19 May 2014

Tanzania: Court Rejects Mining Company's Tax Appeal

THE Court of Appeal has rejected an application by Mabangu Mining Limited, seeking to prevent the Commissioner General of Tanzania Revenue Authority (TRA) from enforcing a decree for payment of over 2bn/- withholding tax.

Justices Nathalia Kimaro, Sauda Mjasiri and Katherine Oriyo ruled in favour of TRA after observing that the application by Mabangu Company for stay of execution of the decree issued by the Tax Revenue Appeals Tribunal in respect of the payments in question was incomplete for being time barred.

"The application is incompetent. The application was filed beyond the required 60 days. It is hereby struck out," the justices declared in a short ruling.

Before reaching the a decision, the panel pinned down advocate for Mabangu Company, Dr Alex Nguruma, on whether the application was competent.

After realising that there were some errors on the matter, Dr Nguruma requested the court to grant an adjournment so that he could rectify the anomaly.

However, advocate for TRA, Mr Felix Haule, opposed the request, claiming that the omission was so resinous, warranting the dismissal of the application.

In the application, Mabangu Company had applied for stay of execution of the decree of the Tribunal issued by Dr Fauz Twaib, a High Court Judge, on July 15, 2011, pending hearing and determination of appeal, seeking to oppose payments of 1,565,429 US dollars plus interests and penalty.

Mabangu Mining Limited is a company registered in Tanzania engaged in gold mining. It is a wholly owned subsidiary of Resolute Tanzania Limited, another locally registered company.

Mabangu Company's main business related to Golden Pride Project, a gold mining enterprise in Nzega District.

For a period up to May 2006, the Golden Price Project was pursued as a 50-50 unincorporated joint venture arrangement between Mabangu Company and Resolute Tanzania Limited.

In a retrospective agreement dated July 20, 2001, which came into force on December 1, 2008, an Australian Company called Gaudhurst Pty Limited agreed to offer material and technical services to Mabangu Company.

The services were to be performed from Gaudhurst Pty Limited base in Australia. In 2008, the TRA carried out a tax audit on Mabangu Company with the latter required to supply evidence that it withheld taxes from payments made to Gaudhurst Pty Limited as required by the Income Tax Act.

On December 19, 2008, Mabangu Company received a letter from TRA explaining that it had misclassified the services provided to Gaudhurst Pty Limited as management fees instead of professional fees.

The TRA proposed the increase of the withholding tax from three to 20 per cent.

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