TRA triumphs in Sh50 billion tax dispute with African Barrick

Dar es Salaam.  African Barrick Gold Plc will have to pay the Tanzania Revenue Authority (TRA) $21.3 million after losing a court battle to resist tax liability on sale of interest in Nyanzaga Gold Exploration Project.

The Court of Appeal has nullified decision of the Tax Revenue Appeals Board (Trab) and the Tax Revenue Appeals Tribunal (Trat) which had initially sided with the UK-based firm that the transaction was not subject to tax under the laws of Tanzania.

“…as the Board had no jurisdiction to entertain the appeal against the existence of tax liability, it embarked on a nullity and its proceedings and judgment cannot be spared. A similar fate befalls the proceedings and judgment of the Tribunal which arose from a nullity,” said the Court of Appeal.

Root of the dispute

The root of the dispute dates back 2010 when the taxman imposed a $21.3 million tax liability on African Barrick following acquisition of interest in Nyanzaga Project.

It is known that African Barrick carried out its business in Tanzania through its subsidiaries including Nyanzaga Gold Exploration (Nyanzaga Project) in Sengerema District, Mwanza Region.

The project was initially jointly owned by Tusker Gold Limited of Australia through its subsidiary company, Sub-Sahara Resources Limited that was registered in Tanzania.

Tusker Gold and African Barrick owned 49 and 51 per cent interest in the Nyanzaga Project respectively.

Records show in 2010 African Barrick, through its subsidiary company registered in UK named BUK Holdco Limited acquired 49 per cent interest that was owned by Tusker Gold Limited.

Following the acquisition, the Nyanzaga Project became wholly owned by African Barrick Gold through BUK Holdco Limited.

Believing that the acquisition of interest in the Nyanzaga Projecte attracted tax, TRA went ahead to impose tax on African Barrick Gold.

The company, however, disputed the tax liability on the ground that the share sale transaction was between the companies registered outside Tanzania.

TRA invoked Section 35 of the Income Tax Act and notified the mining firm that the share sale transaction was a tax avoidance arrangement and required her to settle the unpaid tax immediately.

Seeing TRA was determined get its tax, African Barrick successful lodged an appeal before Trab. The Board had held that the share sale transaction was not subject to tax under the laws of Tanzania since it took place outside Tanzania and involved two foreign companies registered abroad.

Undaunted, TRA unsuccessfully lodged an appeal to the Trat which sustained the decision of the Trab.

Top court turns the tables

The court of Appeal mainly focused on whether the Trab had jurisdiction to entertain and determine the appeal that African Barrick had filed to challenge TRA’s notice of tax liability.

The court agreed with TRA that African Barrick did not fully exhaust available remedy of lodging to challenge the notice.

The top court said the company still had a room to file an objection to the Commissioner General of TRA or forward the matter to Trab by way of reference instead of appealing to the board.

“It is clear that the notice on existence of tax liability by the Commissioner General is certainly not among the decision envisaged to be appealable to the board.

“In our view, the exclusion was deliberate so as to enable the tax payer before invoking the remedy of an appeal, to exhaust the available remedy of lodging an objection to the Commissioner General or forward the matter the Board by way of reference,” said the court.