Understanding Non-FDS and Streamlining Compliance with Belina Payroll

The Zimbabwe Revenue Authority (ZIMRA) is continually refining its tax compliance systems, and one of the most critical recent updates is the formal introduction of the Non-Final Deduction System (Non-FDS) method for Pay As You Earn (PAYE) calculation within the new Tax and Revenue Management System (TaRMS).

This shift has significant implications for both employers and a specific cohort of employees. Staying compliant requires understanding the change and having the right tools to manage the new reporting requirements.

What is Non-FDS (Non-Final Deduction System)?

The Non-FDS calculation method is essentially the non-cumulative approach to calculating PAYE, also known simply as the P.A.Y.E system.

Unlike the Final Deduction System (FDS), which uses a cumulative method by projecting annual income and applying tax credits to ensure the employee’s tax is spot-on by the end of the year, Non-FDS is a non-cumulative method. The employer’s role under Non-FDS is simply to deduct PAYE based strictly on the employee’s current period earnings, without taking into account tax credits.

Who is a Non-FDS Employee?

This method is specifically applied to employees who are not employed for the full tax year under the same employer, or who have multiple income sources.

A person is generally considered a Non-FDS employee if they:

• Start employment during the course of the year.
• Terminate employment during the year.
• Change employers during the year.
• Work for more than one employer in a year (simultaneously or sequentially).
• Receive pensions.

For a clear differentiation between the two systems, see the comparison below:

Feature	FDS (Final Deduction System)	Non-FDS (Non-Final Deduction System)
Calculation Method	Cumulative (Projects annual income)	Non-Cumulative (Based only on current period’s earnings)
Tax Credits	Applied by the employer during calculation.	NOT applied by the employer.
Duration of Employment	Full tax year with the same employer.	Less than a full tax year, or multiple income sources.
Employee Obligation	Generally NOT required to submit an individual tax return (ITF1).	Required to submit an individual tax return (ITF1) after year-end.

 

Implications for Employees and Employers

For Employees Who Joined Mid-Year

If an employee joins your company mid-year, they must be treated as a Non-FDS employee.

The biggest implication is that they will not receive the benefit of their tax credits applied in their monthly PAYE calculation. Consequently, they may have over-paid tax throughout the year.

The responsibility for claiming any potential refund or credit rests squarely with the employee, who is legally obliged to submit an Individual in Employment Tax Return (ITF1) to ZIMRA after the end of the tax year.

For Employers: Compliance and Re-Submission

The ZIMRA TaRMS platform now mandates a clear separation between these two employee groups for all submissions.

1. Monthly PAYE Submission

You must prepare and upload two separate templates under the Employee Management Module: one for FDS employees and one for Non-FDS employees.

2. Re-Submission Requirements

If your organization previously categorized mid-year joiners as FDS (due to the Non-FDS option not being available), ZIMRA requires you to amend already submitted returns to correctly separate FDS and Non-FDS employees. This can be a significant administrative task as it may involve going back to the start of the tax year to re-classify and re-submit the split data for each affected month.

How Belina Payroll Simplifies the Non-FDS Process

Managing this new dual-submission requirement and rectifying past errors manually can be a major headache for payroll administrators. Belina Payroll has adapted to this regulatory change to provide a smooth, compliant process.

1. Easy Employee Conversion (FDS to Non-FDS)

In cases where an employee who started mid-year was mistakenly set as FDS, Belina allows for quick and easy conversion:

The system offers a mechanism to change the tax status of an employee from FDS (Average/Forecast) to Non-FDS (PAYE). This is crucial for correcting historical data for re-submission. Detailed steps to do this are in our help and manual.

2. Seamless TaRMS Export Generation

The most significant time-saver is the ability to generate the correct TaRMS export files directly from your payroll data, correctly separated as required by ZIMRA.

• Split Exports: Belina can easily generate the necessary TaRMS export files, separating the FDS employees from the Non-FDS employees. This directly produces the two distinct files you must upload to the ZIMRA TaRMS portal.
• Data Integrity: The exports are formatted correctly and include the accurate, distinct data for each group, ensuring a smoother upload process on the ZIMRA portal.

By automating the segregation and formatting of FDS and Non-FDS payroll data, Belina transforms a complex compliance requirement into a straightforward, export-and-upload task, significantly easing the burden of both monthly reporting and historical re-submissions. By Ashlene Moyo