Q&A – 24 February 2020
Brother, sister in law sleep separately
My brother and his wife sleep in separate rooms. I find this quite awkward and it puts me in a bad situation. I have tried engaging with them about this but it is not something they want to discuss. I am concerned about the well-being of the two of them. Is there something I need to be aware of? If they are having a problem, is this a ground of divorce that I can file if they are shy to? It is better they part ways rather than sleep in different rooms which is quite uncommon. Please guide me.
OT, Dar
To begin with, it is not your marriage so you need to be careful what you say and what you intend to do. You are a mere third party in the house and have no locus to file for a divorce on their behalf. Unless we start reading between the lines, we are unsure how you are put in a ‘bad situation’ if your brother and his wife sleep separately.
Having stated the above, indeed one of the grounds of divorce is denial of conjugal rights during the pendency of marriage. However just because they are sleeping in separate rooms doesn’t mean that there is such denial of conjugal rights, unless of course there are things you know, that you likely shouldn’t, that you haven’t disclosed to us.
Undue tax benefit
We engaged with foreign consultants to structure a certain transaction that we intend to carry out in Tanzania and some other countries in Eastern Africa. The recommended structure includes having offshore entities that will hold the Tanzanian asset amongst others. Our intention is to properly tax plan and ensure that we are protected within the boundaries of the law but without exposing ourselves to unwarranted tax claims. Is this the right approach and what would you recommend?
FO, Asia
Normally tax planning is an exercise any business owner would do. In recent years what we have seen is aggressive tax planning which has resulted in huge disputes with the taxman. Having an offshore entity for a foreign company is not abnormal, and has been commonly used around the world. Unfortunately, we do not have enough information on the exact structure to be able to comment further. Moreover, it is a good idea to appoint a tax consultant locally to look at this structure to ensure you are not breaching our law.
Before we put our pen down, we would like you to take cognizance of section 8 of the Tax Administration Act 2015 of Tanzania that addresses schemes for obtaining undue tax benefits. It is broadly worded and has been used against structures that are uncommon for bona fide business purposes. There have been various instances of ‘overcreative’ foreign structures that have fallen foul of this law. This section states: 8(1) Notwithstanding any provisions of this Act, where the Commissioner General is satisfied that any scheme that has the effect of conferring tax benefit on any person was entered into or carried out (a) solely or mainly for the purpose of obtaining that benefit; and (b) by means or in a manner that would not normally be employed for bona fide business purposes, or by means or in a manner of the creation of rights or obligations that would not normally be created between persons dealing at arm’s length, the Commissioner General may determine the liability for any tax imposed by this Act, and its amount, as if the scheme had not been entered into or carried out, or diminution of the tax benefits sought to be obtained by the scheme. (2) A determination under subsection (1) shall be deemed to be an assessment of tax and the provisions of this Act and any other provisions of tax law in relation to assessments shall apply accordingly. (3) In this section bona fide business purposes does not include obtaining tax benefit.
Your tax team can guide you further.
Primary Mining Licences (PML)
There is a PML owner who is going bust and I want to rescue his business and buy into this venture. The issue is that I am not a national of Tanzania but that of a neighbouring friendly Swahili speaking nation. Can I directly buy in? My consultant says I cannot hold the PML but he can set up a trust and a nominee to hold this venture for me. Please guide me as I want to set the most efficient structure.
OL, East Africa
You may not like our bold answer, but unfortunately no structure will work for you. As a non-Tanzanian you cannot own or hold a PML. Further, these trust, nominee or other structures are not recognised under our laws in Tanzania. PMLs are exclusively for Tanzanians and for a reason. You have the option of looking for prospective licences or perhaps even mining licences but not PMLs.
Section 8(2) of the Mining Act 2010 has made it very clear that a primary mining licence for any minerals shall not be granted to an individual, partnership or body corporate unless (a) in the case of an individual, the individual is a citizen of Tanzania; (b) in the case of a partnership, it is composed exclusively of citizens of Tanzania; (c) in the case of a body corporate, it is a company and (i) its membership is composed exclusively of citizens of Tanzania; (ii) its directors are all citizens of Tanzania; (iii) control over the company, both direct and indirect, is exercised, from within Tanzania by persons all of whom are citizens of Tanzania.
You may need to visit your strategy taking into account the strict nature of section 8 in as far as PMLs are concerned.