The facts
SEACOM Tanzania Limited is a Tanzanian company engaged in the provision of network facilities. It holds a portion of the SEACOM fibre optic cable within Tanzania’s territorial waters, up to and including a landing point, and operates under a licence issued by the Tanzania Communications Regulatory Authority.
In 2021 the TRA conducted a tax audit of SEACOM Tanzania’s returns and accounts for the year of income 2018, including a review of intercompany balances. The TRA observed that the company had received funds from a related party, SEACOM Ltd, totalling TZS 5,442,324,239. SEACOM Tanzania characterised these funds as operational support rather than financing. The TRA disagreed, treating the entire amount as intra-group financing in the nature of a loan.
Acting under section 33(2)(a) of the Income Tax Act (ITA), the TRA re-characterised the transaction and, on 28 May 2021, issued a withholding tax assessment on deemed interest at the rate of 10 per cent, pursuant to Regulation 10(3) of the Tax Administration (Transfer Pricing) Regulations 2018 read together with section 33 of the ITA.
The litigation
Objection and final determination — TRA prevails
SEACOM Tanzania lodged an objection, arguing the funds were operational support and not a loan. The TRA rejected the objection and issued a final determination reaffirming its original position.
Tax Revenue Appeals Board — TRA prevails
SEACOM Tanzania appealed to the Tax Revenue Appeals Board. The Board upheld the TRA’s assessment and dismissed the appeal.
Tax Revenue Appeals Tribunal — TRA prevails
A second appeal to the Tax Revenue Appeals Tribunal also failed. The Tribunal held that the TRA was empowered to characterise the funds as a loan under Regulation 10(3) read with the Transfer Pricing Guidelines 2020, and that it was entitled to rely on best-judgment assessment where the taxpayer had provided no contemporaneous transfer pricing documentation.
Court of Appeal of Tanzania — 28 November 2025 — appeal dismissed
SEACOM Tanzania appealed to the Court of Appeal on three grounds: that the Tribunal erred in holding the TRA justified in treating the intercompany payable as a loan under Regulation 10(3); that it erred in upholding withholding tax on deemed interest; and that it erred in upholding interest for late payment. All three grounds were dismissed.
- Ground one — re-characterisation. The Court found Regulation 10(3) — which requires a person in a controlled transaction who provides or receives intra-group financing to determine an arm’s length interest rate — mandatory and unambiguous. It distinguished section 33(2)(a), empowering the Commissioner to re-characterise the source and type of any income, loss, amount or payment, from section 33(2)(b), which applies only where the taxpayer has already conducted a comparability analysis. Because SEACOM Tanzania had provided no arm’s length analysis, paragraph (b) was not engaged; the TRA acted lawfully under paragraph (a).
- Ground two — withholding tax. The Court agreed that Regulation 10(3) validly deems imputed interest as accrued and payable, triggering the withholding obligation under section 82(1) ITA. Relying on TRA v Vodacom Tanzania PLC [2025] TZCA 343, it confirmed that corporations account for income tax on an accrual basis and that withholding tax follows the same principle — interest accrued under the arm’s length deeming was sufficient to create the obligation, even though none had actually been paid. The challenge to the applicable rate, raised for the first time at the Tribunal, was barred following Singita Trading Store (EA) Ltd [2021] TZCA 179.
- Ground three — late payment interest. The late payment interest under section 76 of the Tax Administration Act was consequential on the principal assessment. Having upheld that assessment, the Court held the late payment interest properly imposed.
ajiho commentary
Documentation is not optional — it is the first line of defence
The outcome of this case was determined before the legal arguments were joined. SEACOM Tanzania provided no contemporaneous transfer pricing documentation. That omission was cited by the Court at every level as the foundation for the TRA’s authority to re-characterise and to apply best-judgment assessment. The Tanzanian framework — like the OECD Guidelines and most comparable regimes — requires self-assessment on an arm’s length basis. Where the taxpayer does not document its position, it cedes the analytical ground entirely to the authority. Remediation under audit is structurally difficult: the burden of proof rests on the taxpayer (section 18(2) TAA), the authority’s assessment carries a presumption of correctness, and arguments raised for the first time in litigation may simply be barred, as the interest rate challenge was here.
