Tax Implications of a Members’ Voluntary Company Winding Up.
SUMMARY NOTE:
- Overview
- Capital Gains Tax
- Corporate Income Tax
- Stamp Duty
- Withholding Tax
- Value-Added Tax (VAT)
- Employees’ Tax Obligations
- Overview
In the event of a Members’ Voluntary Winding Up of a company in Zanzibar, several taxes may be applicable, depending on the circumstances of the liquidation. Here are the key taxes to consider:
- Capital Gains Tax
Applicable Rate: Capital gains tax is charged on the disposal of assets, which may occur when the company sells its assets during liquidation.
Taxable Event: Any gains made from the sale of assets, including real estate, shares, or other investments, are subject to capital gains tax.
- Corporate Income Tax
Applicable Rate: Corporate income tax (CIT) may be charged on the profits made during the liquidation process, including any income generated from the sale of assets.
Final Returns: The Company must file final tax returns, reporting all income up to the date of liquidation.
- Stamp Duty
Applicable Rate: Stamp duty may be imposed on the transfer of assets or shares during the winding-up process.
Taxable Event: This is relevant where there are transfers of property or shares, which may require registration and incur stamp duty costs.
- Withholding Tax
Applicable Rate: Withholding tax may apply to certain payments made by the company during the liquidation, such as interest, dividends, or payments to non-resident creditors.
Taxable Event: Any distributions made to shareholders or creditors may be subject to withholding tax.
- Value-Added Tax (VAT)
Applicable Rate: If the company has been involved in taxable activities, VAT may be applicable on the sale of goods or services up to the point of liquidation.
Taxable Event: The liquidator must account for VAT on any taxable supplies made during the winding-up process.
- Employees’ Tax Obligations
Pay As You Earn (PAYE): Any payments made to employees during liquidation, such as severance packages or final salaries, will be subject to PAYE.
Social Security Contributions: The Company must ensure all contributions to social security or other employee-related taxes are paid up to the point of liquidation.
- Tax Clearance Certificate
Requirement: Before finalizing the winding-up process, the company may need to obtain a tax clearance certificate from the Zanzibar Revenue Authority (ZRA) confirming that all tax liabilities have been settled.
Disclaimer: This article is authored by Faridi Bakari Chambali, from Rive & Co, a new and innovating law firm as a result of the partnership between ABC Attorneys, Stallion Attorneys and Sepia Attorneys, built on the foundation of trust, credibility, and novelty, offering expert legal solutions. This Article is for informational purposes only and should not be construed as legal advice. It is recommended to consult with a qualified legal professional for advice specific to your situation.