Nissan Zimbabwe (1996) (Pvt) Ltd v The Commissioner General, Zimbabwe Revenue Authority

Nissan Zimbabwe (Nissan Z), a motor dealer and importer, was a subsidiary of Nissan South Africa. It did not sell vehicles directly to the public but only to franchised motor dealers. Due to severe foreign currency shortages in Zimbabwe, individual purchasers were required to pay the full foreign currency price directly to Nissan SA before vehicles were released through the supply chain in non-currency involved (NCI) purchases. The Zimbabwe Revenue Authority (Zimra) assessed Nissan Z for unpaid import duty of almost Z$15.5 billion, arguing that Nissan Z had improperly used its sales tax exempt status when importing NCI vehicles. Zimra contended that these vehicles were not imported for resale in the normal course of Nissan Z's business since end users had already paid for them. Nissan Z had also imported duty-free vehicles on behalf of returning residents, new immigrants, and disabled persons who enjoyed rebates, treating these as imports by the end-users. Nissan Z paid instalments under protest and objected to the assessment.

• Whether there was a sale between Nissan Z and Nissan SA and whether ownership of the vehicles passed to Nissan Z in NCI transactions
• Whether the NCI vehicles were imported by Nissan Z in the normal course of its business for purposes of section 20(1) of the Sales Tax Act
• Whether import tax was properly levied on Nissan Z or should have been levied on the end users
• Whether there was prejudice to the fiscus given that sales tax was ultimately paid
• Whether interest and penalties should be remitted due to lack of culpability on the part of Nissan Z

The appeal succeeded in part. The assessment for principal tax and interest was upheld. The penalties were set aside. Each party was ordered to bear its own costs.

Where a registered operator imports goods using its tax-exempt status, but the goods are not intended for resale in the normal course of its business because they have already been purchased by end users who paid the supplier directly, the importation falls within section 20(1)(b) of the Sales Tax Act and attracts import tax. The registered operator cannot rely on its tax-exempt status in such circumstances even if it physically handles the goods during importation. The transaction is properly characterized as facilitation of importation by the end users rather than importation for resale by the registered operator. Penalties under the Sales Tax Act may be remitted where there is reasonable cause for failure to pay tax and no deliberate evasion, but interest, being compensatory rather than punitive, should generally not be remitted unless the rate is punitive.

The court observed that Nissan Z was caught between economic challenges and high taxation, trying to maintain sales volumes in line with distribution agreements at competitive prices during severe foreign currency shortages. The court noted it was unnecessary to delve into the intricacies of the law of sale and passing of ownership to reach its conclusion, and that it would be unfair to compare the arrangement to disguised sales. The court also commented that the time difference between importation and final sale was about 30 days, meaning any loss to the fiscus would be limited to interest at 35% over approximately 30 days.

This case clarifies the application of section 20(1)(b) of the Sales Tax Act in Zimbabwe, particularly the meaning of "imported for resale in the normal course of business" in the context of complex distribution arrangements during periods of economic difficulty. It establishes that where a registered operator imports goods that have already been paid for by end users, even if passing through the registered operator's hands, the importation is not in the normal course of the operator's business and attracts import tax. The case also provides guidance on when penalties may be remitted under section 33(2) where there is no deliberate tax evasion, while distinguishing this from the levy of interest which serves a compensatory rather than punitive function.