24 March 2014

Tanzania: TRA Appeals Sh320 Billion Tax Arrears Verdict

TANZANIA Revenue Authority (TRA) Commissioner General (CG) has appealed against nonpayment of 200 million US dollars (over 320bn/-) in income tax and stamp duty by a Russian uranium mining company, JSC Atomredmetzoloto (ARMZ).

He is challenging a Tax Revenue Appeals Tribunal verdict of December 18, last year, in which the Vice-Chairman, Mr Hussein Mataka and two other members found for the foreign company on the matter.

The TRA chief has advanced three grounds to support his appeal in question. "It is proposed to ask the court to allow this appeal, i.e., the decision of the Tax Revenue Appeals Tribunal and that of the Tax Revenue Appeals Board be reversed," read the appeal documents in part which were filed in court last week.

It is alleged that sometime towards the end of the year 2010, ARMZ entered into a scheme arrangement to purchase shares from shareholders of a company known as Mantra Resources Limited, trading on the Australian Stock Exchange.

Mantra Resources Limited has shares in Mantra Tanzania Limited.

Later on in March 2012, ARMZ sold and transferred 13.19 per cent of the shares in Mantra Resources Limited to Uranium One, which is a company incorporated in Canada.

Following these transactions, TRA raised and issued the ARMZ with an income tax liability claiming 196,000,000 US dollars.

Such amount was 20 per cent of the total share sale price between ARMZ and Mantra Resources Limited, payable in terms of the Income Tax Act and one per cent of the transaction valued at 9.8 million US dollars being stamp duty allegedly chargeable in accordance with the Stamp Duty Act.

J.S.C. Atomredmetzoloto resisted the raised demands and appealed to the Tax Revenue Appeals Board on grounds that it was a non-citizen company, had no presence in Tanzania and hence, any decision by TRA was ultra vires.

It also challenged TRA's legality to make such demands. In rebuttal, TRA alleged that though the transaction was carried out outside the country, ARMZ had the ultimate intention of acquiring interest in the Mkuju River Project located in Ruvuma Region and acquisition and realisation of shares in the project amounted to getting income from a source within Tanzania.

Furthermore, TRA stated that since the share sale transaction between ARMZ and Mantra Resources Limited led to the acquisition of interest in the Mkuju River Project and resulted in the conveyance of the said project, ARMZ was liable to stamp duty or conveyance under the Stamp Duty Act.

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