Key Tax Takeaways from the case.
The Matter Before the Courts in Layman’s Terms
Imagine you sign a piece of paper just to help a business partner move money to pay a foreign software supplier. You never actually earn or receive the massive amounts of money written on that paper; you just recover the bank charges. Then, years later, the taxman finds this document, decides you made a fortune in US Dollars, and freezes your bank accounts to collect “unpaid” foreign currency taxes—completely ignoring the reality of the situation and the country’s currency conversion laws.
That is exactly what happened in this case. Contitouch Technologies dragged the Zimbabwe Revenue Authority (ZIMRA) to the High Court after ZIMRA hit them with massive estimated tax bills in foreign currency. Contitouch asked the court for a declaratur—a formal statement from the judge declaring ZIMRA’s tax assessments invalid and unlawful.
The Facts of the Case
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The “Dummy” Contract: Around 2017, Contitouch Technologies entered into a contract with Africa Gaming (a sports betting company). Africa Gaming was struggling to find a correspondent bank to pay its offshore software suppliers. To justify the movement of money between the entities and facilitate these offshore payments, they drafted a contract stating Contitouch would be paid US$80,000 per month.
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The Reality: The court found this was a “putative contract”—a dummy agreement. Neither party intended for it to be legally binding, and Contitouch never expected to, nor did they ever, receive the US$80,000. They only earned back the bank charges they incurred while processing the payments.
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The ZIMRA Audit: ZIMRA conducted an audit, found the contract, and realized Contitouch had been declaring assessed losses since 2017 instead of claiming this US$80,000 monthly income.
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The Aggressive Assessment: Despite Contitouch providing bank statements proving the money never came in and explaining the nature of the contract, ZIMRA dug its heels in. They issued amended Income Tax and VAT assessments for 2017–2023 in foreign currency and proceeded to garnish Contitouch’s bank accounts at CBZ Bank.
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The Legal Clash: Contitouch argued that not only was the contract putative (and therefore not taxable), but even if it were valid, the Finance Act No. 2 of 2019 (giving effect to SI 33 of 2019) legally converted all such 2017 contracts to local currency at a 1:1 rate. Therefore, taxing them in foreign currency was illegal.
Key Takeaways from the Judgment
1. A Contract is Only Valid if There is True Intent
The court reinforced the “golden rule” of contracts: ascertain and follow the intention of the parties. Because Contitouch and Africa Gaming never intended to create a binding obligation for US$80,000, the contract was putative. ZIMRA cannot tax an income stream that never existed based purely on a piece of paper that doesn’t reflect the parties’ true intentions.
2. Currency Conversion Laws are Absolute
Even if ZIMRA had been right about the contract being valid, they fundamentally applied the law wrong. Under the Finance Act No. 2 of 2019, legacy contracts from 2017 were converted to local currency. ZIMRA’s insistence on issuing assessments in foreign currency when no foreign currency was actually earned or legally owed was ultra vires (beyond their legal power).
3. ZIMRA Bears a Burden of Proof
ZIMRA admitted they “estimated” the tax under Section 47 of the Income Tax Act. However, the court noted that ZIMRA failed to prove the contract was ever fulfilled or that the applicant actually received the funds. ZIMRA’s own lawyers even conceded that the amounts moving around varied and weren’t strictly US$80,000, severely undermining their own assessment.
4. High Court Jurisdiction in Tax Matters
ZIMRA tried to argue that the High Court didn’t have jurisdiction and that the matter belonged in a specialist court like the Fiscal Appeals Court. The judge swiftly rejected this, confirming the High Court has the jurisdiction to issue declaratory orders when administrative bodies act unlawfully.
5. ZIMRA is Not Above the Law (Punitive Costs)
In a stark warning to the revenue authority, the judge awarded costs against ZIMRA on a higher scale. The court lambasted ZIMRA for its “bad behaviour,” noting that they ignored a flurry of letters and endless meetings where Contitouch provided proof, and proceeded vexatiously anyway.
What Businesses Should Learn from this Case Law
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Be extremely careful with “Accommodation” Paperwork: While Contitouch won, this entire nightmare started because they signed a contract for US$80,000/month just to facilitate banking logistics. If your business acts as a payment conduit or agent, ensure your contracts explicitly state that you are an agent/facilitator earning a specific commission or fee. Do not draft generic service contracts with inflated numbers just to satisfy a bank’s compliance desk—ZIMRA will find it.
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Keep a Meticulous Paper Trail of Engagements: Contitouch was saved largely because they had a documented history of “relentlessly” trying to engage ZIMRA and providing bank statements to prove their case. If ZIMRA audits you, document every meeting, letter, and piece of evidence submitted.
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Don’t Accept Unlawful Foreign Currency Assessments: If your business has legacy contracts or local currency operations, ZIMRA cannot unilaterally demand taxes in foreign currency without statutory backing. Stand your ground on the currency laws (like SI 33/2019).
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You Can Fight Back Against “Self-Help” Tactics: ZIMRA often uses garnishing orders as a strong-arm tactic. This case proves that if ZIMRA acts arbitrarily, ignores evidence, and fails to cite the correct legal provisions, businesses can successfully approach the High Court to have those actions declared invalid and claim legal costs.
