Banks ditch court fight, opens fresh talks with ZIMRA, Treasury

LIVINGSTONE MARUFU

Local banks have ditched a looming courtroom showdown in favour of direct negotiations with the Zimbabwe Revenue Authority (ZIMRA) and the Ministry of Finance, Economic Development and Investment Promotion, as part of efforts to resolve a protracted tax dispute that had threatened to spiral into a full-scale legal battle, Business Times can report.

The shift marks a significant change in approach by the sector, which had initially mounted a coordinated legal challenge against the tax authority under the auspices of the Bankers Association of Zimbabwe (BAZ), signalling a preference for negotiated settlement over costly and potentially disruptive litigation.

The dispute centres on the treatment of interest expenses in taxable income calculations, a technical but an issue with far-reaching implications for bank profitability.

Banks argue that recent tax assessments, applied retrospectively to the 2019–2025 period, have materially distorted their financial positions.

The disallowance of interest expenses in taxable income computations, they contend, has artificially inflated tax liabilities across the sector, placing pressure on earnings and capital buffers.

However, in a written response to Business Times, BAZ confirmed a pivot away from litigation in favour of structured dialogue with authorities.

“We advise that the deductibility of interest expense issue was addressed in the 2026 National Budget,” BAZ said.

“The principle of deductibility has already been legislated, the only remaining issue under discussion is the implementation date.

We are currently engaging with ZIMRA and Treasury to ensure that the transition to these new measures is managed in a way that provides clear fiscal guidance for all parties. As an industry, we regularly engage with the Ministry on these and other issues.”

Major lenders, including FBC Holdings and CBZ Holdings, confirmed that discussions are underway.

FBC Holdings chief executive officer Trynos Kufazvinei described the engagement process as a constructive step toward resolving complex tax positions.

“FBC Holdings acknowledges the ongoing engagement process initiated by Treasury, which provides a platform for constructive dialogue between the authorities and affected institutions,” Kufazvinei said.

“We view this approach as both prudent and progressive, as it allows for the clarification of complex tax positions and the pursuit of mutually beneficial outcomes within an established consultative framework.”

CBZ Holdings chief executive officer Lawrence Nyazema indicated that while the legal route has been paused, progress in the negotiations has been slower than anticipated.

“We only suspended it (the court process) to allow for negotiations, but the process is moving at a much slower pace than anticipated,” Nyazema said.

At the heart of the dispute is the interpretation of Zimbabwe’s Income Tax Act.

ZIMRA maintains that a stricter application of deductible expense rules is required, while banks argue that the current approach departs from established practice and undermines policy predictability, a key pillar for financial sector stability.

Adding to the debate, Finance Ministry Permanent Secretary George Guvamatanga last week urged corporates to prioritise administrative engagement over litigation in resolving tax disputes.

He argued that many of the cases currently before the courts could have been settled through dialogue, insisting that the legal framework governing tax obligations is sufficiently clear, particularly on the currency of settlement.

According to Guvamatanga, tax laws have consistently required companies to remit obligations in the same currency in which transactions are conducted.

“For 90% of the current assessments, companies collected US dollars but paid ZIMRA in local currency. The law was very clear,” he said.

“That is why in most of these cases that went to court, judgment has gone in favour of ZIMRA.”

The Treasury believes a significant portion of disputes stems from this mismatch between revenue collection and tax remittance, an issue it says has already been tested and largely settled in the courts.