African Barrick Gold Plc vs Commissioner General Tanzania Revenue Authority (Civil Appeal 144 of 2018) [2020] TZCA 1754 (31 August 2020)

Key Facts

Tax Type

Issues

• The court determined whether a foreign company (incorporated in the UK) issued with a Certificate of Compliance under the Companies Act is deemed 'formed' in Tanzania for tax residency purposes under section 66(4)(a) of the Income Tax Act 2004. The appellant argued that 'formed' should not include foreign companies registered in Tanzania through such certificates, while the respondent maintained that the certificate granted the company resident status, making it liable for withholding tax on dividends paid to offshore shareholders.
• The court examined the Tribunal's use of purposive interpretation to label the appellant's actions as tax evasion, despite the Board not making a criminal finding. The appellant argued the Tribunal overstepped by introducing the accusation, while the respondent contended the evidence supported the conclusion of a tax avoidance scheme. The court clarified that no criminal findings were made but upheld the Tribunal's interpretation for tax compliance purposes.
• The court assessed if the appellant, as a non-resident company, was legally obligated to withhold tax on dividends paid to its offshore shareholders. The respondent claimed the Certificate of Compliance made the company a tax resident, requiring it to comply with section 82 of the ITA 2004. The appellant contested this, asserting it was not conducting business in Tanzania and thus not liable for such taxes.
• The court evaluated the legality of assigning a Tax Identification Number (TIN) and Value Added Tax Registration Number (VRN) to the appellant, which was incorporated in the UK. The respondent argued these registrations were mandatory for tax residents, while the appellant claimed it was not a resident and therefore should not have been subjected to these obligations under the ITA 2004 and VAT Act 1997.
• The court addressed the legal interpretation of 'incorporated' and 'formed' in the ITA 2004, determining if a Certificate of Compliance under the Companies Act could equate to 'formation' in Tanzania. The appellant argued these terms were distinct and that 'formed' should not apply to foreign companies, while the respondent contended the purposive interpretation of the statute justified treating the certificate as equivalent to formation for tax residency.

Tax Years

• 2012
• 2013
• 2011
• 2010

Holdings

• The Court dismissed the appeal, affirming that the Tribunal correctly interpreted the law to conclude the appellant is a resident company in Tanzania. The appeal was found to lack merit, with the Court emphasizing that the assignment of Taxpayer Identification Number (TIN) and Value Added Tax Registration Number (VRN) are legal consequences of the company's tax residency status.
• The Court of Appeal of Tanzania held that a foreign company incorporated in the United Kingdom, which was issued a Certificate of Compliance under section 435 of the Companies Act 2002, is deemed 'formed' in Tanzania for income tax purposes under section 66(4)(a) of the Income Tax Act 2004. This legal status as a resident company subjects the appellant to withholding tax obligations on dividends sourced from its Tanzanian mining entities.

Remedies

Tax Issue Category

• Gaar / Anti-Avoidance
• Residence / Source
• Withholding-Tax Characterisation

Legal Principles

• The court addressed concerns about a potential tax avoidance scheme by the appellant, which involved declaring dividends from Tanzanian mining profits while its subsidiaries reported losses. The purposive interpretation of the ITA was partly motivated to close such loopholes.
• The court held that the appellant failed to discharge its burden of proof under section 18(2)(b) of the Tax Revenue Appeals Act (TRAA) to demonstrate it did not engage in tax avoidance. The respondent provided documentary evidence (exhibits R5-R8) supporting the source of dividends from Tanzania.
• The Court of Appeal applied a purposive construction to section 66(4)(a) of the Income Tax Act (ITA) 2004, interpreting the term 'formed' to include foreign companies that obtain a Certificate of Compliance under the Companies Act 2002. This approach was used to ensure tax residency and liability for withholding tax on dividends sourced from Tanzanian mining operations.

Disputed Tax Amount

Precedent Name

• AFRICAN BARRICK GOLD PLC VS COMMISSIONER GENERAL (TRA)
• NORTH MARA GOLD MINE LIMITED V. COMMISSIONER GENERAL OF THE TANZANIA REVENUE AUTHORITY
• COMMISSIONER GENERAL AND ANOTHER V MAC ARTHUR AND BAKER INTERNATIONAL (MBI)
• ATLAS COPCO TANZANIA LIMITED V. COMMISSIONER GENERAL, TANZANIA REVENUE AUTHORITY

Cited Statute

• Companies Act, 2006 (United Kingdom)
• Tanzania Revenue Authority Act (Cap 399)
• Tax Revenue Appeals Act (Cap 408)
• Value Added Tax Act, 1997
• Income Tax Act, 1973
• Income Tax Act, 2004
• Companies Act, 2002 (Cap 212)

Judge Name

• Juma
• Mugasha
• Ndika

Passage Text

• In the upshot of all above, the appeal is devoid of merit. It is dismissed with costs to the respondent. Ordered accordingly.
• We think, the legal effect of the Certificate of Compliance is to vest legal status to a foreign company to conduct business in Tanzania. In terms of the definition of the 'corporation' under section 3 of the ITA, 2004, the certificate of compliance issued by the Registrar of Companies conferred upon the appellant 'a business establishment status' in Tanzania for among other purposes, income taxation.
• We agree with the Tribunal's purposive method of interpretation of section 66(4)(a) of ITA 2004 to the effect that once the appellant was issued with a Certificate of Compliance under section 435 of the Companies Act, the appellant not only acquired a place of business in Tanzania, it was also deemed to bear all the statutory obligations under Companies Act.