JUDICIARY OF TANZANIA: NBC APPEAL CASE AGAINST WITHHOLDING TAX PAYMENTS FLOPS

By Faustine Kapama-Judiciary

THE Court of Appeal has dismissed with costs the appeal lodged by the National Bank of Commerce (NBC), seeking to challenge payments of withholding tax in respect of services by non-resident entities and rentals paid on various lease agreements.

Justices Rehema Mkuye, Mary Levira and Sam Rumanyika ruled against the NBC, the appellant, after holding that the appeal lodged to fault findings of the Tax Revenue Appeals Tribunal in favour of Commissioner General of the Tanzania Revenue Authority (TRA), the respondent, lacked merits.

During hearing of the appeal, the appellant stated that the Tribunal erred in law in stepping into shoes of the Tax Revenue Appeals Board to determine the issue on imposition of withholding tax for payments made by the Appellant to offshore entities without affording the parties an opportunity to be heard.

However, in their judgment delivered in Dar es Salaam recently, the justices came to the contrary position that the parties were given the right to be heard and the appeal has no merit. “Consequently, we dismiss the appeal with costs,” the justices declared.

They pointed out that the decision of the Tribunal was based on materials which were presented by the parties to answer the issues which were raised before the Board. Under such circumstances, it was the position of Justices that the appellant could not claim to have not been accorded the right to be heard.

The justices noted from the arguments of appellant counsel that his client was not satisfied with the decision of the Tribunal, but in the concluding remarks he ended up saying that the Tribunal was required to receive further clarification from the parties so as to arrive at a just decision.

At any rate, they said, dissatisfaction of a party to a suit does not justify a claim of denial of a right to be heard; whether the Tribunal needed further clarification or otherwise does not amount to denial of a right to be heard as the counsel for the appellant would wish us to decide.

“In our settled view, the appellant's claim is unfounded and it is nothing but an afterthought. To prove this, with respect, it can be observed from the submission by the counsel for the appellant above that he tried to contrary to touch various issues to justify his claim.

“However, he ended up conceding that the parties were accorded the right to be heard but only fact that, they needed to make more clarification forgetting that the Tribunal did what was supposed to be done by the Board,” the justices said.

In 2012, the respondent conducted an audit on tax affairs of appellant. Upon such audit, the respondent discovered that the appellant made certain payments to non-resident persons in respect of services supplied to the appellant by non-resident entities as well as on rentals on various sale agreements.

As a result, the respondent imposed withholding taxes on those payments and rentals which in essence aggrieved the appellant. Therefore, the appellant preferred an appeal to the Tax Revenue Appeals Board.

Before the Board four issues were raised, including whether payments made by the appellant for services performed outside Tanzania by non-residents are subject to withholding tax.

The Board had also to consider whether the respondent took into consideration withholding tax remittances on rental payments when making withholding tax demand and whether in the circumstances, imposition of interest is correct in law.

Having heard the appeal, the decision of the Board was partly in favour of the respondent and partly the parties were ordered to reconcile accounts, specifically the remittances allegedly made by the appellant.

Dissatisfied, the appellant appealed to the Tribunal where it was discovered that the Board did not make a specific finding on two issues.

Such issues include whether the payments made by the appellant to its offshore service providers for services performed outside Tanzania are subject to withholding tax and whether the respondent took into consideration withholding tax remittances on rental payments in raising withholding tax demand.

Based on the available evidence and submissions presented before the Board, the Tribunal decided to step into the shoes of the Board to determine the undecided issues together with other grounds of appeal. However, the Tribunal found the appellant's appeal lacking in merits and dismissed it right away.