TRA defeats GGM in 3 billion tax battle

[Dua]

TRA defeats GGM in 3bn/- tax battle​

THE Court of Appeal has ordered the Gold Mining Company, Geita Gold Mine (GGM) Limited, to pay about 3bn/- to the Tanzania Revenue Authority (TRA) as withholding tax for various transactions made to third parties.

Justices Stella Mugasha, Gerald Ndika and Mary Levira ruled in favour of the Commissioner General with TRA after dismissing with costs the appeal the mining company, as appellants, had lodged to fault findings of the Tax Revenue Appeals Tribunal (Tribunal).

“The appeal is not merited,” the justices ruled. “We uphold the decision of the Tribunal, order the appellant to pay the demanded withholding tax at the prescribed rate plus interest thereon.

In the result, the appeal is dismissed with costs,” they declared. The justices noted that the obligation to pay tax is a creature of statute under section 6(1) (a) and (b) of the Income Tax Act whereby, in case of a reside person the criterion is the chargeable income for the year of income from employment, business or investment.

According to the panel, a similar criterion is applicable to a non-resident person, but only to the extent that the income has a source in the United Republic of Tanzania.

The justices noted further that it was not in dispute that, according to the Gold Mine Development Agreement (MDA Agreement), the appellant is entitled to enjoy the tax incentives stated therein.

Also, they said, the appellant is as well obliged to withhold tax at the rate of three per cent from payment made to third parties who supplied technical services to the appellant as prescribed under the Income Tax Act of 1973.

But the parties had locked horns on the applicable clauses of the MDA and propriety or otherwise of the applicability of the Income Tax Act of 2004 which had changed the rate of tax to be withheld from three to 15 per cent.

In disposing of the grounds of appeal, therefore, the issue for the Court’s determination was whether or not the obligation to withhold income tax under clause 4.5 of the MDA is static regardless of the new rate of 15 per cent subsequent to change of the law.

After having closely scrutinised the Agreement in question, the justices were of the views that it was common ground the appellant, who was privy to it was legally obliged to withhold taxes from the nonresident third parties who provided services to him.

“In our jurisdiction which is the practice in the Commonwealth jurisdictions, the effect of repealing Legislation is that, unless the contrary intention appears the repeal does not revive anything not in force or existing at the time at which the repeal takes effect,” they said.

During hearing of the appeal, the counsel for the appellant company had stated, however, that clause 4.2 of the MDA bars the application of new rates of withholding tax which were intended to be static throughout the lifespan of the mine.

In their judgment, the justices ruled that it is crystal clear that the tax and duties referred to in the clause are those imposed on companies including the appellant whereas under clause 4.5.2 he was obliged to withhold tax from payment made to third parties and remit the same to the respondent.

“Therefore, the change in the rate of withholding through amendment or repeal of the law, does not in any way affect the appellant who collects such tax on behalf of the respondent.

Thus, the appellant’s complaint that the rate of 3 per cent was intended to be static is unfounded,” they said. The appellant is a Gold Mining Company dealing in the mining industry in Geita region.

On June 24, 1999 the appellant through its shareholders entered into the MDA with the government of the United Republic of Tanzania pursuant to which he was entitled to enjoy tax incentives stipulated therein.

Between 2009 and 2011, the appellant claimed to have engaged various non-resident persons to perform technical services in connection with its mining activities and as consideration, the appellant paid fees for such services which were provided by affiliate companies.

Such companies are Anglo- Gold Ltd, AngloGold Ashanti Ltd, AngloGold Australia and AngloGold. Moreover, during the period in question, the appellant paid insurance premiums to cover personal injury or incapacitation.

In addition, the appellant made payments for various goods and services supplied to it by persons who did not have Tax Identification Number registration.

In 2013 the respondent conducted a tax audit on the appellant’s business affairs covering years of income 2009 to 2011. The audit had the objective of ascertaining the appellant’s compliance in payment of various taxes.

As a result, on July 29, 2013 the audit findings communicated to the appellant were to the effect that, it was required to remit the withholding tax at the rate of 15 per cent from payments made to third parties.

On December 31, 2013 the appellant vide a letter of finalisation of the Tax Audit issued to the respondent a withholding tax certificate demanding 1,819,002,183/- as principal sum and 1,123,875,027/- as interest, making a total of 2,942,877,210/-.

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Kesi ilikuwa inaunguruma tangu 2013, walipe tu sasa hakuna namna.

