TAXPAYERS should put in place policies and procedures for employees working from home and make alternative arrangements in view of Covid-19 as back-up for tax claims, businessdigest has learnt.
This is necessary since taxpayers are burdened to prove the claims in terms of section 63 of the Income Tax Act. Necessary documentation includes receipts for payments made as well as time sheets.
Upon relaxing Covid-19 lockdown regulations recently, the government directed employers to have workers tested for Covid-19 before resuming operations with Statutory Instrument 99 of 2020 stating that the cost will be borne by the employer.
Taxation specialist Tax Matrix in its May update said the directive has financial implications for employers.While civil society organisations have challenged the government on the issue of testing, it is unclear whether they are testing their employees at all.
However, Tax Matrix in its May 2020 report said there are tax implications that come with the directive, for example the direct costs of Covid-19 testing, which in all fairness should be fully deductible.
According to the report, Section 15 (2) (a) of the Income Tax Act provides for the deduction of “… expenditure and losses to the extent to which they are incurred for the purposes of trade or in the production of the income”.
The report says the practical considerations when dealing with Covid-19-induced costs include consumables and disposal costs such as hand sanitiser, hand washing liquid, disinfectant and masks which should be tax deductible.
“Testing and screening equipment/infrastructure: capitalised and claimed in line with capital allowance policy… Approved testing (diagnostic products and administration of tests) for Covid-19 should be deductible when incurred,” read the report .
Transportation fleet hiring for Covid-19 testing-related services should also be tax deductible while costs of isolation or rest rooms are incidental expenses of conducting on trade and are tax deductible.
However, with regards donations of medical supplies and equipment to hospitals and medical centres, the report says deduction is only allowable when made to state hospitals subject to a maximum of ZW$1 million.
The Covid-19 pandemic has significantly affected business and economies globally with some companies being forced to completely close while others have resorted to working virtually due to lockdown.