Unki Mine (Private) Limited v Zimbabwe Revenue Authority

Unki Mine (Private) Limited ('the appellant'), a Zimbabwean platinum mining company and subsidiary of AmZim Holdings Limited Group ('Amzim'), which is part of the Anglo American Group ('Amhold'), paid US$10 million to the Tongogara Rural District Community Share Ownership Trust ('the Trust') in 2011. This payment was made in the context of Zimbabwe's indigenisation laws requiring foreign companies to transfer 51% equity ownership to indigenous entities. The appellant claimed this US$10 million as a tax deduction in its 2011 self-assessment, categorizing it as a contribution to the Community Share Trust under section 15 of the Income Tax Act. The Zimbabwe Revenue Authority ('the respondent') disallowed the deduction on 2 September 2015, finding the payment was of a capital nature and not made for trading purposes. The appellant objected, arguing the payment was made to comply with the Indigenisation and Economic Empowerment Act and was revenue expenditure. The respondent rejected the objection on 13 April 2016. The appellant appealed to the Fiscal Appeal Court, which dismissed the appeal on 8 January 2020, finding the donation was made by the appellant on behalf of its holding company Amhold and was capital expenditure.

• Whether the appellant had a legal obligation to donate US$10 million to the Community Share Ownership Trust under Zimbabwe's indigenisation laws
• Whether the US$10 million payment was deductible expenditure of a revenue nature or capital nature for income tax purposes
• Whether a subsidiary company can claim tax deductions for payments made on behalf of its holding company
• Whether the indigenisation compliance obligation rested on the appellant as a Zimbabwean subsidiary or on its foreign holding company Amhold

The appeal was dismissed with costs. The amended assessment issued by the Commissioner on 2 September 2015 was confirmed.

A subsidiary company cannot claim tax deductions for payments made on behalf of its holding company, as a holding company is a separate legal entity for income tax purposes. Each individual company within a corporate group must be assessed according to its own taxes and cannot make deductions in respect of expenses incurred by other companies in the same group. Under Zimbabwe's indigenisation laws, the legal obligation to comply with indigenisation requirements by transferring 51% equity ownership to indigenous entities rests on foreign holding companies, not on their Zimbabwean subsidiary companies. A taxpayer is only entitled to claim tax deductions where there is a legal obligation to incur the expenditure and where the applicable tax provisions allowing such deductions were in force at the time the expenditure was incurred.

The Court observed that even if the appellant had made the US$10 million payment on its own behalf (which it did not), it would not have been entitled to claim the deduction under the Income Tax Act in 2011 because the relevant provisions of section 15(2)(ii) only came into force on 1 January 2013 and did not have retrospective effect. The Court also noted that given its finding that the appellant had no legal obligation to make the payment, it was unnecessary to determine whether the payment was of a capital or revenue nature, and similarly that the court a quo need not have determined this issue either. The Court observed that the main object of the Trust was to use the proceeds for development programmes benefiting residents of the area, which was part of the broader indigenisation and empowerment schemes initiated by the Government of Zimbabwe.

This case is significant in Zimbabwean tax and corporate law as it establishes important principles regarding: (1) the separate legal personality of holding companies and subsidiaries for income tax purposes; (2) the principle that a taxpayer cannot claim tax deductions for expenses incurred by related companies within the same corporate group; (3) the interpretation of indigenisation obligations under Zimbabwe's Indigenisation and Economic Empowerment Act, clarifying that such obligations apply to foreign holding companies rather than their Zimbabwean subsidiaries; and (4) the non-retrospective application of amendments to tax legislation. The case reinforces the strict approach to tax deductions and the requirement that each company within a group be assessed according to its own tax position.