OIL and Gas Exploration Company, Statoil Tanzania AS, is to pay over 170m/- to the Commissioner General of Tanzania Revenue Authority (TRA) as stamp duty on Farm-Out Agreement executed with ExxonMobil Exploration and Production Tanzania Limited (ExxonMobil) outside Mainland Tanzania.
This followed the decision of the Court of Appeal to dismiss with costs the appeal lodged by Statoil Tanzania AS, currently known as Equinor Tanzania AS, the appellant, against the decision of the Tax Revenue Appeals Tribunal, which reversed the findings of the Tax Revenue Appeal Board on the matter.
“(……) we find no merit in the appeal. Consequently, we dismiss the appeal in its entirety with costs,” Justices Rehema Mkuye, Panterine Kente and Paul Kihwelo declared in favour of the TRA Commissioner General, the respondent into the appeal.
They concluded after going through the record of appeal that the appellant’s case was weak to discharge its burden of proof that he complied with the tax exemption regime as required by the law.
“It could not ride on the weaknesses of the respondent which in our view is not the case in the instant appeal before us. We are satisfied, as the Tribunal did, that the appellant had no strong case. Consequently, we find that, the Tribunal was right in reversing the Board’s decision,” the justices said.
During hearing of the appeal, the counsel for the appellant had complained, among others, that his client was prejudiced by the respondent issuing notice of confirmation of assessment without first issuing the objection determination letter.
The counsel argued that failure to receive the letter of determination deprived the appellant’s right to know detailed reasons for refusal and therefore prepare properly their grounds of appeal to the Board.
In their judgment delivered in Dar es Salaam recently, the justices hastened to state that the argument, as the State Attorney for the respondent had termed it, was a mere afterthought since the appellant conceded himself that the notice of confirmation is as good as the final determination.
They thought, in all fairness to the parties, the appellant could not be heard now to complain for something he condoned and actually benefited from at the early stages of the proceedings before the Board without which the matter would have been struck out by the Board for being premature.
“Entertaining the appellant’s invitation, would amount to shifting goal posts in order to unfairly benefit the appellant something we are not prepared to extend that far,” the justices said.
They momentously observed that the respondent had requested from the appellant further information including the Production Sharing Agreement (PSA) as one of the necessary documents for determination of the objection, but the appellant elected not to heed to the request.
“In our considered opinion, even if the respondent was to make determination, it had nothing upon which to make determination,” the justices said.
The appellant is a limited liability company incorporated under the laws of Tanzania and its principal business is exploration of oil and gas in Tanzania since 2007. One of the areas where the appellant was operating was Block 2, situated within Tanzania’s Exclusive Economic Zone.
Epicenter of the dispute is the demand notice for stamp duty issued by the respondent to the appellant, following a comprehensive tax audit exercise conducted on August 19, 2013 into the tax affairs of the appellant.
The tax affairs covered stamp duty, withholding tax, Value Added Tax (VAT) and Pay as You Earn for the year of income 2011 and came to the conclusions that, there was a tax liability to the tune of 170, 414, 448/- arising from the Farm-Out transaction on Block 2 between the appellant and ExxonMobil.
In such transaction, the appellant assigned its petroleum rights under the PSA to ExxonMobil. Apparently, on April 18, 2007, the appellant had signed a PSA with the Government and Tanzania Petroleum Development Corporation (TPDC) in respect of Block 2 offshore Tanzania Mainland.
The appellant claimed that, according to Article 27 (e) of the PSA, he was exempted from any liability connected with assignment and operations of the sites. The appellant, unamused with the demand notice, lodged an objection before the respondent contesting it.