activities. While tithes and donations remain exempt from taxation, the sale of goods for profit is clearly within the scope of tax law.
The authority’s statement makes it clear that income generated from various activities beyond religious contributions is taxable. This includes proceeds from selling reading materials, wristbands, or renting out properties.
This action by ZIMRA is not unprecedented. In 2019, the state prosecuted Walter Magaya, leader of the Prophetic, Healing, and Deliverance Ministries, for failing to declare over $28 million in taxes accrued between 2018 and 2019.
These unpaid taxes stemmed from revenue generated from the sale of regalia, anointing oil, and operations at the Yadah Hotel in Harare. Magaya’s case serves as a stark reminder of the legal consequences of non-compliance for religious organisations engaging in commercial activities.
ZIMRA’s notice emphasises the importance of tax compliance, urging churches to review their tax affairs and make voluntary disclosures for any omitted income or unfulfilled tax obligations. The authority encourages voluntary compliance to avoid penalties that can significantly impact operations. The notice further details the specific tax obligations applicable to religious organisations:
Income Tax on Business Profits: This tax applies to business profits generated within Zimbabwe. While donations, tithes, and offerings are exempt, income from activities like selling merchandise or renting properties is taxable.
Employees’ Tax (PAYE): Churches employing individuals to administer church activities are required to register for PAYE within 14 days of employing staff. This necessitates monthly PAYE deductions and remittance to ZIMRA by the 10th of the following month.
Value Added Tax (VAT): Religious organisations exceeding $60,000 (this figure may not be current) in taxable supplies over a twelve-month period must register for VAT. VAT payable must be remitted to ZIMRA by the 25th of the following month. Importantly, churches are not exempt from paying VAT on their purchases of goods and services subject to VAT.
The ZIMRA website further elaborates on these tax obligations, providing detailed guidance for churches and religious organisations to ensure compliance. The website encourages voluntary disclosure to avoid penalties, emphasising the importance of accurate reporting and timely tax payments
