Ice Class Properties (Pvt) Ltd v NMB Bank Limited and Zimbabwe Revenue Authority

The applicant borrowed money from the first respondent (NMB Bank) and failed to repay. On 20 December 2016, the applicant sold property (Stand 19610 Harare Township, 14.9665 hectares) to the first respondent to settle the debt, with a buy-back option until 20 December 2017, extended to 28 February 2018 by addendum. Five days before expiration, the first respondent sold the property to Chamber of Mines Pension Enhancement Fund for $5,986,600 with the applicant's consent. The parties agreed that from the purchase price, $2,052,258.30 would be held in trust to pay taxes (CGT or VAT whichever applicable) and amounts due to the first respondent. On 29 March 2018, the second respondent (ZIMRA) assessed both capital gains tax ($346,548.79) and VAT ($780,860.87) against the first respondent. The first respondent instructed its conveyancers to pay both taxes from the trust funds. The applicant objected to the VAT payment, claiming the first respondent as a financial services provider was not liable for VAT and only one tax (CGT or VAT) was payable per their agreement.

• Whether the VAT assessment by ZIMRA against the first respondent was unlawful and violated section 11(a) of the Value Added Tax Act
• Whether the first respondent was registered for VAT purposes and liable to pay VAT on the disposal of immovable property
• Whether the applicant had standing to challenge the VAT assessment made against the first respondent
• Whether a declaratory order under section 14 of the High Court Act was the appropriate remedy
• Whether the transaction constituted a loan settlement or a sale attracting VAT

The application was dismissed with costs.

A registered VAT operator is liable to account for VAT on all taxable supplies, including disposal of immovable property, regardless of whether its primary business involves exempt financial services, provided it engages in other VAT-liable activities. A tax assessment made by a statutory authority against a taxpayer registered for VAT, who disposes of immovable property, is lawful where the taxpayer is properly registered and has been conducting VAT-liable business activities. A party who is not the subject of a tax assessment and lacks privity with the tax authority has no standing to challenge the lawfulness of that assessment through an application for a declaratory order. A declaratory order under section 14 of the High Court Act is inappropriate where the real dispute is contractual breach rather than unlawful conduct violating constitutional or statutory provisions.

The court observed that the applicant took a complicated route of selling and repurchasing property rather than the straightforward route of passing a mortgage bond, suggesting this was because the applicant owed a large debt it could not repay and wanted to benefit from the sale proceeds. The court commented that the applicant was the author of its own misfortunes by lumping together matters that should not have been combined, and that the proper remedy was a suit for breach of contract against the first respondent rather than seeking a declaratory order against ZIMRA. The court noted that while the first respondent's default entitled the applicant to judgment, such judgment could not be granted based on the application as framed, since any breach by the first respondent was contractual and did not constitute unlawful conduct warranting a declaration.

This case clarifies the circumstances under which a registered VAT operator must account for VAT on disposal of immovable property, even when the operator's primary business is providing exempt financial services. It demonstrates that registration for VAT (particularly when retrospective) creates liability for VAT on all taxable supplies, including property sales. The judgment reinforces that third parties lacking privity of contract with a tax authority cannot challenge tax assessments made against other parties, and that contractual disputes regarding payment of taxes are distinct from challenges to the lawfulness of tax assessments. It illustrates the proper scope and limitations of declaratory relief under section 14 of the High Court Act, emphasizing that courts cannot declare lawful conduct unlawful and that breach of contract does not constitute unlawful conduct warranting a declaratory order.