Investors who are considering entering the Zimbabwean market inevitably raise the question of the tax implications of their proposed transaction. Whilst many transactions are a replication of a business structure in existence, for which the tax implications are common, there are instances where the transaction is of a novel nature or where an investor requires certainty regarding how the Zimbabwe Revenue Authority (“ZIMRA”) will view the transaction. This is especially necessary for certainty in the transaction and transaction costs going forward.

In order to assist investors in Zimbabwe and the general body of taxpayers, section 34D of the Revenue Authority Act [Chapter 23:11] (the “RAA”) gives the Commissioner General of ZIMRA the authority to issue advance tax rulings upon application by any person interested in a transaction that is or may be liable to tax. An advance ruling is defined as “a written statement in the form of a binding general ruling, binding private ruling and binding class ruling issued by the Commissioner-General regarding the interpretation or application of the relevant Act”. The “relevant Act” includes one of the following, which are Acts which commonly affect investors:

1. Betting and Totalizator Control Act [Chapter 10:02];
2. Capital Gains Tax Act [Chapter 23:01];
3. Customs and Excise Act [Chapter 23:02];
4. Income Tax Act [Chapter 23:06];
5. Value Added Tax Act [Chapter 23:12].

As stated above, advance tax rulings are binding on the Commissioner General of ZIMRA and, therefore, have the effect of managing the risk of tax controversy which is both costly, uncertain and time consuming. Where the tax payer is in disagreement with the ruling, it also has the effect of preparing the tax payer for the disagreement with ZIMRA and potential tax controversy. This is because a binding private ruling may be cited by the Commissioner General of ZIMRA or by the applicant (tax payer) in proceedings before the court.^[1]

There are three types of binding advance tax rulings. They are as follows^[2]:

1. A binding class ruling being “an advance tax ruling issued in response to an application by an applicant regarding the application or interpretation of the relevant Act as it affects a specific class of persons”;
2. A binding general ruling, being an “advance tax ruling issued in accordance with the requirements of the relevant Act”;
3. A binding private ruling, being “an advance tax ruling issued in response to an application by an applicant regarding the application or interpretation of the relevant Act in respect of a proposed transaction as it affects the applicant alone.”

An investor will most likely require a binding private ruling. A caution is raised, however, that not every opinion applied for and expressed by the Commissioner General of ZIMRA is a binding ruling. Opinions of the Commissioner General of ZIMRA which do not adhere to the requirements of sections 2 and 10 of the Fourth Schedule of the RAA are classified as “non-binding private opinions.” These are written statements “issued by the Commissioner-General in response to an inquiry by a person in order to provide the person with informal guidance in respect of the tax treatment of a particular set of facts and circumstances or transaction, but which does not have any binding effect.”^[3]

For an opinion expressed by the Commissioner General of ZIMRA to be binding on ZIMRA it must meet the specific requirements of the Fourth Schedule of the RAA. Failure to meet the requirements will result in any court regarding the purported ruling as an opinion of the Commissioner General which is non-binding. Furthermore, in terms of section 3 of the Fourth Schedule to the RAA, there are cases where applications for an advance tax ruling must be rejected, for example, where proposed transaction that is hypothetical or not seriously contemplated. The majority of the cases where the application for an advance tax ruling may be rejected fall within the jurisdiction of the assistance provided by tax lawyers and corporate lawyers. Accordingly, it may be beneficial to obtain the assistance of a corporate lawyer or a tax lawyer in identifying the most appropriate avenue of assistance.