Zimra in a major legal victory against Pacific Cigarette Company

The Zimbabwe Revenue Authority (ZIMRA) has secured a major legal victory after the Supreme Court of Zimbabwe ruled that Pacific Cigarette Company (Private) Limited was not entitled to a Tax Clearance Certificate (TCC) while owing more than US$19.5 million in outstanding taxes and operating under corporate rescue.

In a unanimous judgment delivered in Harare on 16 February 2026, a three-judge bench overturned a High Court ruling that had compelled the tax authority to issue the struggling cigarette manufacturer with a TCC despite substantial arrears and ongoing insolvency proceedings.

Pacific Cigarette Company was placed under corporate rescue on 20 September 2023 after falling into financial distress triggered by arrear tax assessments amounting to US$19,204,398.35 in income tax and US$330,140.26 in non-resident tax on fees. ZIMRA maintained that the amounts remained due and payable.

After creditors - including ZIMRA - unanimously adopted a corporate rescue plan on 3 April 2024, Pacific applied for a TCC on 2 January 2025.

ZIMRA rejected the application, citing an outstanding ZWL$1 million in current obligations and legacy arrears exceeding US$19 million. Although the company subsequently settled its current obligations, it did not make any payment toward the historical debt.

Writing for the court, Justice Antonia Guvava held that the refusal to issue the certificate was lawful and did not constitute an "enforcement action" barred by Section 126 of the Insolvency Act, which suspends legal proceedings against companies under corporate rescue.

"To characterise the appellant's decision as an enforcement action is to miscomprehend both its form and function," she said.

The court clarified that enforcement action refers to formal court-driven measures such as the execution of court orders. By contrast, ZIMRA's refusal to issue a TCC was an administrative consequence of unmet statutory obligations.

"The appellant's refusal to issue the TCC was not an act of enforcement but a lawful administrative consequence of unsatisfied tax obligations demanded by s 34C of the Revenue Act," the judgment stated.

The bench agreed with ZIMRA that tax obligations arise ex lege - by operation of law - and are not automatically suspended merely because a company enters corporate rescue.

The judges further ruled that routine tax administration is not barred by the corporate rescue moratorium and that courts must apply legislation as written.

"Courts are not at liberty to re-write legislation under the guise of interpretation," the ruling read.

Pacific had argued that withholding the TCC amounted to an indirect attempt to compel payment of arrears in violation of the moratorium. However, the Supreme Court found that the company had failed to demonstrate that it was entitled to the certificate, particularly since the corporate rescue plan did not incorporate a binding repayment arrangement for the arrears.

ZIMRA also challenged a later proposal by the rescue practitioner to settle the debt over 40 years, arguing that it was unrealistic and had never been formally adopted into the approved rescue plan.

In overturning the High Court's decision, the Supreme Court rejected the lower court's view that the Insolvency Act overrides the Revenue Authority Act. Instead, it held that the High Court had misdirected itself by treating routine tax administration as enforcement action.

The appeal was upheld in full, with the Supreme Court setting aside the High Court's declaratory order and replacing it with an order dismissing Pacific's application with costs.