National Foods Limited v Zimbabwe Revenue Authority

National Foods Limited (NFL), a Zimbabwean company engaged in milling, food manufacture and distribution, submitted income tax self-assessment returns for tax years 2014-2021. The Zimbabwe Revenue Authority (ZIMRA) conducted an audit and identified inconsistencies relating to management fees, technical fees, procurement agreements, and foreign currency tax obligations. ZIMRA issued assessments in September 2021, followed by further engagement with NFL. ZIMRA then issued additional assessments on 4 March 2022 comprising income tax of US$3,317,132.23 and ZWL592,226,753.97, non-resident tax on fees of ZWL386,219,563.52, non-resident shareholder tax of ZWL315,700,080.90, plus a 20% penalty for late payment. NFL disputed whether an objection had been filed to the September 2021 assessments and challenged the validity of the March 2022 assessments on multiple grounds.

• Whether ZIMRA became functus officio after issuing the September 2021 assessments and was thus precluded from issuing further assessments for the same tax period
• Whether the March 2022 assessments were validly issued in terms of section 47 of the Income Tax Act
• Whether the assessments complied with the statutory requirements set out in sections 2 and 51 of the Income Tax Act
• Whether the assessments properly indicated the empowering provision under which they were issued
• Whether the assessments properly notified the taxpayer of procedural rights to object within 30 days as required by section 51(3)
• Whether an objection had been filed to the September 2021 assessments
• Whether assessments marked 'original' could be issued when prior assessments for the same period existed
• Whether schedules of withholding taxes constituted valid assessments

1. The 15 schedules of withholding taxes dated 4 March 2022 appearing on record pages 272-286 were withdrawn and declared invalid. 2. The point in limine was dismissed. 3. Each party to bear its own costs.

A tax assessment must comply strictly with the requirements of sections 2 and 51 of the Income Tax Act. Section 51(3) requires that the Commissioner, in the notice of assessment itself (not in a covering letter), must give notice to the taxpayer of the right to object within 30 days. Assessments that fail to indicate ex facie the taxpayer's procedural rights are invalid and constitute nullities that cannot create tax obligations. The validity of an assessment is a matter that can properly be raised as a point in limine as it is potentially dispositive of a tax appeal. Where there is a dispute of fact on a critical issue affecting the validity of assessments (such as whether an objection was filed to prior assessments), the court cannot make findings without proper evidence being led or agreement between the parties.

The court observed that taking "two leaps per chasm is untenable" in reference to the Supreme Court's ruling in Nestle that assessments cannot be issued subject to further audit - they must be final. The court noted that while ZIMRA is empowered under section 47 to issue additional assessments where it discovers income not properly taxed, this power is subject to limitations including those in section 62(4) regarding the three-month period to respond to objections. The court emphasized that certainty is required in tax matters and revenue authorities should maintain clear records, including written confirmation of whether objections have been received and how they have been processed. The court suggested that ZIMRA could have clarified the basis for the March 2022 assessments by stating in its letters that re-assessments were being conducted pursuant to section 47 following further engagement with the taxpayer.

This case reinforces several critical principles in South African and Zimbabwean tax law: (1) the requirement of certainty in tax assessments; (2) the need for strict compliance with statutory formalities in issuing tax assessments; (3) the importance of assessments indicating ex facie the taxpayer's procedural rights, particularly the 30-day objection period required by section 51(3); (4) that invalid assessments are nullities that cannot create tax obligations; and (5) that covering letters cannot cure defects in assessments themselves. The judgment follows the Supreme Court's guidance in Nestle Zimbabwe v ZIMRA SC 148-21 and Zimbabwe Revenue Authority v Triangle Limited SC 59-23, emphasizing that validity of assessments can be raised as a point in limine as it is potentially dispositive of tax disputes. The case highlights the consequences when revenue authorities fail to maintain clear records and documentation of procedural steps in the assessment process.