Imposition of Interest on 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 60 of the Tax Administration Act, [Cap. 438 R.E. 2023], 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 86 and 87 of the TAA. Section 86 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 eighty percent of the correct amount of the income tax payable by the payer for the year of income. Under section 87 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 86 relates to underestimation of the correct amount of tax payable while interest imposed under section 87 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. Your lawyer can guide you further.