ZIMBABWEAN businesses continue to face challenges as tax authorities employ a controversial method dubbed the “stealth surcharge” that is pushing tax bills far beyond legally approved rates.
The Zimbabwe Revenue Authority (Zimra) introduced the Currency of Payment Revalorisation Mechanism (CPRM) in its multi-currency tax assessments for the 2019-22 period.
While meant to account for foreign currency income and local payments, experts say CPRM results in companies paying more tax than the statutory 25% income tax and Aids levy set by Parliament.
This practice effectively extracts a net amount in United States dollar economic terms that exceeds the rates expressly authorised by law.
The problem arises from a two-legged assessment trap.
First, Zimra assesses the tax amount on historical income received in US dollars at its full current value.
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Then, it credits payments already made in Zimbabwe Gold (ZiG) at outdated, historical exchange rates.
Due to the drastic depreciation of the local currency over time, these ZiG credits are worth only a small fraction of their value at the time of payment.
This leaves companies to cover a massive gap at the much stronger dollar rate, even though the original debt should have been neutralised by the prior payment.
The scale of this stealth surcharge is vividly illustrated in the latest financial results of Innscor Africa Limited.
The group is contesting massive assessments, where Zimra has deemed that historical taxes settled in local currency should have been paid exclusively in foreign currency.
As of December 31, 2025, additional assessments for Innscor’s divisions and subsidiaries amounted to US$13,140 million.
An additional US$5,157 million has been assessed against the group’s associate entities.
To remain compliant, while challenging the assessments in court, the group and its subsidiaries have already paid US$12,126 million to Zimra.
Its associate entities have paid a further US$4,934 million.
While Innscor is being assessed at current US dollar values for 2019-21 taxes, Zimra has given “no credit” for the equivalent amounts already lawfully settled in local currency.
Innscor has taken a firm legal stand, as noted in its latest report: “These assessments have been objected to and challenged at the courts, and are at various stages of appeal.
“Should these appeals not be successful, it is expected that the historical Zimbabwe dollars previously paid towards the settlement of these taxes will be refunded to the group in local currency, at the equivalent current value prevailing at the date that the refund occurs.”
This uneven application of exchange rates means effective tax rates exceed those allowed by law, raising serious legal questions regarding the principle of “no taxation without Parliament” approval.
Tax experts argued that Zimra is operating ultra vires or beyond its legal authority, by increasing tax obligations through administrative methodology rather than a parliamentary mandate.
By refusing to give credit for the equivalent value already paid in local tender, Zimra’s approach appears to ignore the Supreme Court principle of currency nominalism, which states that a debt must be paid in its nominal value regardless of fluctuations.
Following expert advice to safeguard corporate stability, Innscor has recorded these massive payments as taxation prepayments on its statement of financial position.
This reflects a disciplined legal strategy: paying the demand to avoid further penalties while formally reserving the right to a refund in “equivalent current value” should the court appeals succeed.
The asymmetry extends beyond income tax to value-added tax (Vat), where Zimra often restricts the deduction of ZWL input tax from US dollars output tax.
By imposing this “currency matching” requirement without an explicit statutory provision, Zimra effectively turns Vat into a gross turnover tax — a shift that undermines the fundamental design of the Vat system and contradicts administrative justice.
Furthermore, this practice ignores recent legal frameworks like Statutory Instrument 60/2024, which mandates the conversion of all ZWL balances to the new ZiG currency rather than a reconstruction using historical rates.
The financial consequences are severe: while Zimra applies penalties of at least 20% and interest of 10% to these new US dollar demands, the original depreciated ZWL payments do not accrue interest, resulting in what experts call the “double enrichment” of the fiscus.
Legal experts are advising affected businesses to adopt a disciplined strategy: challenge incomplete assessments, demand full reasoning for the conversion methods used and record all payments as being “made under protest” with a clear reservation of rights.
They warn that allowing administrative methods to outrun statutory power risks damaging Zimbabwe’s fragile economic recovery, jeopardising corporate stability and eroding investor confidence.
As Zimbabwe navigates complex economic realities, the debate over CPRM highlights the delicate balance between tax administration and legal constraints — a balance critical for the country’s financial stability and business environment.