Government of Zimbabwe re-introduces the export incentive scheme

Mon May 10 21:44:32 CAT 2021

 <mailto:info at bulls.co.zw>  <https://www.facebook.com/Hyundaizimbabwe/> 

Government re-introduces export incentives

Harare-The Ministry of Finance has re-introduced the export incentives
albeit modified in a bid to promote focus towards export oriented
production.

The Ministry of Finance and Economic Development has introduced the
Incremental Export Incentive Scheme indicating that the scheme seeks to
support NDS-1 through diversifying production and exports away from the
export of unprocessed products.

The scheme is expected to achieve the following objectives: -

a)      Boost productivity by firms currently engaged in exporting business
as well as encourage entities that are not exporting so that they may
venture into exporting business

b)     Generate sustainable growth in export revenue

c)      Fine tune the policy on export receipts retention threshold so that
the benefits accrue directly to the exporters of goods and services and

d)     Encourage the listing and participation of firms on the Victoria
Falls Stock Exchange and Victoria Falls Offshore Financial Centre.

Retention Thresholds

Export Retention Levels

All Exporters

Exporter Licenced Under Special Economic Zones

Exporter listed 

on VFEX

Current Retention Levels

60%

60%

60%

Retention Levels On Incremental Export Proceeds

100%

100%

100%

Source: Ministry of Finance & Economic Development

In order to promote gold production and deliveries to Fidelity Printers &
Refiners (FPR), gold producers who deliver quantities above their average
monthly deliveries shall be entitled to a retention level 80% on the
incremental portion of the gold delivered to FPR. Those companies listed on
the VFEX will be entitled to a 100% retention level of their incremental
exports

Large scale gold producers that qualify for the 80% retention threshold
shall also be entitled to directly export the incremental portion of the
gold to enable them to secure funding and gold loans to enhance their
production. FPR will facilitate the exportation process for the qualifying
producers under the scheme.

Fiscal Incentives

A number of fiscal incentives that are aimed at promoting exports and
investments include:-

a)    Tax Holiday

Newly established investment enterprises that fall within any priority
investment category will be granted tax holidays with respect to their
corporate or turnover tax and depreciation allowance

b)   Duty Free Importation Schemes

Duty free importations of raw materials that are designated for the
manufacture of goods for export through the Duty Export Draw Back Scheme and
or the Inward Processing Scheme.

c)    Export Drawback Scheme

Under the Export Drawback Scheme refund for the import duties is claimed on
goods are exported from Zimbabwe.

d)   Inward Processing Rebate Scheme

The Inward Processing Rebate (IPR) is a claim for refund and applies to
processing or repair of imported good for re-export. The applicant has to be
involved in repairing or processing of imported goods for re-exportation.
Processing activities under this scheme including fitting or assembling,
industrial packaging or re-packaging, mixing and blending and the use of
agents such as catalysts, accelerators or retarders of chemical reactions
which disappear entirely or partially in the course of production and
thereafter indistinguishable in the goods produced.

e)    Corporate Tax

Taxable income from a manufacturing company with exports 51% or more of its
output is taxed at the rate of 15%.

f)     Export Market Development Expenditure

in order to promote exports, the Government provides for a deduction of an
amount of any export-market development expenditure incurred by the taxpayer
during the year of assessment, together with an amount equal to 100% percent
of such expenditure. This means exporters are allowed to claim twice the
amount of export market development expenditure incurred during the year of
assessment. Qualifying expenditures under this incentive include:-

i)                   Research into or obtaining of information relating to
markets outside Zimbabwe

ii)                 Research into the packaging or presentation of goods for
sale outside Zimbabwe

iii)               Advertising goods outside Zimbabwe or otherwise securing
publicity outside Zimbabwe for goods

iv)                Soliciting business outside Zimbabwe or participating in
trade fairs

v)                  Investigating or preparing information, designs,
estimates or other material for the purpose of submitting tenders for the
sale or supply of goods outside Zimbabwe

vi)                Bringing prospective buyers to Zimbabwe from outside
Zimbabwe and

vii)              Providing samples of goods to persons outside Zimbabwe

Commentary

The best incentive that can be given to exporters in an ideal world is just
100% retention. To be told that you can now retain 100% of your money isn't
really an incentive. The best deal would also be a forex exchange market in
which all players have confidence in and can participate. Hopefully, the RBZ
will manage to restore confidence in the Auction market. 

Economic agents will be watching closely how the Government will manage the
scheme this time around given its tragic end the last time. At least there
are no attempts to introduce the local currency through the back door.

The tax incentives are a positive move in whatever format they come. They
represent real value to the companies and do buttress the export promotion
agenda.

Invest Wisely!

Bulls n Bears 

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