Tanzania Revenue Authority (TRA)

The hearing of the main appeal filed at the Tax Revenue Appeals Board late 2011 could not commence as TRA submitted a preliminary objection that was heard early last week, and its ruling given the following day in Dar es Salaam.

Tax revenue appeals board chairman Pentarin Kente ruled that the board declare that the preliminary objection raised by the respondent has no basis in law. “It is consequently dismissed but with an order that each party shall bear its own costs.”

Kente also noted in his ten-page ruling that the main appeal shall proceed to hearing on a date to be fixed by the board and communicated to the parties in due course.

The respondent (TRA) had raised the preliminary objection on two grounds, first that the appeal was incompetent for being instituted prematurely before issuance of tax assessment, and the second being that the appeal was bad in law as the appellant was appealing against a decision which did not exist.

TRA counsel Switi Salvatory had contended before the board that the said appeal was not tenable in law as it was lodged rather prematurely without the requisite assessment as provided for under section 12 of the Tax Revenue Appeals Act, or the notice of existence of tax liability as provided for under section 14(2) of the same act.

But board chairman Kente’s ruling states: “We have examined the disputed document and the applicable law in relation to the present matter. With all due respect we can not contemplate the real objective of the letter (Annexture FB1) apart from the information given by the respondent to the appellant company to inform it that it is liable to pay tax amounting to 196,000,000 American Dollars. If anything the same can be correctly interpreted as being the notice with regard to the existence of tax liability to pay tax as envisaged be section 14(2) of the Tax Revenue Appeal Act.”

There is also 1 percent of stamp duty amounting to $9,800,000 but this was not involved in the dispute as it does not require assessment under the applicable tax laws.

Kente adds: “Perhaps the erroneous position maintained by the respondent in this matter is premised on the assumption that prior to the issuing of an assessment, the respondent is at liberty to engage in correspondences with the tax-payer as he wanted, ad infinitum.”

“The message from this board is that while this could be true, the law does not empower the Commissioner General or his assistants in the course of such correspondences to issue vague and involuted notices which will put the tax-payer in a life full of uncertainty.

The more the respondent does so the more he plays into taxpayer’s hand. By inference such taxpayer has the right to come to this board as he seeks for legal redress.”

The ruling went ahead to state that what boiled down in the respect of the appeal is that except in deserving cases, the board would not condone any act or omission by any tax officer which translates into unnecessary bureaucracy and even inefficiency in tax administration.

“—– It is therefore incumbent upon tax administrators to treat every tax dispute with utmost sobriety and clarity knowing that they just might end up being faced with major opposition making it ideal for civil litigation as it is in the instant case,” affirmed the board chairman.

On the main appeal the appellant (ARMZ) represented by lead counsel Fayaz Bhojani prays it can not liable for income tax as he says that the appellant is a nonresident company that has no presence in Tanzania.

“It is not registered in Tanzania and has no Tax Identification Number (TIN) and hence any decisions by the respondent (TRA) on the appellant are ultra vires, and the appellant challenges the jurisdiction of the respondent in making such decisions.”

ARMZ also argues that the payment for acquisition of shares by the appellant of Mantra Resources Limited of Australia has no source of income whatsoever in Tanzania.

The Russian firm owned by State Atomic Agency Corporation (Rosatom) stands that the appellant acquired shares from Mantra Resources Ltd, a company registered in Australia and not Mantra Tanzania Limited which is a company registered in the United Republic.

Furthermore the appellant contends that the respondent erred in law and/or fact in saying that the appellant acquires shares of Mkuju River Project which has no shares and cannot be acquired.

He also asserts that the respondent erred in law and/or fact in concluding that there was a change in control of Mantra Tanzania Ltd following the appellant’s purchase of shares in Mantra Resources of Australia.

Other legal arguments by the appellant is that the respondent erred in law by concluding that there was a realization of a domestic asset by the appellant in Tanzania and that the appellant had a tax liability arising from investment income from the United Republic.

But TRA argues in their letter dated November 30, 2011 that: “We agree that ARMZ is a non-resident company that had acquired shares of a foreign company from another non-resident company. It is equally true that the Commissioner has jurisdiction to tax non-residents if there is a nexus connecting the non-resident person and the source of income in Tanzania. The nexus arises where the source of income originates in the tax jurisdiction.

The source of income is determined in accordance with the source rules as provided for under section 68 of the Income Tax Act.”

In March 2011ARMZ acquired shares of Mantra Resources Ltd of Australia, the mother company of Mantra Tanzania Ltd, holder of the Mkuju River uranium mining concession.

The Mkuju River uranium project has estimated resources of 101.4 million pounds (24 million kilograms) of uranium oxide concentrate, equivalent to 77 per cent of global mined output in 2010. The project would last for 12 years as the country expects to earn $5 million a year through royalties.



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