Discover moreWatervehiclewaterThe Zimbabwe Revenue Authority (ZIMRA) has won a major Supreme Court appeal against Pacific Cigarette Company (Private) Limited after the court ruled that the company was not entitled to a tax clearance certificate (TCC) while owing more than US$19.5 million in taxes and operating under corporate rescue.
In a unanimous judgment delivered in Harare on 16 February 2026, a three-judge panel found that the High Court had "erred and misdirected itself" when it compelled ZIMRA to issue the struggling cigarette manufacturer with a TCC despite massive arrear tax assessments and ongoing corporate rescue proceedings.
Pacific had been placed under corporate rescue on 20 September 2023 after falling into financial distress triggered by arrear tax assessments of US$19,204,398.35 in income tax and US$330,140.26 in non-resident tax on fees, amounts that ZIMRA said 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.
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ZIMRA rejected the application, insisting the company still had an outstanding ZWL$1 million in current obligations and owed legacy arrears amounting to more than US$19 million. Although Pacific settled its current obligations, it made no payment toward the arrears.
The Supreme Court said refusing to issue the certificate was lawful and did not amount to an "enforcement action" prohibited by section 126 of the Insolvency Act, which suspends legal proceedings against companies under rescue. Justice Antonia Guvava, writing for the court, said: "To characterise the appellant's decision as an enforcement action is to miscomprehend both its form and function."
She explained that enforcement action refers to formal, court-driven measures such as the execution of court orders.
By contrast, ZIMRA's refusal was simply an administrative consequence of unmet tax 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 court agreed with ZIMRA that tax obligations arise "ex lege" by operation of law and are not suspended merely because a company enters corporate rescue.
Routine tax administration, the judges held, is not barred by the corporate rescue moratorium. The court said a literal reading of the law produced no absurdity and must be applied as written: "Courts are not at liberty to re-write legislation under the guise of interpretation."
Pacific had argued that withholding the TCC was an indirect attempt to force payment of arrear taxes in breach of the moratorium. But the Supreme Court ruled that the company failed to prove it was entitled to the certificate in the first place, especially given that the corporate rescue plan had not included a proper repayment arrangement for the arrears.
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ZIMRA also argued that the payment proposal later offered by the rescue practitioner, a 40-year plan, was unrealistic and was never adopted into the binding rescue plan.
The judgment overturns the High Court's finding that the Insolvency Act overrides the Revenue Authority Act. Instead, the Supreme Court ruled that the High Court misdirected itself by treating tax administration as an enforcement action.
In the end, the court upheld ZIMRA's appeal in full, concluding that the High Court's declaratory order was improperly granted. It further ruled that there was no basis to penalise the tax authority with costs for exercising its statutory mandate.
The court ordered that the High Court judgment be set aside and replaced with an order dismissing Pacific's application, with costs.
