Zimra loses US$15,9m tax dispute against Nestle

THE long running legal dispute between Zimbabwe Revenue Authority (Zimra) and Nestlé Zimbabwe over US$15,9 million income tax assessments for the period 2009 to 2013 has been finalised with the Supreme Court backing a High Court judgement that prevented replacement notices of tax assessments.

The dispute hinged on points of law and interpretations of law, rather than factual disputes, and revolved initially around the self-assessments made by Nestle Zimbabwe and the desire by Zimra to have replacement assessments.

The replacement assessments would not have meant Nestle had to pay more tax, since it had already paid the assessed taxes, but Zimra wanted the legal position accepted while Nestle were ready to go to court to make sure their legal view prevailed.

In the end Nestle won.

Zimra had sought the intervention of the Supreme Court to reverse the High Court decision blocking the revenue authority from issuing replacement notices of reviewed tax assessments to Nestle.

But a three-judge panel of Justice Susan Mavangira, Justice George Chiweshe and Joseph Musakwa unanimously upheld the lower court’s decision finding that the assessments were null and void, and therefore Zimra’s bid to have the replacements validated was devoid of merit.

Writing the judgment for the court, Justice Musakwa upheld the objection by Nestle. “The issuance by the appellant (Zimra) of replacement assessments where no tax liability arises flies in the face of the principle of finality to litigation which is a pillar of the rule of law,” ruled Justice Musakwa, dismissing the appeal with costs.

This latest ruling follows the precedent made in the Supreme Court three years ago in an earlier round of the dispute which held that an assessment by the Zimra Commissioner-General consequent to self-assessment by a taxpayer is final.

But in that case the Supreme Court also found that the five Zimra assessments in contention were invalid. It follows that after nullification of the assessments in the present case, Zimra had no leg to stand on.

The long running dispute between Zimra and Nestle spilled into the courts after the revenue authority, in May 2016, issued several amended tax assessments to Nestlé for the five tax years 2009, 2010, 2011, 2012 and 2013.

It claimed to have discovered several anomalies that amounted to misrepresentation regarding the self-assessment declarations initially submitted by Nestlé.

This was disputed by Nestlé, with the matter finally spilling into the Special Court for Income Tax Appeals. The Special Court upheld the determination of the Zimra’s Commissioner to the objections filed by Nestle.

This prompted an appeal to the Supreme Court under which the revised assessments issued by Zimra were held to be invalid.

And the court in its 2021 judgment involving the parties under case SC 148/21 ruled that the revised assessments issued by Zimra did not conform to the requirements of certain provisions of the Income Tax Act.

Tax assessments for 2009, 2010, 2011, 2012 and 2013 were specifically invalidated for being made subject to an audit when such an endorsement was not provided for under section 51 of the Income Tax Act.

Accordingly, the entire proceedings were set aside because they were premised on a nullity. Later in January 2022, Zimra went on to issue new assessments it believed were in compliance with the Income Tax Act.

Zimra attempted to pacify Nestle by clarifying that there was no obligation to pay any further tax since it had previously been making regular payments as per the nullified assessments.

Conversely, Nestle queried the legal basis upon which the replacement assessments were issued in light of the decision of the Supreme Court under SC 148/21. In response, Zimra said the Supreme Court only set aside the notices of assessment as opposed to the actual assessments defined in section 2 of the Income Tax Act.

This sparked a series of exchanges between the parties. Zimra remained resolute in its stance that it was entitled to issue novel “notices of assessments”.

The impasse resulted in Nestle applying for declaratory relief in the High Court and when that was granted, there was the appeal by Zimra and the latest decision by the Supreme Court.

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