{"id":112,"date":"2025-04-13T03:27:00","date_gmt":"2025-04-13T03:27:00","guid":{"rendered":"https:\/\/taxbaraza.co.ke\/?p=112"},"modified":"2025-08-12T08:50:14","modified_gmt":"2025-08-12T08:50:14","slug":"case-study-commissioner-general-tanzania-revenue-authority-v-vodacom-tanzania-public-limited-company-no-485-of-2023-2025-tzca","status":"publish","type":"post","link":"https:\/\/taxbaraza.co.ke\/?p=112","title":{"rendered":"Case Study: Commissioner General Tanzania Revenue Authority v Vodacom Tanzania Public Limited Company NO. 485 of 2023 \/ [2025] TZCA"},"content":{"rendered":"\n

<\/p>\n\n\n\n

Genesis and Background of the Case<\/strong><\/p>\n\n\n\n

This case involved an appeal by the Commissioner General of the Tanzania Revenue Authority (TRA)<\/strong> against a decision of the Tax Revenue Appeals Tribunal<\/strong>, which had upheld an earlier decision of the Tax Revenue Appeals Board<\/strong> in favor of Vodacom Tanzania PLC<\/strong>. The dispute concerned the timing of withholding tax payment obligations under Section 82(1)<\/strong> of the Income Tax Act (ITA), Cap. 332<\/strong>, specifically relating to interest payments on loans received from Vodacom\u2019s sister companies\u2014Vodacom Group<\/strong> and Mirambo<\/strong>.<\/p>\n\n\n\n

Vodacom received loans from Vodacom Group (2004, 2007, 2009) and Mirambo (2009), but delayed the actual payment of interest. While payments to Vodacom Group commenced in 2015<\/strong> and to Mirambo in 2009<\/strong>, the withholding tax was only paid in 2015<\/strong> and 2017<\/strong>, respectively. TRA conducted an audit covering 2011\u20132012<\/strong>, resulting in a tax assessment of TZS 7,779,581,441<\/strong>\u2014comprising TZS 6.29 billion<\/strong> in principal and TZS 1.49 billion<\/strong> in interest for late payment.<\/p>\n\n\n\n

Background of the Case \u2013 Key Points<\/strong><\/p>\n\n\n\n

    \n
  1. Loan Structure<\/strong>: Vodacom borrowed from its affiliates, incurring interest obligations annually but delaying actual payments.<\/li>\n\n\n\n
  2. Withholding Tax Paid Late<\/strong>: While interest was paid to creditors from 2015 onwards, TRA argued that the corresponding withholding tax should have been paid when the interest accrued.<\/li>\n\n\n\n
  3. Tax Assessment<\/strong>: TRA issued Certificate No. WHT\/BI\/01\/10\/2014, demanding TZS 7.78B<\/strong> for late withholding tax on accrued interest.<\/li>\n\n\n\n
  4. Tribunal Decision<\/strong>: Both the Tax Board and Tribunal held that withholding tax arises upon payment<\/strong>, not accrual, and thus no late interest was due.<\/li>\n<\/ol>\n\n\n\n

    Appellant\u2019s Submissions (TRA)<\/strong><\/p>\n\n\n\n

      \n
    1. Withholding Tax Due on Accrual<\/strong>: Argued that under Sections 21(3), 23(1)(a), and 82(1)<\/strong> of the ITA, withholding tax is triggered on an accrual basis<\/strong>.<\/li>\n\n\n\n
    2. Technical Meaning of \u201cPayment\u201d<\/strong>: Cited the definition in Section 3 of ITA<\/strong>, which includes asset creation and entitlement, not just cash transfer.<\/li>\n\n\n\n
    3. Harmonious Interpretation<\/strong>: Urged the Court to reconcile Section 82(1) with general provisions (Sections 3, 21, and 23) rather than treat it as an exception.<\/li>\n\n\n\n
    4. Literal Interpretation Leads to Absurdity<\/strong>: Claimed that interpreting \u201cpays\u201d narrowly would defeat the broader statutory intent and facilitate tax avoidance.<\/li>\n\n\n\n
    5. Interest Justified<\/strong>: Asserted that since the withholding tax was due on accrual, the delayed payment rightly attracted interest under Section 76(1) of the Tax Administration Act<\/strong>.<\/li>\n<\/ol>\n\n\n\n

      Respondent\u2019s Submissions (Vodacom Tanzania PLC)<\/strong><\/p>\n\n\n\n

        \n
      1. Withholding Tax Due on Payment<\/strong>: Maintained that Section 82(1)<\/strong> clearly states withholding tax arises \u201cwhen a resident pays interest\u201d<\/strong>, implying actual disbursement.<\/li>\n\n\n\n
      2. Specific Provision Prevails<\/strong>: Argued that Section 82(1), being specific, overrides the general accounting provisions in Sections 21 and 23.<\/li>\n\n\n\n
      3. Literal Interpretation Is Appropriate<\/strong>: Relied on ordinary dictionary meaning of \u201cpays\u201d as discharge of debt, citing Black\u2019s Law Dictionary<\/strong>.<\/li>\n\n\n\n
      4. No Late Payment Arises<\/strong>: Since tax was withheld and remitted in the year interest was paid, no delay existed within the meaning of law.<\/li>\n\n\n\n
      5. Precedents Cited<\/strong>: Relied on National Bank of Commerce v Commissioner General (TRA)<\/strong> to support literal reading.<\/li>\n<\/ol>\n\n\n\n

        Court of Appeal Decision \u2013 Key Points<\/strong><\/p>\n\n\n\n

          \n
        1. \u201cPays\u201d Interpreted Technically<\/strong>: Held that the term includes more than cash transfer\u2014it encompasses creation of a liability or asset under Section 3 of ITA<\/strong>.<\/li>\n\n\n\n
        2. Accrual Basis Mandated for Corporations<\/strong>: Reaffirmed that Section 21(3)<\/strong> requires companies to account for tax on an accrual basis, thus aligning with Sections 23(1)\u2013(3)<\/strong>.<\/li>\n\n\n\n
        3. No Conflict Between Provisions<\/strong>: Found that Section 82(1) does not override, but rather complements, Sections 21 and 23.<\/li>\n\n\n\n
        4. Tax Due When Entitlement Arises<\/strong>: Determined that withholding tax becomes due when the recipient becomes entitled to the interest, not when it is actually paid.<\/li>\n\n\n\n
        5. Interest on Delayed Tax Justified<\/strong>: Upheld TRA\u2019s right to impose interest on delayed withholding tax payment under Section 76(1) of the Tax Administration Act<\/strong>.<\/li>\n\n\n\n
        6. Appeal Allowed<\/strong>: Set aside the Tribunal and Board decisions; reinstated TRA\u2019s assessment.<\/li>\n\n\n\n
        7. Costs Awarded<\/strong>: Vodacom to bear costs of appeal.<\/li>\n<\/ol>\n\n\n\n

          Judgement Date<\/strong>: 8 April 2025<\/strong>, delivered by Justices Korosso, Rumanyika, and Issa<\/strong> at Dodoma<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Genesis and Background of the Case This case involved an appeal by the Commissioner General of the Tanzania Revenue Authority…<\/p>\n","protected":false},"author":1,"featured_media":113,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-112","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/112","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=112"}],"version-history":[{"count":1,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/112\/revisions"}],"predecessor-version":[{"id":114,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/posts\/112\/revisions\/114"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=\/wp\/v2\/media\/113"}],"wp:attachment":[{"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=112"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=112"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxbaraza.co.ke\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=112"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}