Q&A – 22 December 2014

Fishing in small vessel

I am an expatriate working in Tanzania and like to spend my weekend fishing with my son. Recently I was told by my colleague that fishing of whatever nature is not allowed without getting a licence, particularly a foreigner like me and that I could get myself into serious legal trouble. Is this true?
ER, Mtwara

The Fisheries Act of 2003 provides that no person shall engage in fishing unless he applies for and is granted by the Director or any other authorized officer a licence in respect of such activity. The Fisheries Act provides some exemptions to the effect that, no licence or permit or permission shall be required for fishing by means of any of the following methods: (a) fishing for prawns using cloth- Kutanda Uduvi; (b) using rod and line or hand line from the beach without using a fishing vessel whether for sport fishing, domestic consumption or sale, except in a declared trout stream or spawning ground; and (c) small cast nets.

From what we make out of your question, it is likely that you are fishing out at sea in a boat, which does not fall into any of the exemptions. Hence a licence is required and we suggest you do apply for such a licence.

Transfer pricing tips in Tanzania

Does Tanzania have any transfer pricing laws and if so, how do they compare with international best practice? Where can I find the transfer pricing regulations and practice notes? What documents should I keep not to get caught into this trap?
HK, Dar

Tanzania has always had transfer pricing control under section 33 of the Income Tax Act which states that In any arrangement between persons who are associates, the persons shall quantify, apportion and allocate amounts to be included or deducted in calculating income between the persons as is necessary to reflect the total income or tax payable that would have arisen for them if the arrangement had been conducted at arm’s length.

In 2014, the government published the first transfer pricing regulations followed by transfer pricing guidelines. One of the key provisions of the guidelines states that transfer pricing of goods, services and intangible properties are intercompany pricing arrangements between associated parties in their transactions. When independent parties deal with each other, independent market forces shape the commercial pricing of goods, services and intangibles transacted between them. However, business transactions between associates may not always reflect the dynamics of market forces. These Transfer Pricing Guidelines (hereinafter referred to as the Guidelines) are largely based on the governing standard for transfer pricing which is the arm’s length principle as set out under the Organization for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines and the United Nations (UN) Practical Manual on Transfer Pricing for Developing Countries, (hereinafter referred to as OECD/UN Guidelines). TRA abides by this arm’s length principle and believes that this is the most appropriate standard to determine transfer prices of related parties. Although some parts of the Guidelines have been adopted directly from the OECD /UN Guidelines, there may be areas which differ to ensure adherence to the Income Tax Act Cap.332 as well as domestic circumstances. In this regard, the Guidelines may be reviewed from time to time. Examples used in the Guidelines are for demonstrative purposes only. Thus, in dealing with actual cases, the facts and circumstances of each case must be considered before deciding on the applicability of any of the methods recommended in the Guidelines.

Due to the size of this column, we are unable to compare the entire transfer pricing regulations with international best practice but you can see from the above that the regulations do reflect widely upon the OECD arm’s length principle.

According to the guidelines, to ensure the acceptability of the contemporaneous transfer pricing documentation, reasonable efforts should be given to: (a) Undertake a transfer pricing analysis to ascertain that transfer prices comply with the arm’s length principle and reflect commercially realistic outcomes for all controlled transactions. (b) Maintain documents that are applicable to the circumstances and be prepared to provide additional information or documentation not contained above, but which may be relevant for the determination of the arm’s length price. (c) Prepare the documentation in accordance to the Rules and The Guidelines. (d) Implement and review the arm’s length transfer pricing policies and redesign the transfer pricing policy to accommodate any changes in the business environment. (e) Prevent from providing vague, useless or inadequately founded information. (f) Apply a coherent and transparent approach in identifying uncontrolled transactions. (g) Provide detailed analysis of functions, assets, risks, market conditions and business strategies. (h) Apply a transfer pricing method in accordance to the Rules. (i) Ensure that the factual, economic and empirical representations in transfer pricing documentation are specifically relating to company, product and market. (j) Ensure that the transfer pricing documentation is accurate and precise, and matches the accounting, financial and benchmarked data/comparables. (k)

Highlight and document any specific event that may have hindered the MNE’s performance so that appropriate fact-based adjustments can be considered. (l) Maintain adequate background documents and full records containing particulars about the factual assumptions and relevant factors that have been taken into account in working out the arm’s length price. (m)

Avoid documentation which is not properly supporting the transactions, limited, and incomplete.
It is strongly recommended that a transfer pricing policy be in place. Should you wish to get a copy of the regulations and/or guidelines, please email us on info@fbattorneys.com with subject Transfer pricing regulations.