The
applicant seeks a provisional order in the following terms:
“Terms of final order sought
That
you show cause why a final order should not be made in the following terms:
1. That
it be declared that the respondent's assessment dated 7th July 2010,
for the tax payable of US$822,379=12, be and is hereby deemed to have been
received by the applicant on 25th October 2010.
2. That
the applicant's objection to the respondent dated, 28th October
2010, be and is hereby deemed to have been filed within time.
3. It
be and is hereby declared that the letter by W. Madya, dated 30th
November 2010, dismissing the applicant's objection dated 25th
October 2010 be and is hereby declared to be null and void as it was not
drafted and signed by, or, on behalf of the Commissioner-General of the
respondent.
4. The
respondent be and is hereby ordered, through its Commissioner-General, to
consider the applicant's objection dated 28th October 2010 and to
respond in detail thereto.
5. It
is declared that applicant shall thereafter be entitled to file an appeal in
terms of the Income Tax Act against the Commissioner-General's decision in the
event the applicant will be dissatisfied with the said decision.
6. That
pending the resolution of an appeal against the Commissioner-General's decision
in the event such appeal is filed, the respondent shall be stopped from placing
a garnishee on any of the applicant's bank accounts.
7. That
in the event that the Commissioner-General does not give his written response
within three months, from the 28th October 2010, then it be and is
hereby declared that the applicant's employees' tax liability on the total
amount of R12,884,079= shall be deemed to be no more that R2,273,798=51 and the
respondent be and is hereby ordered to refund to the applicant, within seven
days of the granting of this order, the excess paid to it by the applicant.
8. That
the respondent shall pay the costs of suit on the legal practitioner client
scale.
Interim relief granted
Pending
the return date and finalization of this matter, the applicant is granted the
following interim relief:
(a) The
garnishee order placed by the respondent through its Chiredzi Branch on the
applicant's Standard Chartered Bank account held with the Chiredzi Branch, be
and is hereby suspended and the bank officials of the aforementioned bank be
and are hereby ordered to ignore the directive to garnishee the applicant's
account by the respondent.
(b) In
the event that the garnishee has been effected, it be and is hereby ordered
that it be reversed and the respondent is hereby ordered to transfer back to
the applicant's Standard Chartered account held with the Chiredzi Branch, the
monies transferred to it via the garnishee, within 24 hours of the granting of
this order.”
The
background facts of this case are the following.
The
applicant is Triangle Limited, a limited liability company carrying on business
in Triangle. The respondent is the Zimbabwe Revenue Authority. In May 2010, the
Zimbabwe Revenue Authority carried out a pay-as-you-earn (“PAYE”) audit on the
applicant. The audit is still on-going. While conducting the audit, the
Zimbabwe Revenue Authority's officers got a tip off that the applicant's
Executive Management had received part of their remuneration from the
applicant's parent company, Tongaat Hullet, which is based in South Africa
during the period ranging from March 2008 to February 2009. These amounts did
not form part of the applicant's payroll and were it not for the tip-off such
remuneration would never have been discovered by the Zimbabwe Revenue
Authority. The Zimbabwe Revenue Authority then wrote an e-mail to the
applicant's Human Resources Director, one F.Nyangwe, on 10 May 2010, enquiring
about this alleged remuneration which was not being declared. On 17 May 2010,
Tongaat Hullet's Tax Manager, a Mark Sandiford, responded to the enquiry of 10
May 2010. He admitted that, indeed, certain key managers of the applicant and
Hippo Valley received payments from Tongaat Hullet. He further stated that the
said payments were for “required provision of services” by the said employees
of the applicant and Hippo Valley to Tongaat Hullet in South Africa which is
outside Zimbabwe. He then argued that since the services were performed in
South Africa the affected persons were subject to tax in South Africa. A
schedule was presented of the amounts paid to these individuals and the taxes
paid to the South African Revenue Service in that regard. By letter dated 20
May 2010, the Zimbabwe Revenue Authority responded to the applicant advising
that since the managers in question had not been resident in South Africa for a
period of 183 days rendering the alleged services, the remuneration was subject
to taxation only in Zimbabwe in terms of the provisions of Article 1X(2) of the
Double Taxation Agreement between Zimbabwe and South Africa. In the
circumstances, the Zimbabwe Revenue Authority computed the tax payable and
prepared a schedule. The said letter and the schedule were presented by Ms
Chasi of the Zimbabwe Revenue Authority to Mr Nyangwe of the applicant on 20
May 2010. These documents were explained to Mr Nyangwe by Ms Chasi and the
former undertook to respond on behalf of the applicant in due course. By 7 July
2010, the applicant had not yet commented on the schedule and the letter.
Neither had it paid the amounts due in terms of the schedule. The Zimbabwe
Revenue Authority then issued out two assessments to the applicant which were
again served on Mr Nyangwe on 7 July 2010. The first assessment, being number
91076005, was for withholding tax in terms of section 10(1)(a) of the 13th
Schedule of the Income Tax Act. The second assessment was number 91076115 for
penalty in terms of section 10(1)(b) of the 13th Schedule of the
Income Tax Act. The applicant did not
pay the tax assessed resulting in the Zimbabwe Revenue Authority resorting to
garnishees to recover the tax. A garnishee was placed on the applicant's…,
bankers for the full amount of tax comprising the principal amount and the
penalty amount. The amount demanded was ZAR12,606,072=. Tongaat Hullet offered
to pay the principal amount for the garnishee to be withdrawn on condition that
the parties engage in dialogue on the issue of the penalty.
The
Zimbabwe Revenue Authority withdrew the garnishee and the applicant indeed
settled the principal amount.
