Withholding tax for non-resident service provider

We are a company based in Dar es Salaam. In 2019, we engaged a foreign consultancy firm for certain services. Following this engagement, we made payments to the firm and did not withhold tax based on advice from a local tax consultant. According to the tax consultant, the payments made to the said non-resident service provider, had no source in Tanzania and were for services performed outside Tanzania hence, not liable to the withholding tax. The Tanzania Revenue Authority (TRA) has conducted a tax audit on our company and is now demanding withholding tax on the payments made to the foreign firm. Why did the consultant and the TRA have a different view? Kindly guide us.
MK, Dar es Salaam

We believe the concern is on the application of sections 6(1)(b) on chargeable income of a non-resident person with a source in United Republic of Tanzania (Tanzania); 69 (i)(i) on payments considered to have a source in Tanzania; and section 83(1)(c) on withholding tax for services fee of the Income Tax Act, [Cap. 332 R.3 2019]. A number of cases before the Court of Appeal (the Court), have dealt with the interpretation and application of these sections on withholding tax for services rendered by a non-resident service provider. The gist of these provisions is the compliance with withholding tax in respect of service fees paid by a resident company to non-resident service providers. The position regarding the interpretation of the above-cited provisions of law and their proper application, has already been settled by the Court that there is an obligation to withhold tax for payments made to the non-resident entity as per the rates provided by law even when the services were performed outside Tanzania. This is the settled position in Tanzania and you should comply. Your tax consultant can guide you further.