Q&A – 11 November 2013

Agency notice by TRA

I am one of the largest tax payers in the country and fully compliant with the law. I have been served with an agency notice to deduct a very large amount from a supplier of ours amounting to over Tsh 600M the supplier has purportedly not paid duty and VAT on. What is an agency notice? What if I do not owe anything to the supplier- TRA officials are saying that I can deduct in the future and for now I should pay it from my cashflow. Kindly guide me as I am under pressure and TRA is threatening to penalize me.
UY, Dar

Imports into the country are governed by the East African Community Customs Management Act (“EACCM”) and the TRA have a right to conduct what is called a post audit of imports made by an importer.
It seems like your supplier might have been importing items that TRA seem to have audited and found underdeclaration on leading to a tax liability. The agency notice is issued to you so that if you have any payables to this supplier, TRA wants you to remit such funds to TRA to set off the liability of the supplier. In short it is a recovery measure against the supplier not against you.

The agency notice above is governed by section 131 of the EACCMA which states: (1) The Commissioner may, by written notice addressed to any person (in this section called the agent) appoint that person to be the agent of another person (in this section called the principal) for the purposes of collecting duty due under this Act from the principal where the Commissioner is satisfied that the agent- (a) owes or is about to pay money to the principal; (b) holds money for or on account of the principal; (c) holds money on account or some other person for payment to the principal; (d) has authority from some other person to pay money to the principal; (e) holds goods belonging to the principal which are liable to duty and on which duty has not been paid, and the Commissioner shall in the notice specify the amount of duty to be collected by the agent, which amount shall not exceed the amount, or value of the goods, held or owing by the agent for or to the principal. (2) The Commissioner may, by notice in writing, require any person to furnish the Commissioner within thirty days from the date of service of the notice, with a return showing detail of any moneys or goods which may be held by that person from whom duty is due under this Act. (3) This section shall apply to an agent appointed as though he or she were a duly authorized agent acting on behalf of the owner. (4) An agent who is appointed under subsection (1) and who claims to be, or to have become unable to comply with the notice for any reason shall notify the Commissioner accordingly in writing stating the reasons for his or her inability, and the Commissioner may accept, amend or reject the notification as the Commissioner may deem fit.

From the above, you are merely an agent for the taxpayer and need not pay from your cashflow. Hence if there are no payables, or payables that are disputed, you should inform TRA accordingly and they cannot force you to pay from your own cashflow. It is a debt owed to TRA by your supplier not by you.

In the event that there are payables to the supplier, you have no choice but to comply with the agency notice otherwise you will be fined, held personally liable and even imprisoned.

Your lawyers can guide you further.

Contents, duration of arrest warrant by Court

One of my close friends was arrested and there is a pending criminal case in Court. I have been informed that he defaulted appearance and the Court has, few months ago, issued a warrant of arrest. How do I identify this warrant of arrest. Since it was issued some months ago, has it not expired? Please respond.
NY, Tanga

Warrant of arrest is one of the modes of compelling an accused person to appear in Court where he has failed to appear voluntarily. Starting with the question of contents, every warrant of arrest must be signed by the issuing Judge or Magistrate and shall bear the seal of the Court. It should also briefly state the offence that the accused has been charged with. It will equally name or describe the person to be arrested and it will order the person to whom it is directed to, to bring the arrested person before the Court.

Finally, the warrant of arrest remains in force until it is executed or cancelled by the Court which issued it. It does not automatically expire as you seem to be suggesting. You are advised to consult your Attorneys for further guidance.

Price without VAT

There is a particular store that I go to that has some labels with price inclusive VAT and others without. It is very confusing. Is there no law that regulates this? What should I do?
MV, Mwanza

Our Value Added Tax has a specific provision that governs this which clearly states the following in section 63. (1) Any person making or publishing an advertisement in respect of the supply of any goods or services shall, if the advertisement mentions the price at which such goods or services may be obtained, state the price inclusive of tax. (2) In this section, “advertisement” includes any label attached to the goods and any sign displayed in connection with the goods or services and any quotation of their price.

Hence all labels and adverts should have prices on them which must include VAT. There is no option for the store owner. TRA is, as one would expect a tax authority to be, extremely strict about compliance and we suggest you report this to the TRA who will take immediate action.