Civil Reference No. 7 of 2004
The appellant, Statoil Tanzania AS (now Equinor Tanzania AS), was engaged in oil and gas exploration in Tanzania, operating in Block 2 within Tanzania's Exclusive Economic Zone under a Production Sharing Agreement (PSA) signed on 18th April 2007 with the Government of Tanzania and Tanzania Petroleum Development Corporation (TPDC). In 2011, the appellant executed a Farm-Out Agreement outside Mainland Tanzania, assigning its petroleum rights under the PSA to ExxonMobil Exploration and Production Tanzania Limited. Following a tax audit in 2013, the respondent (Commissioner General, TRA) assessed stamp duty liability of TZS 170,414,448 on the Farm-Out Agreement. The appellant objected, relying on Article 27(e) of the PSA which it claimed exempted it from tax liability connected to assignment of the sites, but the objection was unsuccessful and the disputed sum was deducted from the appellant's VAT refunds. The Tax Revenue Appeals Board initially ruled in the appellant's favour, but on appeal the Tax Revenue Appeals Tribunal reversed the Board's decision, holding the stamp duty was properly chargeable. The appellant then appealed to the Court of Appeal.
(1) Whether the appellant discharged its burden of proving it was exempted from payment of stamp duty on the Farm-Out Agreement. (2) Whether Article 27(e) of the PSA obliged the Government to give legal effect to an agreed stamp duty exemption absent a Ministerial Gazette notice. (3) Whether the Farm-Out Agreement, executed outside Mainland Tanzania, was chargeable to stamp duty immediately upon execution, or only upon its arrival in Mainland Tanzania under section 26 of the Stamp Duty Act. (4) Whether the respondent's issuance of a Notice of Confirmation of Assessment without first issuing an objection determination letter, as required by law, prejudiced the appellant.
The appellant argued that Article 27(e) of the PSA constituted a binding exemption from stamp duty on assignment transactions, that this exemption was not nullified by absence of a Government Notice, and that the appellant had discharged its burden of proof under section 18(2)(b) of the TRAA by attempting registration under section 143 of the ITA. It further argued that stamp duty is levied on instruments (not transactions) and that under section 26 of the Stamp Duty Act, an instrument executed outside Mainland Tanzania is only chargeable once it physically arrives in Mainland Tanzania, which had not occurred; alternatively, if duty were payable, section 41(d) placed liability on the grantee (ExxonMobil), not the appellant. It relied on Bidco Oil and Soap Ltd v. Commissioner General and Cape Brandy Syndicate v. IRC for strict construction of tax statutes, and sought a refund of the sum deducted from VAT refunds. On the fourth ground, the appellant argued that failure to receive an objection determination letter before the Notice of Confirmation of Assessment deprived it of the reasons for refusal and prejudiced its ability to frame grounds of appeal.
The respondent countered that stamp duty exemption is not automatic but must be granted by a Ministerial Notice in the Gazette under section 16(1) of the Stamp Duty Act, which the appellant never produced, nor did it produce the PSA itself in evidence. It argued that section 5(1)(b) of the Act makes instruments executed outside Mainland Tanzania relating to property in Mainland Tanzania chargeable with duty, and that a PSA cannot itself override statutory tax obligations, citing Cape Brandy Syndicate v. IRC. On the fourth ground, the respondent argued the appellant's complaint was an afterthought since the appellant had itself treated the Notice of Confirmation of Assessment as the final determination, had failed to submit required documents (including the PSA) for verification of its exemption claim, and was not prejudiced since it was able to appeal to the Board.
The Court of Appeal dismissed the appeal in its entirety with costs, upholding the Tribunal's reversal of the Board's decision. On the first three grounds, the Court held that stamp duty exemption under the Stamp Duty Act is not automatic but requires a Ministerial Notice published in the Gazette under section 16(1); the appellant failed to produce such a notice or even the PSA and Farm-Out Agreement in evidence, and had not registered the Farm-Out Agreement under section 143 of the ITA. Consequently, the appellant failed to discharge its burden of proof under section 18(2)(b) of the TRAA that the assessment was excessive or erroneous. The Court found the Farm-Out Agreement, executed outside Mainland Tanzania and relating to property in Mainland Tanzania, was chargeable to stamp duty under section 5(1)(b) of the Act, and rejected the argument that section 26 suspended chargeability until physical arrival of the document in Mainland Tanzania. On the fourth ground, the Court held that the appellant could not complain of prejudice from lack of an objection determination letter because the appellant itself had treated the Notice of Confirmation of Assessment as the final decision and had relied on this position to found its appeal before the Board; moreover, the appellant had failed to supply requested documents (including the PSA) necessary for the respondent to make a determination. The ground was therefore dismissed as an afterthought lacking merit.
The judgment reinforces the principle that tax exemptions must be strictly grounded in statute and cannot arise merely from contractual undertakings such as a Production Sharing Agreement; exemption from stamp duty requires a specific Ministerial Notice published in the Gazette under section 16(1) of the Stamp Duty Act. It confirms that instruments executed outside Mainland Tanzania relating to property situated in Mainland Tanzania are chargeable with stamp duty under section 5(1)(b), and clarifies that section 26 (governing timing of stamping upon arrival) does not defer or negate the chargeability created by section 5. The decision also illustrates the burden of proof under section 18(2)(b) of the TRAA resting squarely on the taxpayer to prove an assessment is excessive or erroneous, including production of underlying agreements relied upon. Finally, it demonstrates an estoppel-like approach whereby a taxpayer who treats a Notice of Confirmation of Assessment as a final determination and proceeds to appeal on that basis cannot later complain of procedural prejudice from the absence of a formal objection determination letter, particularly where the taxpayer itself withheld key documents from the tax authority during the objection process.
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