Re-characterisation power is broad where compliance is absent
The Court confirmed a clear and commercially important distinction. Section 33(2)(a) — re-characterisation of the source and type of any income, loss, amount or payment — is available where the taxpayer has failed to comply with the arm’s length principle under section 33(1), and requires no prior comparability analysis by the authority. Section 33(2)(b) — apportionment of expenditure based on comparability analysis — is triggered only where the taxpayer has itself conducted a comparability exercise. A taxpayer that characterises intercompany receipts as operational support without any transfer pricing analysis, and without a loan agreement or interest documentation, is squarely within paragraph (a). The authority’s re-characterisation power in those circumstances is effectively unconstrained.
The accrual basis principle extends to withholding tax on deemed interest
The withholding tax ground turns on a point that is easily overlooked. Tanzania’s income tax framework requires corporations to account on an accrual basis (section 21(3) ITA). The Court confirmed, following Vodacom Tanzania PLC, that withholding tax follows the same principle. Where Regulation 10(3) deems an arm’s length interest rate to apply to intra-group financing, that interest accrues for tax purposes irrespective of whether it is actually paid. The practical consequence for groups with intercompany balances that have not been documented as loans — and for which no interest is flowing — is significant. A TRA audit that re-characterises those balances will not wait for a cash payment before imposing withholding tax. The liability crystallises on accrual.
The comparability omission cannot be remedied retrospectively
SEACOM Tanzania raised a challenge to the applicable interest rate during the Tribunal proceedings — after proposing no alternative rate in its objection letter or before the Board. The Court declined to entertain the argument, consistent with established Tanzanian appellate practice: issues not ventilated before the Commissioner cannot be raised on appeal. The lesson is straightforward. If a transfer pricing position is disputed, any alternative quantification — an alternative rate, method, or characterisation — must be placed on record at the earliest stage of the administrative process. Once that window closes, the evidential record is fixed.
East Africa as an emerging FTTP audit jurisdiction
This judgment is one of a small but growing body of East African transfer pricing decisions on intra-group financing. Tanzania’s TP Regulations (2018) and TP Guidelines (2020) draw on OECD principles, including Chapter X on financial transactions, and the regulatory architecture they create is broadly comparable to more established jurisdictions. The judgment confirms that the TRA is willing to use that architecture aggressively where documentation is absent. Groups with Tanzanian operations — in telecoms, infrastructure, extractives, and real estate — should treat the decision as a clear signal that undocumented intercompany balances carry material audit exposure.
What this means for your business
If your group has intercompany balances with Tanzanian entities — whether characterised as operational support, shareholder loans, management fee accruals, or otherwise — this case raises several immediate practical considerations.
On the characterisation risk. Any transfer of funds between related parties that sits on the balance sheet as an intercompany payable or receivable is potentially re-characterisable as a loan under Regulation 10(3) and section 33(2)(a) ITA. The absence of a loan agreement, interest documentation, or repayment terms does not prevent the TRA from treating the balance as financing — it may make re-characterisation easier.
On documentation. Contemporaneous documentation — prepared at or around the time of the transaction — is the primary defence: a written agreement reflecting the commercial terms, an arm’s length pricing analysis calibrated to the relevant rate benchmark, and consistent treatment in the accounts of both parties. Reconstruction after the event is inadequate.
On withholding tax exposure. Where the TRA re-characterises an intercompany balance as a loan, withholding tax at 10 per cent will be applied to deemed interest on an accrual basis, not on a cash-payment basis. Groups carrying long-standing undocumented intercompany balances face potentially significant retrospective exposure.
On managing a dispute. If the TRA raises a transfer pricing query on intercompany financing, any alternative position — on characterisation, rate, or method — must be documented and submitted at the objection stage. Arguments first raised at the Tribunal or on appeal will not be heard.
Case reference
SEACOM Tanzania Limited v Commissioner General, Tanzania Revenue Authority · Court of Appeal of Tanzania at Arusha · Civil Appeal No. 147 of 2025 · 28 November 2025
Judgment of Ndika, Fikirini and Mgeyekwa JJA (heard 15 November 2025). Underlying appeal from the Tax Revenue Appeals Tribunal, Tax Appeal No. 22 of 2023. Primary source: certified copy of judgment. Cases cited include Commissioner General TRA v Vodacom Tanzania PLC [2025] TZCA 343 and Singita Trading Store (EA) Ltd v Commissioner General TRA [2021] TZCA 179.