VIP Engineering and Marketing Limited has asked the Commissioner General with Tanzania Revenue Authority (TRA) to refund them 13,130,934.75 US dollars (about 26bn/-), which was deducted as tax when the company sold its shares in Independent Power Tanzania Limited (IPTL).
“It is VIP’s understanding and
submission that the refund of USD 13,130,934.75 cannot be credibly
disputed in good faith,” reads part of a verbal note file by the local
investment company before the Tax Revenue Appeals Board in Dar es
Salaam.
The company stated that TRA erroneously
assessed capital gains tax at the rate of 30 percent instead of the 10
percent rate applicable to a Tanzania resident entity and also collected
30 percent capital gains tax on default interest of USD 3,761,812.50.
VIP Company further stated that the
delay by TRA to refund the amount was causing great harm as it has
engaged in complex international litigations to enforce claims against
various institutions, including international banks and the VIP’s total
claims currently stood at 1.2 billion US dollars (about 2.4tri/-).
“These claims, if awarded by the courts
will be the basis for substantial corporation income tax assessments,
which may amount to more than USD 350 million at the current corporation
income tax rate,” reads another paragraph of the verbal note.
It states that the TRA continuing breach
of its statutory duties was seriously hampering the prosecution of VIP
Company’s claims because the immediate funding of its litigation of not
less than 5 million US dollars was at risk.
According to the company, it goes
without saying that the inability to prosecute the claims would not only
cause irreparable damage to VIP’s claims but also to TRA’s opportunity
to raise more taxes in connection with such claims.
“VIP therefore urges TRA to comply with
its statutory refunding obligations, so that the much bigger interests
that are at stake will not be impaired. Most urgent is the necessary
funding in the English proceedings,” the company stated.
According to a schedule of computation
relating to the payments, the gross proceedings from disposal of the
VIP’s 30 percent shares that were sold to PAP in IPTL was 75,010,000 US
dollars.
The 10 percent capital gains tax
neglecting deduction of USD 13,500,000 cost of acquisition of the shares
and USD 35,000,000 costs of maintenance and realisation of the shares,
which is maximum possible taxable capital gains, is 7,501,000 US
dollars.
The verbal note show that if 2,997,500
US dollars would be added to the capital gains tax withheld by VIP from
disposal of shares, the total amount of maximum capital gain taxes would
be 10,498,500 US dollars.
Amount of capital gains tax actually
collected from VIP by TRA on January 23, 2014, was USD 23,629,434.75 and
the amount for immediate refund by TRA to VIP pending determination of
tax appeal before the Tax Revenue Appeals Board are USD 13,130,934.75.
The total amount of refund claimed by
VIP in the tax appeal pending before the Tax Revenue Appeals Board is
USD 24, 076,471.65 and the balance amount to be adjudicated upon by the
Board is USD 10,945,536.90.
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