Reflections on recent Delta Corporation vs ZIMRA judgment
FUNGAI CHIMWAMUROMBE AND LEON GONA
Recently the apex court handed down a seminal judgment that had pitted the Revenue Authority against Delta Corporation Limited in a wrangle over tax liabilities amounting to approximately US$ 58.4m.
The issue under contestation revolved around whether or not the tax liability ascribed to Delta Corporation Limited could be settled in local currency at the prevailing interbank rate.
The judgment epitomises the fluid and dynamic currency issues that have been unfolding since the re-introduction of the local currency in 2019.
The judgment, therefore, becomes an essential and current guideline to taxpayers as they not only account for their earnings but also assess their liabilities. The short discourse below highlights the pertinent issues taxpayers should remain conscientious about.
- The Revenue Authority shall collect taxes in the currency that has been earned by the taxpayer i.e. the taxpayer is obligated to remit taxes in the currency of trade. In this case, ZIMRA undertook a tax audit of Delta Corporation Limited for the period between 2019 and 2021 to assess the correctness of the Value Added Tax and Income Tax returns filed with the same. I hasten to point out that Zimbabwe operates a self-assessment tax regime hence the Revenue Authority in this instance invoked powers vested in same under s44 of the Income Tax Act [ Chapter 23:06], together with ss 57-66 of the Value Added Tax Act [Chapter 23:12] and s34F of the Revenue Authority Act [ Chapter 23:11] to investigate and institute such audit. Taxpayers should therefore now be cognizant that in respect of tax remittances, only the lawful act of settling a foreign currency obligation has now been rendered obsolete.
Indeed, s4A of the Finance Act [Chapter 23:04] still requires the payment of taxes in foreign currency notwithstanding the amendment carried in the Finance Bill 2024 (which comes into effect on the 1st of August 2024) which provides that a taxpayer remitting quarterly installments of estimated provisional taxes in terms of s 72 of the Finance Act, and such provisional taxes are estimated to exceed 50 % or more in foreign currency, such taxpayer may remit half of such quarterly provisional tax in local currency (ZiG).
- Whilst it has been noted above that the present tax regime operates on a self-assessment basis, the Delta Corporation Limited vs ZIMRA case is a practical example of the Revenue Authority’s capacity to issue out reassessments on a taxpayer’s tax returns filed of record. In respect of VAT s 31(3) of the VAT Act [Chapter 23:12], empowers the Commissioner to assess the amount of tax payable in instances where the same is not satisfied with any return or declaration furnished by a taxpayer. It follows that due care and diligence ought to be applied when compiling such returns.
The brief overview of some of the pertinent issues arising from the seminal Delta Corporation Limited vs ZIMRA judgment brings clarity on the issue of applicable currency in which to remit taxes. The point is settled you settle your obligations in your currency of trade. The case also highlights the broad powers of reassessment when the Revenue Authority disapproves of the self-assessment undertaken by the taxpayer. Taxpayers should update their manuals and ensure their tax obligations are above board to avert hefty tax bills years later down the road.
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at fungai@zenaslegalpractice.com and WhatsApp 0772 997 889.
Leon Gona is a registered legal Practitioner and an Associate at Chimwamurombe legal Practice and can be contacted for feedback at leon@zenaslegalpractice.com. Whatsapp +263 77 245 1360
