The Court of Appeal has directed Vodacom Tanzania Public Limited Company to pay the Tanzania Revenue Authority (TRA) more than Sh1.4 billion in interest for the delayed payment of withholding tax on loans acquired from its sister companies Vodacom Group and Mirambo.
The ruling, delivered on April 8, 2025, in Dodoma, was made by a panel of three justices: Winfrida Korosso, Sam Rumanyika, and Abdul-Hakim Ameir Issa.
The judges overturned earlier decisions by the Tax Revenue Appeals Board and the Tax Revenue Appeals Tribunal, which had favored Vodacom.
“The proceedings and decisions of the Board and Tribunal are hereby set aside. The respondent is ordered to pay the interest in accordance with the tax assessment conducted by the appellant,” the justices stated in their ruling.
The dispute centered on whether withholding tax is due at the point when interest is paid or when it becomes payable.
The lower tribunals had ruled that the tax obligation arises only when interest payments are made.
However, the Court of Appeal disagreed, concluding that the term “pays,” as used in the Income Tax Act, must be interpreted technically.
Under Section 21(3) of the Act, companies are required to recognize income on an accrual basis, meaning tax obligations are triggered when interest becomes payable not when it is actually paid.
According to the court, Vodacom was legally obligated to remit withholding tax as soon as interest accrued, and any delay warranted interest charges under Section 76(1) of the Tax Administration Act.
“Therefore, the Board and Tribunal erred in holding that charging interest on late payment of withholding tax was unjustified. Their interpretation of the law was flawed,” the judges concluded.
The case stems from loans Vodacom obtained from Vodacom Group in 2004, 2007, and 2009, and from Mirambo in 2009.
Although Vodacom was expected to pay interest annually, it did not begin making payments to Vodacom Group until 2015, at which point the withholding tax was also paid. In the case of Mirambo, interest payments began in 2009, but the tax was not remitted until 2017.
Following a tax audit covering the 2011 and 2012 financial years, TRA issued an assessment totaling Sh7.77 billion, comprising Sh6.29 billion in principal tax and Sh1.49 billion in interest for late payment.
TRA was represented in court by Principal State Attorneys Hospis Maswanyia and Juliana Ezekiel, supported by State Attorneys Octavian Kichenje and Nicodemus Agweyo. Vodacom was represented by advocates Yohanes Konda and Thompson Luhanga.