Hapa Kazi Tu!

 

[mama D]

Wataelewa tuu

 

[Sethshalom]

Huo ni uzembe wa management maana Withholding tax ni mandatory na lazima iwe deducted from the payment ya mhusika au beneficiary of the service alike on behalf kulingana na makubaliano ya mkataba wao. So lazima interest iwe accrued throughout the years. Poleni sana kwao

 

[Mzee Wa Republican]

Kweli ni uzembe wa management. Na hao wanaowashauri kuhusu kodi wamefeli vipi kuwapa hints katika ishi sensitive kama hiyo. Wakalipe tu withholding tax ya watu

 

[mlingoti west]

Wamezoea walipe

 

[Wacha1]

Tanzania: Vodacom Loses 3bn/-Tax Case to TRA

VODACOM Tanzania Public Limited Company has lost a move to oppose payment of over 3bn/-as tax to the Tanzania Revenue Authority (TRA) in a transaction relating to the purchase of software for operation of her requirements.

This followed the decision of the Court of Appeal delivered in Dar es Salaam last week to reject the appeal lodged by the Telecommunications Network and Wireless Services Provider Company, seeking to oppose the findings of the Tax Revenue Appeals (Tribunal).

Justices Stella Mugasha, Ferdinand Wambali and Rehema Kerefu ruled against Vodacom Company, formerly Vodacom Tanzania Limited, the appellant, after holding that the appeal was time barred.

During the hearing of the appeal, they noted on record two certificates of delay issued by the Registrar of the Tribunal to exclude the time under which the appellant was waiting for the preparation of the certified copies of the proceedings, judgment and the decree of the impugned Tribunal's decision.

On December 6, 2018 the Registrar issued a certificate of delay excluding a period from November 15-28, 2017 to have been utilised for preparations and the delivery of the certified copies of the judgment, decree and proceedings of the impugned decision of the Tribunal.

After expiry of 55 days, that is, on January 22, 2019, the appellant's counsel vide a letter requested to be supplied with certified copies of the judgment decree and proceedings on ground that the initially supplied copies were not signed by the Vice-Chairman and Members of the Board.

However, the justices observed that on the record there was no evidence that the Registrar had acknowledged or made any response to the appellant's letter.

Instead, on record there was a letter dated March 12, 2019 whereby the appellant's counsel sought a second certificate of delay.

Such a certificate, according to the justices, was excluding the period between November 15, 2007 to March 11, 2019 to have been utilised for the preparations and delivery of the proceedings, the judgment and decree of the impugned decision of the Tribunal.



"Since the first certificate was not withdrawn, and considering that the two certificates of delay cannot co-exist in one appeal, the appellant cannot rely on the second certificate which is in our view inconsequential," they said in their judgement.

According to them, the first certificate of delay which was a valid one and in terms of the proviso to Rule 90(1) of the Tanzania Court of Appeal Rules, 2009, the appeal ought to have been filed not later than January 27, 2019.

However, the justices noted, the appeal was filed 162 days after the expiry of the excluded period and beyond the prescribed period. "In view of what we have endeavoured to demonstrate there is no gainsaying that the appeal is time barred and we accordingly strike it out," they ruled.

The appellant registered in Tanzania entered into an agreement with the software supplier, Siemens Telecommunications (PTY) Ltd, for the purchase of software to enable the appellant operate the software in accordance with his requirements.

It is stated that the TRA, the respondent, conducted tax audit in respect of the appellant's business affairs for the period covering the year 2001 to 2004. On November 10, 2006 the respondent served the appellant with preliminary audit findings.

In the wake of the appellant being discontented with the tax audit, a meeting was convened between the parties following which, on April 24, 2007, the respondent prepared and issued the revised preliminary audit findings.


As the appellant was still not happy with the tax audit results, two more meetings were convened between the parties, but yielded no positive results as the appellant was not yet satisfied with the revised preliminary audit findings.

Ultimately, on August 21, 2008, the respondent issued to the appellant demand notices for withholding tax and penalties with respect to the services and royalty amounting to 1,028,644,778/87 and 1,917,171,792/- respectively.

The appellant was dissatisfied with the assessment filed an appeal to the Tax Revenue Appeals Board. The Board dismissed the appeal in its decision on August 21, 2015. Aggrieved with that decision, the appellant unsuccessfully appealed to the Tribunal

Credit: Daily news