Category: Blog

Who is a “Beneficial owner”?

The Companies Act Cap 212 defines a “beneficial owner” as a natural person: –

• who directly or indirectly ultimately owns or exercises substantial control over an entity or an arrangement;
• who has a substantial economic interest in or receives substantial economic benefit from an entity or an arrangement directly or indirectly whether acting alone or together with other persons;
• on whose behalf an arrangement is conducted; or
• who exercises significant control or influence over a person or arrangement.

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Introduction:
The Finance Act, No. 8 of 2020 came into force on 15th June, 2020. The Act amends a number of provisions of different laws, which include the Tanzania Revenue Authority Act (Cap. 399), the Tax Administration Act (Cap. 438), the Value Added Tax Act (Cap. 148), and other laws. In this article, we shall point out the changes that the Finance Act has made to the Tax Administration Act, which has been amended in the following ways.

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Summary,
The Government introduced in the February Session of Parliament, a Bill, which, among other things, is aimed at amending the Companies Act [Cap 212 R.E. 2002].

The proposed changes (in Part VI of the Bill) include the following.

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On 18th August 2020, the Tanzania Revenue Authority (TRA) issued a public notice to require all employees to have a Tax Payer Identification
Number (TIN).

The reason behind the said requirement is the introduction of the new online system for tax collection known as Electronic Filing System of Tax Returns (E-filing). The system is set to facilitate companies or institutions on the following:

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The Registrar of Companies has issued a public notice calling on all companies incorporated or registered under the Companies Act [Cap 212 R.E. 2002] to ensure full compliance with their statutory annual returns. The public has been asked to require production of a copy of certificate of incorporation together with a copy of the latest annual returns (or annual accounts for companies incorporated outside Tanzania and having a registered office in Tanzania) endorsed by the Registrar or an official search report issued by the Registrar prior to signing of any contractual arrangements. The notice may be viewed at www.brela.go.tz.

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Background

The Tax Administration (General) (Amendment) Regulations were published on 28 February 2020 as Government Notice No. 169 of 2020. They were made under sections 28, 30, 92, 94 and 98 of the Tax Administration Act [Cap 438 R.E. 2019].

Agency Notice

Section 67(1) of the Tax Administration Act gives the Commissioner General of the Tanzania Revenue Authority, where a taxpayer fails to pay tax on time, powers to issue an Agency Notice to a third party to whom a taxpayer owes money for the third party to pay the money owed to the taxpayer to the Commissioner General. Section 67 is supplemented by Regulation 91 of the Tax Administration (General) Regulations, which provides:

91.-(1) In executing powers under section 67 of the Act, the Commissioner General shall serve an Agency Notice to the third-party debtor who owes money to the taxpayer.

Before GN No. 169 of 2020, the Commissioner General’s powers under section  67(1) and Regulation 91 were not expressly restricted in any way. That restriction has now come through the GN, which amended the Regulations by adding immediately after regulation 91(2) the following subregulation:

“(3) Sub regulations (1) shall not apply to bank accounts held in banks in the United Republic by mining companies in which the Government of the United Republic has shares and has concluded an agreement with the company unless there is a court decree issued to the Commissioner General after final completion of judicial proceedings.”

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There are no specific provisions under the Tanzania Employment and Labour Relations Act or the subsidiary legislations that address states of emergency like the Corona Pandemic however, one can borrow from the general provisions of the referred legislations in this article. The corona pandemic has without any doubt disrupted business and the way we do things leading to some businesses closing while others may be contemplating downsizing or even closure due to reduced operations or activities and drastic reduction in revenues while overheads including payment of salaries and related HR costs remain high.

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The recent announcement of TPB Bank Plc’s (“TPB”) merger with TIB Corporate Bank Limited (“TIB’) was met with much optimism especially within the Tanzanian banking and media industry. This is owed to the fact that TPB has now joined a unique group of commercial banks operating in Tanzania that hold assets amounting to TZS 1 trillion (approximately USD 431 million) or more. This follows the government owned lender’s acquisition of the assets and liabilities of TIB, which is also a government majority owned bank.

This signals a continued shift towards consolidation within the banking industry but also further raises questions of the implications of the COVID-19 pandemic on the banking industry and the role that mergers and acquisitions may play in its consequences.

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