Q&A – 3 March 2014
Power of attorney
If I have been granted a power of attorney, can I also give someone else a power of attorney based on this power of attorney. In short I want someone else to act as the attorney not myself, although I am the original holder of the power of attorney.
RB, Dar
A power of attorney (POA) is a written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter. The person authorizing the other to act is usually the donor and the one authorized to act is the done or the attorney.
The person who creates a power of attorney, known as the grantor, can only do so when he/she has the requisite mental capacity. In some powers of attorney the grantor states that he/she wishes the document to remain in effect even after he/she becomes incapacitated. This type of power is commonly referred to as a durable power of attorney which has, to the best of our knowledge, not been tested in Tanzania. If someone is already incapacitated, it is not possible for that person to execute a valid power. If a person does not have the capacity to execute a power of attorney (and does not already have a durable power in place), often the only way for another party to act on their behalf is to either refer to the person’s will or make an application in court for the appointment of a guardian to act in the best interests of the person.
Coming to your specific question, it is very unlikely that you can further delegate you powers under the power of attorney, unless the power of attorney specifically states so. Under the legal principle of delegata potestas non potest delegari, no delegated powers can be further delegated. Your lawyer can guide you further.
Death sentence
If a death sentence is passed in Tanzania, does the accused have a right to appeal? If the appeal is pending, and there is no stay of execution, can the person be executed? What are the rules for stay of execution in civil appeals and how soon must a notice of appeal be filed within?
PK, Mtwara
Yes the person can appeal the death sentence. Rule 11(1) of the Court of Appeal rules clearly states that no sentence of death or corporal punishment shall be carried out until the time for giving notice of appeal has expired or, where notice of appeal has been given, until the appeal has been determined. Hence in criminal appeals as soon as one files a notice of appeal, until the appeal has been determined, any death sentence or corporal punishment cannot be carried out.
In civil appeals stay of execution must be applied for and granted- there is nothing like an automatic stay. Rule 11(2)(d) states the following conditions to be satisfied for stay of execution to be granted: no order for stay of execution shall be made under this rule unless the Court is satisfied-
(i) that substantial loss may result to the party applying for stay of execution unless the order is made;
(ii) that the application has been made without unreasonable delay; and
(iii) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.
A notice of appeal must be lodged within thirty days of the date of the decision against which it is desired to appeal. Your lawyers can guide you further.
Taxes in farm in farm out agreements
In oil and gas contracts, when a company cedes its rights under a production sharing agreement, the typical farm in farm out agreement, what are the income tax consequences of such transactions? Are there specific tax rules that govern this? What guidance can you give us?
KL, Dar
The farm in farm tax consequences are debated internationally. Unfortunately there are no specific guidelines on how such agreements are to be taxed since there are many different kinds of farm in farm out agreements, some with tax consequences, others with very little consequences. For example a company that is farming out that has no proven hydrocarbon reserves and that is farming out at cost will have little tax consequences as opposed to a company that has a discovery and that is cashing out, even if a small percentage, at a premium. Establishing the premium in such uncertain circumstances is subjective and the cause of many tax disputes around the world.
In this connection, it should be remembered that substance, not form, controls in the application of income tax law although as a practical matter, the substance of a transaction will tend to follow the form in which it is cast.
There are various types of Farm-out agreements which include the simple farmout, the sublease, the undivided interest farm-out, the checkerboard farmout, the carried interest farm-out, the net profit farm-out, the back-in farm-out to mention a few.
To address an ambiguity or interpretation issues in the Income Tax Act in Tanzania, section 131 of the Income Tax Act specifically provides for a private ruling whereby a tax payer can ask the Tanzania Revenue Authority in advance on tax consequences of a transaction. Section 131 states the following: The Commissioner may, on application in writing by a person, issue to the person, by notice in writing served on the person, a private ruling setting out the Commissioner’s position regarding the application of this Act to the person with respect to an arrangement proposed or entered into by the person.
We recommend that you proceed for a private ruling under section 131. Another tax consequence that your tax team should also consider is that of Value Added Tax on the transaction. Your lawyers can guide you further.