Innscor battles ZIMRA over tax demands

Innscor Africa Limited, one of Zimbabwe's leading diversified conglomerates, has entered a high-stakes legal dispute with the Zimbabwe Revenue Authority (ZIMRA) over contested tax assessments exceeding US$18 million, citing uncertainty caused by shifting tax regulations and unclear transitional measures.

The dispute centers on the currency of settlement during the volatile period of 2019 to 2021, when Zimbabwe alternated between local and foreign currencies. Innscor insists it fully met its obligations at the time, paying in Zimbabwe dollars, the functional currency during the settlement periods. ZIMRA, however, demands that both principal amounts and accrued penalties be paid exclusively in US dollars.

"Innscor believes that the settlements it previously made fully expunged its tax liabilities in line with the legal requirements prevailing at the time," said Chairman Addington Chinake. He noted that legislative ambiguity regarding currency obligations has led to differing interpretations between taxpayers and authorities, creating uncertainty for corporate compliance.

As of June 30, 2025, ZIMRA issued additional assessments of US$13.398 million against Innscor's divisions and subsidiaries, with US$5.151 million imposed on associate entities. The company has formally objected and challenged these assessments in court.

Chinake highlighted the risks of Zimbabwe's "pay now, argue later" principle, which requires companies to remit disputed taxes while legal challenges proceed. To date, Innscor's divisions and subsidiaries have paid US$12.126 million, while associate entities have contributed a further US$4.934 million, with these sums recorded as taxation prepayments pending the outcome of appeals.

Despite the tax uncertainties, Innscor reported strong financial results for the year ending June 30, 2025. Revenue rose 19.4% to US$1.086 billion, driven by volume growth across all core segments. Profit increased 6% to US$50.98 million, even after absorbing a US$1.853 million loss due to exchange rate devaluation in the first quarter. Depreciation and amortisation costs climbed 16.2% to US$33.247 million, reflecting the group's ongoing capital investment programme.

Chinake confirmed shareholders received dividends, supported by disciplined cost management and robust cash generation.

While confident of prevailing in its legal challenge, Innscor warns that such disputes underscore the fragility of Zimbabwe's investment climate, where retroactive or ambiguous tax rules can create multi-million-dollar uncertainties. Executives note that these conditions discourage new capital deployment and disproportionately burden compliant companies, while informal operators often evade taxation entirely.

The outcome of this case could have far-reaching implications for Zimbabwe's corporate sector, investment predictability, and the interpretation of historic tax obligations in a transitioning currency environment.