Mbeya Cement Company Limited will have to pay over Sh1bn unremitted tax to the Tanzania Revenue Authority (TRA) after losing an appeal that challenged tax assessment.
Last week, the Court of Appeal sided with TRA when by ruling that “there was no cause for the court to interfere with the decision of the administrative tribunal” that the assessment was valid.
The cement company was challenging the assessment of additional Value Added Tax (VAT) of Sh1billion made by TRA over imported technical and management services it received between January 2001 to March 2005.The company lodged a notice of objecting of the assessment to TRA, but the latter declined to withdraw the assessment on grounds that it has powers to make such assessments.
Mbeya Cement then successfully appealed against the assessment at the Tax Revenue Appeals Board (Trab). In April 2007, the board held that TRA did not have powers under section 43 (1) of the VAT Act to make the assessment.
However, Trab decision was overturned five months later following TRA’s appeal to the Tax Revenue Appeals Tribunal (Trat) which held that section 43 (1) of the VAT Act empowered the authority to make tax assessment on imported services on the appellant.
Trat further held that the failure by a registered taxpayer to comply with the provision occasioned a failure to account for the demanded tax.
Aggrieved, Mbeya Cement lodged an appeal at the Court of Appeal, arguing that the tribunal erred in holding that the commissioner for VAT had powers under section 43 (1) of the VAT Act to make tax assessment on imported services of a registered taxpayer.
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