Imposition of interest in tax

Our Company received a notice of assessment on interest from the Tanzania Revenue Authority (TRA). We assume this is an error because our Company had already been assessed for interest in another assessment on corporate income tax issued on the same date and in respect of the same year of income. We think the imposition of double interest is legally unfounded. Kindly guide us.
BM, Arusha

According to section 49 of the Tax Administration Act, [Cap. 438 R.E. 2019], when the Commissioner General makes an assessment under a tax law, there is an obligation to serve a written notice of the assessment on the taxpayer. The notice of assessment must state (a) the name of the taxpayer and the Taxpayer Identification Number; (b) the Commissioner General’s assessment of the tax payable by the taxpayer for the period, event or matter to which the assessment relates and the amount remaining to be paid; (c) the reasons why the Commissioner General has made the assessment; (d) the date by which the tax shall be paid; and (e) the time, place and manner of objecting the assessment. This requirement is provided in the law so as to prevent errors and protect taxpayers against arbitrary assessments.

The assessments of interest are issued in accordance with the provisions of section 75 and 76 of the TAA. Section 75 of the TAA, applies where a tax payer’s estimate or revised estimate of income tax payable for a year of income is less than 80 percent of the correct amount of the income tax payable by the payer for the year of income. Whereas, under section 76 of the TAA, interest is payable where any amount of tax imposed under a tax law remains unpaid after the due date prescribed in a tax law. In simple terms, interest imposed under section 75 relates to underestimation of the correct amount of tax payable while interest imposed under section 76 relates to late payment of tax.

As a matter of principle of tax law, interest is a consequential effect of either underestimating the tax liability or late payment of tax. In that regard, underestimation and late payment interest can be imposed on a tax payer in the same year of income. Since we have not seen the assessments, we can only assume that the assessments are valid and independent assessments as they have been issued on the basis of underestimation of tax payable in the year of income and failure to pay tax on the due date. However your tax consultants can guide you further.

Status of arbitration agreement in an invalid contract

We are a Hospital based in Dodoma and entered into a contract for supply of human organs for educational purposes with another Hospital based in Dar es Salaam. The contract contained an arbitration clause, where we agreed to resolve any disputes by way of arbitration. Unfortunately, the other Hospital did not honour the contract on the ground that it was invalid because supply of human organs is not permitted under Tanzanian law. Having learned this, we request for the return of money paid under the contract. However, the other Hospital is refusing to pay us back. We are unsure whether to go to Court or pursue arbitration as stipulated in the ‘invalid’ contract.
PJ, Dodoma

The question on invalidity of a contract does not stop the disputes arising out of the contract from being decided by arbitrators under the arbitration agreement. It is a general principle under common law that the arbitration clause is distinct from the main contract. This principle is enshrined in the Arbitration Act [Cap. 15 R.E. 2020] (the Arbitration Act) which codifies the common law principle in Tanzania. Section 12 of the Arbitration Act provides that unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement, whether or not in writing, shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, did not come into existence or has become ineffective, and the arbitration agreement shall for that purpose, be treated as a distinct agreement.

Note that it is only when the arbitration clause itself is directly impeached for a specific reason that the arbitral tribunal will be prevented from deciding the dispute relating to the main contract. In this case, it is insufficient to say that the contract as a whole is impeachable on the ground of illegality. Courts have also held that an arbitration clause cannot be impeached on grounds of invalidity of a contract. Your lawyer can guide you further.

Selling herbal medicine

When I was a child, my grandmother used to give us a mix of herbs to prevent Malaria. I believe this is the reason why I have never suffered from Malaria and am now considering selling this herbal mix. Is it legal to sell herbal medicine in Tanzania? Please, guide me.
RF, Kagera

Congratulations on your creativity.

Yes, it is legal to sell herbal medicine in Tanzania, provided that the local manufacturers, suppliers or distributors of herbal medicine ensure that the herbal medicine is registered before it is sold. There are two forms of herbal medicine regulated by two principal legislation, that is, herbal medicine which are labelled and in a form of pharmaceutical dosage and those not labelled and in pharmaceutical dosage.

On the one hand, herbal medicines which are labelled and in a form of pharmaceutical dosage need to be registered with the Tanzania Medicines and Medical Devices Authority before they are distributed for use to the population as provided under Medicines and Medical Devices Act [Cap.219 R.E 2021]. On the other hand, herbal medicines not meeting this criteria fall under the Traditional and Alternative Medicine Act, 2002. (Act No. 3 of 2002) which requires such medicine to be registered with the Traditional and Alternative Health Practice Council. Based on this, both forms of herbal medicine should be registered before they are sold. Your lawyer can guide you further.