Introduction
The Zimbabwe Revenue Authority (ZIMRA) is a statutory body established in terms of The Revenue Authority Act [Chapter 23:11] tasked with the administration and collection of revenues due in terms of various taxing statutes including the VAT Act, the Income Tax Act and the Custom and exercise Act.
Zimbabwe currently operates on a source-based tax regime, meaning income sourced within or deemed to have been sourced from Zimbabwe will be subject to tax.
Value added tax is a transactional tax, and its implications vary from transaction to transaction. This simply means some transactions are taxed at a rate of 15% while other transactions are exempt from value added tax. Customs and Excise Act relates to taxes imposed on goods imported into Zimbabwe.
Tax Assessment
Every tax payer is obliged to submit a tax assessment to ZIMRA after the end of each tax year. ZIMRA will scrutinize the assessments as per the tax payer computations for any anomalies, if there are anomalies, ZIMRA will do additional assessment and send it to the tax payer for settlement of same. It is these assessments that give rise to disputes which in most instances culminate to litigation.
Tax payers are encouraged at this stage to engage the services of a lawyer with adequate experience in tax matters to challenge the assessment by ZIMRA. In the past a number of tax payers have unnecessarily lost their cases on procedural grounds which could have been avoided by engaging a lawyer.
How an Assesment is Challenged
The law provides two ways in which an assessment may be challenged. A taxpayer who is aggrieved by an assessment may lodge an objection with the Commissioner of the Taxes against the assessment or file an appeal.
The first step is to lodge an objection against the assessment. An objection is an internal review mechanism for resolving disputes between the taxpayer and the taxing authority. The law does not stipulate the possible reasons for an aggrievement giving rise to the lodging of an objection. However, it does provide challenges done by way of objection to assessments which the taxpayer considers to be valid and not assessments which the taxpayer challenges on the basis that they are invalid or unlawful.
Whilst the law does not stipulate what the reasons for the aggrievement should be for a taxpayer to lodge an objection, the assessment impugned must be valid. An assessment should be done in accordance with the law. The use of the word “any assessment” in the Act implies that there must be an assessment and a valid one made by the respondent before any challenge can be raised by way of an objection. The courts have already pronounced that an assessment must be issued in terms of the law and that where it is a nullity, it cannot create any obligation to pay tax, its existence being paramount before it can be challenged by way of objection or appeal.
A taxpayer is entitled to file an appeal to the Commissioner after his objection has been filed, determined and turned down by the Commissioner and may do so in terms of s65(1) of the Act which stipulates that the decision of Commissioner is appealable to the High Court or the Special Court.
Whether a taxpayer has an entitlement to lodge an objection or appeal to the Special Court depends on the nature of the grievance of the taxpayer. Nonetheless, an appeal can only be lodged where there is a valid assessment.
Procedure where an Assessment is Impugned on the basis that there is No Valid Assessment
The Act doe not make provision for an interlocutory application relating to an objection or appeal or make specific provision for a challenge to validity of an assessment. In the case of a challenge to the validity of an assessment, it is legally accepted that the remedy of an objection and appeal may not be the appropriate course to follow, entitling the taxpayer an election to challenge the assessment by way of a declarator.
The courts have already pronounced that where a taxpayer cites that there is no valid assessment or that an assessment is unlawful and invalid, a taxpayer’s recourse lies with the High Court for a declaration of the law.
Where there is no valid assessment, there can be no valid objection or appeal. In the case of a challenge to the validity of an assessment, it is legally accepted that the remedy of an objection and appeal is not the appropriate course to follow entitling the taxpayer to elect to challenge the assessment by way of a declaratur.
The High Court’s has discretionary powers to grant a declarator. Declaratory relief is a statement of a legal position made by the court at the request of a party to litigation. It is settled law that declaratory order is an order by which a dispute over the existence of some legal right or obligation is resolved
Can a Taxpayer file a declaratur after an objection has been filed and determined?
It is settled that a point of law may be raised at any stage of the proceedings. The fact that a taxpayer has objected to an assessment resulting in it being turned down by the Commissioner does not imply the existence of a valid assessment nor is a taxpayer bound to that course. The taxpayer is not barred from seeking a declaratur at the High Court for a determination of the validity of an assessment which is a point of law.
Time periods within which to lodge Objections and or Appeal
With regards to Value Added Tax and Income Tax assessments, a taxpayer has 30 days to lodge an objection with the Commissioner. ZIMRA has three months to respond to the objection. However, after the expiry of the three months period and ZIMRA has not responded to the objection, it is deemed that the objection has been dismissed.
Upon receiving a response from the Commissioner in respect of the objection to the assessment or after the expiry of the three months, a taxpayer has 21 days to lodge an appeal with the Fiscal Court in respect of Value Added Tax and in the Special court in respect of Income Tax.
The Customs and Excise Act is very strict on timelines, here a taxpayer is issued with a notice of seizure after the taxpayers’ goods has been seized. A taxpayer must engage a legal practitioner and furnish him or her with the notice of seizure. The legal practitioner must scrutinize the notice of seizure for compliance with the Act.
In terms of the Customs Act, a taxpayer intending to institute proceedings against the Commissioner must give 60 days’ notice in writing to the Commissioner of the intended proceedings. After the expiry of the notice period a taxpayer has 30 days to lodge the objection in respect with the notice of seizure. After the determination of the objection, an appeal may be lodged within 21 days to the Special Court.