On the 9th day of January 2024, the Supreme Court of Zimbabwe handed down a seminal decision in the dispute between Delta Corporation Limited v Zimbabwe Revenue Authority (ZIMRA) under Judgment No: 62/24.
The decision by the Supreme Court provides key insights that companies and other business entities operating in Zimbabwe should be mindful of when dealing with the tax aspects of their business.
We provide herein a summary of the three takeaways from the decision viz:
1. VAT and Income Tax must be paid in the currency of trade.
This simply means that if a taxpayer earns income in foreign currency, he or she is supposed to pay tax in foreign currency. Ipso facto, if he or she earns income in local currency it follows that tax is paid in local currency and if he or she earns income in both local and foreign currency then he/she or it has an obligation to pay tax in both currencies.
2. Reassessment
While a taxpayer has the right to self-assess their tax obligations, the law also confers upon ZIMRA wide powers to issue reassessments on those self assessments.
In order for it to exercise these powers, certain jurisdictional facts have to be present. The jurisdictional facts which must be present to allow ZIMRA to issue a reassessment include:
2.1. Failure to furnish any returns as required by the law.
2.2. The Commissioner is not satisfied with any return or declaration which any person is required to furnish by law.
2.3. The Commissioner has reason to believe that any person has become liable for the payment of any amount of tax but has not paid such amount.
2.4. Submitting a corrected self-assessment return after receiving notice of irregularity from ZIMRA.
3. The use of language which is foreign to tax statutes does not invalidate an assessment.
Internal administrative language employed by ZIMRA in its assessments does not invalidate assessment per ser, as long as all the requirements of a valid assessment have been met. According to the law, a valid assessment must contain:
3.1. A taxpayer’s taxable income.
3.2. The tax credits to which the taxpayer is entitled to.
3.3. Tax payable by the taxpayer; and
3.4. A notice that any objection to the assessment must be lodged within 30 days.
An example of this if found in the case under discussion where the use of the term “gross tax” by ZIMRA was not a ground for the invalidation of the assessment as the conditions for a valid assessment had been met.
In doing business in Zimbabwe, the importance of complying with tax laws cannot be overemphasised as doing otherwise can result in adverse and severe consequences.
Article by Rudo Magundani (magundanir@scanlen.co.zw) & Fidelis Manyuchi (manyuchif@scanlen.co.zw) – Partners, Scanlen & Holderness
