Note: The Tax Display explained, below, uses tax tables from prior years. The principals used, in explanation, can be applied to the current year. If there is any doubt please refer to your tax consultant.
Explanation
The 'Tax Display' shows how the PAYE amount has been calculated for an employee using the PAYE - Non FDS Method of calculation
The 'Heading' section of the PAYE - Non FDS Method of calculation displays:
|
The projection of income in the PAYE - Non FDS Method: •takes the figures of the current period in isolation. It does not consider what has happened in the past, or what will, or may, happen in the future. •does not take into account tax credits •Does not do self balancing. Each period is taken in isolation. If there has been an over, or under, deduction in prior periods there is no adjustment to balance this off. At the end of the year a P6 form would need to be submitted to ZIMRA together with the ITF1 form. Any adjustment would then be done by ZIMRA when they make an 'Assessment'. •Bonus Earnings are included as 'Special' Income and taxed at the marginal tax rate (the last tax band applied to normal earnings). •The projection simply uses the number of periods of the tax year as the multiple (in our example 12)
Taxable Normal Earnings The projection of regular income, in the FDS - Average Method of tax calculation, is done in the following manner for each Transaction Code:
|
Special Income - Bonus and Irregular Income
Bonus The PAYE - Non FDS Method of calculation takes annual bonuses, subject to the bonus tax-free allowance, as special income. The amount of the bonus is not projected and is taxed in the current period at the marginal tax rate, the highest tax band used in the calculation of tax on regular income.
Irregular Income Notice that Irregular income is treated like a bonus. It is not projected and also taxed at the marginal rate of tax, i.e. the highest band used in the taxation of normal income. It is not projected since this would result in an over-deduction of taxation and result in there being a need to claim a tax refund after the annual tax assessment has been done.
|
The Pension section of thePAYE - Non FDS Method of calculation displays a listing of pension Transaction Codes that have transactions. It takes into account the pension deductible amount, set at $5400 per annum or 7.5% of emoluments (as of 2013 tax year):
|
Tax Payable on Projected Income
Step 1 - Calculate the tax payable on the 'Total Taxable Income' (projected above)
This is calculated as follows:
This is the annual Tax Payable.
Step 2 Calculate the Tax Payable on Regular income plus Special Income (including Irregular Income)
Step 3 - Calculate the Tax Payable this period
Calculate Tax Payable on Normal income for this period:
Step 4 - Aids Levy The final step in the calculation is to deal with the Aids Levy. The calculation simply takes 3% of the amount calculated in step 3, above.
|
