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Zimra knocks on Innscor’s door for extra US$1,46m tax

THE Zimbabwe Revenue Authority (Zimra) has knocked on Innscor Africa Limited’s door for US$1,46 million in additional taxes after an assessment of the group’s payment of taxes in the period 2019 to 2021.

In Innscor’s full financial year ended June 30, 2024, Zimra had assessed additional income taxes, penalties and interest amounting to US$11,74 million.

The tax was for the period 2019 to 2021 against Innscor’s divisions and subsidiaries for amounts that had already been settled in Zimbabwe dollars. The tax authority argued that the tax should have been paid exclusively in foreign currency.

In its half-year financial report ended December 31, 2024, Innscor revealed that the total amount being sought by Zimra from the group’s divisions and subsidiaries had risen to US$13,21 million.

These tax obligations were slapped on Innscor, a consumer staple and durable goods manufacturer, despite the group having ongoing engagements with the authorities over the matter.

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“The Zimbabwe Revenue Authority (Zimra) continues to assess additional income taxes, VAT [value added tax], penalties and interest for this particular period for amounts already settled by group entities in Zimbabwe dollars but which Zimra deemed should have been paid exclusively in foreign currency or for matters on which the group believes it has no tax liability,” Innscor chairperson Addington Chinake said.

“As at 31 December 2024, the total amount being sought by Zimra from the group’s divisions and subsidiaries amounted to US$13,211 million, while the collective amount for associate companies for the same period in question (2019 to 2021) amounted to US$4,718 million.”

He said no credit had been given by Zimra to the equivalent amounts already paid in the country’s local tender.

Chinake made the remarks in a statement attached to the group’s half-year results under review.

“The group’s divisions and subsidiaries have so far paid a total of US$11,346 million under the ‘pay now, argue later’ principle out of the total amounts assessed, while the group’s associate entities have paid a further US$4,501 million,” he said.

The group said the local market has experienced significant currency and legislative changes since 2018, which have created numerous uncertainties in the tax treatment of transactions due to the absence of clear guidelines and transitional measures.

“In addition, there are further complications arising from the wording of the legislation concerning the currency of settlement of certain taxes for the periods 2019 to 2021, which give rise to interpretations that may differ from those of the tax authorities, thereby creating uncertainties in tax positions,” Chinake said.

Consequently, ¬ Innscor has objected to and challenged these assessments at the courts, which are now at various stages of appeal.

“Should the group’s various appeals not be successful, it is assumed that the historical Zimbabwe dollars previously paid towards the settlement of these taxes will be refunded to the group in local currency, at the equivalent current value prevailing at the date that the refund occurs,” Chinake said.

“The group continues to engage the relevant authorities while these assessments are being objected to and challenged through the courts.”

He said the tax payments had been made with respect to the revised assessments and have been accounted for as taxation prepayments on the group’s statement of financial position in anticipation of a successful appeal process.

“The group believes that the settlements it previously made to fully expunge its tax liabilities for these historical periods were in line with the legal requirements prevailing at the time of settlement,” Chinake said.

However, he said ¬legislative gaps giving rise to differences in interpretations remain and could lead to additional assessments for periods not yet audited by Zimra.

Local companies have been complaining about excessive taxes, with the average firm paying 51 such obligations.