HARARE – The High Court of Zimbabwe has ruled in favour of Contitouch Technologies (Pvt) Ltd, declaring foreign currency income tax and VAT assessments issued by the Zimbabwe Revenue Authority (ZIMRA) invalid.
Justice Gibson Mandaza presided over the case, which centered on a disputed contract between Contitouch and Africa Gaming.
Contitouch argued that ZIMRA’s assessments were unlawful because they were denominated in foreign currency, despite the company never having earned any foreign currency as stipulated in section 4(A) of the Finance Act.
The company further contended that a contract with Africa Gaming, upon which the assessments were based, was a “putative” or non-binding agreement intended only to facilitate the movement of funds for Africa Gaming’s software payments to a foreign supplier.
Contitouch asserted it merely processed these payments and was only compensated for bank charges incurred.
Despite Contitouch’s repeated attempts to engage with ZIMRA and provide evidence, including bank statements, demonstrating the contract’s true nature, ZIMRA insisted on the validity of the assessments.
ZIMRA argued that the contract stipulated payments of US$80,000 per month to Contitouch, which were not reflected in the company’s tax returns.
ZIMRA maintained that the contract was valid, that Contitouch had never previously disputed it, and that the “putative” argument was an afterthought.
They also argued that the contract predated Statutory Instrument 33 of 2019 and the subsequent Finance Act No. 2 of 2019, and therefore could not be considered a local currency contract.
Justice Mandaza, however, found in favour of Contitouch, stating that the “golden rule” in contract interpretation is to ascertain and follow the parties’ intention.
The court noted the lack of evidence proving that the contract with Africa Gaming was ever fulfilled or that Contitouch received the claimed US$80,000 monthly payments.
The judge questioned ZIMRA’s insistence on the US$80,000 figure, especially after ZIMRA admitted that the actual payments varied.
The court also highlighted ZIMRA’s failure to specify the legal provision under which the assessments were issued, citing a previous Supreme Court ruling that requires ZIMRA to clearly state the legal basis for its actions.
Furthermore, the judge pointed out that ZIMRA disregarded the provisions of Finance Act No. 2, which converted existing contracts to local currency.
Justice Mandaza stated that Contitouch had a direct and substantial interest in the matter, fulfilling the requirements for a declaratory order.
The court also dismissed ZIMRA’s claim that Contitouch had not exhausted internal remedies, noting the numerous unsuccessful attempts by Contitouch to engage with ZIMRA.
“The gist of the matter is that the Respondent (ZIMRA) by its admission taxed the Applicant on a contract that was not put into operation. The matter could have been easily solved if the endless meetings that were held had yielded results.
“Despite being shown proof that the contract was not put into action, the Respondent still insisted on taxing the Applicant in foreign currency which it had not earned. The Respondent was insistent on taxing in foreign currency to the extent of ignoring Finance Act number 2.
“The respondent cannot be above the law. As such it must be visited with costs,” the judge ruled.
The court declared the foreign currency tax assessments invalid and ordered ZIMRA to pay Contitouch’s legal costs on a higher scale, citing ZIMRA’s persistent pursuit of the case despite the lack of evidence and their disregard for relevant legislation.
The court deemed ZIMRA’s conduct worthy of censure, emphasizing that no entity is above the law.
Mawere and Sibanda represented Contitouch, while the ZIMRA Legal Department acted on behalf of ZIMRA.
