Delta risks losing US$35m on taxes
BUSINESS REPORTER
Delta Corporation faces the risk of losing close to US$35m amid ongoing disputes between the Zimbabwe’s largest brewer and the Zimbabwe Revenue Authority (Zimra) with respect to the currency of payment of certain taxes and the methods of splitting the taxes by currency.
The complications came when the country made significant currency changes in 2018 resulting in different tax interpretations.
Also, further complications arose from the wording of the legislation in relation to the currency of settlement of certain taxes which give rise to interpretations that may differ with Delta and those of the tax authorities, thereby creating uncertainties in tax positions.
In a statement accompanying half year 2024 results ended September 30 2023, Delta chairman Sternford Moyo said the brewer has paid all taxes accordingly and will approach the courts to resolve the issues.
“Should the group’s appeal not be successful it would be refunded the Zimbabwe dollar payments made towards the settlement of these taxes.
“Due to the effects of inflation, these amounts would be equivalent to US$0.5m based on the exchange rate prevailing on September 30 2023. The resultant value loss to the group would amount to US$34,5m,” Moyo said.
He said the group continues to engage the relevant authorities while these assessments are being objected to and challenged through the courts.
Based on expert and legal advice received to date, the Board is of the view that the group entities acted within the confines of existing legislation.
Delta will make any payments with respect to the revised assessments have been accounted for as prepayments in anticipation of a successful appeal process.
For Delta to dispute, tax calculations, ZIMRA has made additional income tax and value added tax assessments, penalties and interest of US$54.7m against the group entities for amounts that were settled in Zimbabwe dollars, but that ZIMRA deem should have been paid in foreign currency.
“No credit has been given by ZIMRA to the equivalent amounts already paid in legal tender of Zimbabwe. The principal amount settled in Zimbabwe dollars, which exclude penalties and interest, is equivalent to US$9.8m for Income Tax and US$25.2m for Value Added Tax [total US$35m] based on the exchange rates prevailing on the date of payment,” Moyo said.
Similarly, Natbrew Zambia is challenging an assessment by the Zambia Revenue Authority relating to transfer pricing positions on royalties and group charges for periods prior to the acquisition of the entity.
The group considers that its settlements were made in line with the legal requirements and anticipates a favourable determination on these tax matters based on its interpretation of the law.
Delta reported a 164% increase in revenue in the six months to September 30, 2023 to ZWL$1.9 trillion from ZWL$728.91bn achieved in the prior comparative period due to strong volume growth across all business units.
The rise in topline comes after the business invested US$70m in capacity in the Chibuku Super Plant and packing line, PET packaging line, and lager beer glass packaging line.
“The spike in revenue reflects the volume growth across business units and the increased proportion of foreign currency sales to over 80%. There was an increase in the proportion of domestic transactions settled in foreign currency,” Delta CEO Matts Valela said.
Earnings before interest and tax (EBIT) grew by 153% to ZWL$408bn in inflation adjusted terms.
Delta bottom line surged 420% to ZWL$338.78bn during the period under review from ZWL$65.17bn due to the rate tracking prices and high volumes.