Q&A – 31 October 2011

Royalty on mining operations

Can a mining licence automatically be extended under the Mining Act 2010? What additional period can we apply for? How is the royalty calculated under the new Mining Laws in Tanzania?
DP, Australia

The newly introduced Mining Act of 2010 provides that the holder of a mining licence can apply to the Minister for a renewal not later than six months prior to expiry date of the licence. The law states that an application for renewal shall be in a prescribed form and shall be accompanied by the prescribed fee and tax clearance certificate issued by the Tax Authority in respect of operations to be conducted during the renewal period.

The law further states that on receiving an application, the Minister shall renew the mining licence for the period for which application has been made, but not exceeding ten years, unless (a) the applicant is in default; Provided that the licensing authority shall not reject an application to renew a mining licence on the grounds that the holder is in default, without first serving on the holder a notice specifying particulars of the default and requiring the holder to remedy the default time specified in the notice; (b) the development of the mining area has not proceeded with reasonable diligence; (c) minerals in workable quantities do not remain to be produced;(d) the applicant has failed to conduct mining operations in the mining area in strict compliance with the applicable Regulations relating to safety and environmental management.

From the above it is clear that if you are not in default of any of the above, then your licence upon the application being made atleast six months prior to expiry of the current mining licence, will be automatically extended.

On the royalty side, the Mining Act 2010 provides the following percentages as royalty based on the gross value of minerals produces under the minerals: for uranium, gemstone and diamonds 5% ; for metallic minerals such as copper, gold, silver and platinum group minerals the rate is 4%.

The price of the minerals are based on an arms length purchase price and a subsidiary selling at a discounted rate to a holding company is not acceptable under the law. The Minister where he considers that the realised price does not correspond to the price which would have been paid for the minerals if they had been sold on similar terms in a transaction at arms length between a seller and a buyer, may give notice to that effect to the licence holder.

The Mining Act also specifically defines ‘gross value’ as the market value of minerals at the point of refining or sale or, in the case of consumption within Tanzania, at the point of delivery within Tanzania.

Tax revenue appeals board

We have objected to an assessment by the Tanzania Revenue Authority (TRA) and the matter is at the Tax Revenue Appeals Board. TRA is trying to prove that we are supposed to pay some colossal amount of tax. How does the TRAB work and what should we be doing?
OG, Dar

We are sure that prior to filing your objection and subsequently the appeal, you as the appelantwould have been guided on how the procedure works. Nonetheless we will repeat it here.

First and foremost it is not TRA that has to prove what they have assessed but you to disprove the assessment.

The Proceedings of the TRAB are under the Tax Revenue Appeals Act which states that proceedings shall be of judicial nature and be conducted on such occasions and at places as the Chairman may direct.

In every proceedings before the Board and before the Tribunal, (a) the appellant shall appear either in person or by his duly authorised agent on the day and at the time fixed for hearing of the appeal (b) the onus of proving that the assessment or decision in respect of which an appeal is preferred is excessive or erroneous shall be on the appellant; (c) the appellate authority may confirm, reduce, increase or annul the assessment concerned or make such other orders thereon as it may think fit; (d) the costs of the appeal shall be in the discretion of the
appellate authority; (e) the appellate authority shall, within fifteen days of its decision, cause a notice of such decision and of the date thereof to be issued and such notice shall be served on the parties to the appeal; (f) where the decision of the appellate authority results in any amendment to an assessment, the assessment shall be amended accordingly and the Commissioner-General shall cause a notice setting out such amendment and the amount of tax payable to be served on the person assessed.

The Board may also call any person to attend at a hearing and give evidence including the production of any document if the Board believes such evidence will assist in its deliberations. Your tax consultant can guide you further.

Sale of matrimonial land by widow

In 2006 our father died and was survived with 3 children and a wife who is our step mother. After his death our step mother remarried another man with whom she is staying with todate. She has secretly sold the house we have lived in since our childhood and the buyer is now forcing us to pay rent or give vacant possession of the house. The house was jointly bought by our father and the said step mother. Are we not entitled to stay in the house? Please assist- we have nowhere to go.
DF, Morogoro

If the house was bought as joint tenants between your late father and step mother, the law is clear that the entire house belongs to the other surviving joint tenant, who is your step mother who is entitled to do what she wants with the house.

Had the house been bought under a tenancy in common, then your father and stepmother would have shares in the house and your fathers share would pass to his heirs under his Will. Unfortunately in joint tenancy the entire house goes to the other surviving joint tenant.

We recommend you double check whether the house was bought as a joint tenancy or tenancy in common and consult your attorney thereafter.