TAX LAW UPDATE: DEFINING WHAT STAMP DUTY LEVY IS AND RECOGNIZING INSTRUMENTS THAT ARE CHARGEBLE WITH STAMP DUTY UNDER THE STAMP DUTY ACT CAP 189 REVISED EDITION 2006
- Meaning of stamp duty
- Brief discussion of provisions of the Stamp Duty Act R.E 2006 (“the Stamp Duty Act”) that require instruments to be charged with stamp duty
- List of instruments that are chargeable with stamp duty
- Consequences of not complying with the Stamp Duty Act (Among other consequences, the instrument may not be admitted as evidence in a court of law)
Stamp duty, is one of the oldest levies in Tanzania, despite the fact that it is rarely known to people compared to other kind of levies and taxes such as Income Tax; Value Added Tax (“VAT”); Import Duty; and Excise Tariff. Therefore, our tax department deemed it fit to discuss some important aspects of stamp duty.
2.0. Meaning of the stamp duty:
Stamp duty is a tax that is levied on instruments. Impressed stamp or adhesive stamp has to be attached upon the instrument in order to designate that stamp duty has been paid. An impressed stamp may be in form of rubber stamped on the instrument showing the amount paid, the date of payment and signature of an officer. While adhesive are similar to postage stamps and they are purchased at the Tanzania Revenue Authority (“TRA”) offices around the country.
One may be wondering what an instrument means for the purposes of stamp duty payment. According to Section 2 of the Stamp Duty Act amended by Section 18 of the Finance Act No. 14 of 2009 an instrument means and includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded in a paper or electronic form.
3.0. Requirements for charging stamp duty as per the Stamp Duty Act
Section 5 of the Stamp Duty Act provides for instruments chargeable with stamp duty. It provides that, all documents listed in the schedule of the Stamp Duty Act and which are executed in Tanzania mainland or executed outside Tanzania mainland but, relate to any property, or any matter to be performed in Tanzania mainland, shall be chargeable with stamp duty.
Sections 25 and 26 of the Stamp duty Act respectively provide that, all chargeable instruments executed by any person in Tanzania Mainland shall be stamped within thirty (30) days of execution and every chargeable instrument executed out of Tanzania Mainland shall be stamped within thirty (30) days of its first arrival in Tanzania Mainland.
Section 41 of the Stamp Duty Act gives room for parties to agree on who shall be liable for paying stamp duty. In the absence of an agreement between parties, the Stamp Duty Act imposes the liability of paying stamp duty on the person whose stamp duty should be borne. For instance, a stamp duty shall be borne by the person drawing or executing the instruments in case of instruments such as administration bonds; bills of exchange; bonds; bottomry bonds; customs bonds; debentures; further charges; indemnity bonds; promissory notes; releases;; security bonds; settlements.
4.0. Assorted Cases and persons charged with duty to pay stamp duty in a transaction
The following are different cases attracting stamp duty and the persons chargeable to stamp duty:-
- in the case of a policy of insurance other than fire insurance, by the person effecting the insurance;
- in the case of a policy of fire insurance, by the person issuing the policy;
- in the case of a conveyance (including a reconveyance of mortgaged property), by the guarantee; in the case of a lease or agreement to lease, by the lessee or intended lessee;
- in the case of a counterpart of a lease, by the lessor;
- in the case of a mortgage-deed, by the mortgagor;
- in the case of an instrument of exchange, by the parties in equal shares;
- in the case of a certificate of sale, by the purchaser of the property to which such certificate relates;
- in the case of an instrument of partition, by the parties in proportion to their respective shares in the whole property partitioned, or when the partition is made in execution of an order passed by a civil court or arbitrator, in such proportion as such court or arbitrator directs;
- in the case of a transfer of shares in an incorporated company or other body corporate, by the purchaser or transferee;
- in the case of a transfer of debentures, being marketable securities, whether the debenture is liable to duty or not, by the purchaser or transferee;
- in the case of a transfer of any interest secured by bond, mortgage deed or policy of insurance, by the purchaser or transferee;
- in the case of a receipt or acknowledgement of a debt, the person giving or issuing same; and
- in any other case, such party to the instrument as a Stamp Duty Officer may direct
5.0. List of instruments that are chargeable with stamp duty:
There is a long list of documents which are chargeable with stamp duty. Please see the index for a full list including Affidavits, Conveyance documents, Debentures, Agreements, Share Warrants, Company Memorandums and Articles of Association, Powers of Attorney, Bonds, Valuations etc. provided in the Schedule to the Act.
6.0. Consequences of not complying with the Stamp Duty Act:
The following are the consequences where an instrument which is chargeable under the stamp Duty Act is not duly stamped:-
6.1. An instrument may be impounded or confiscated by a public officer
Section 42 of the Stamp Duty Act provides that, a public officer to whom an instrument is produced in the course of the performance by him of his functions, shall examine such instrument to ascertain whether such instrument is duly stamped and shall, if he is satisfied that it is not duly stamped, impound the instrument or cause the same to be impounded by any other public officer.
Where an instrument is impounded, Tanzania Revenue Authority may impose a penalty on such instrument. The penalty may be 25% of the duty payable or not more than ten times the amount of the proper duty.
6.2. Instrument cannot be admitted as evidence in any court of law
Section 47 (1) of the Stamp Duty Act restricts all instruments chargeable with duty to be admitted in evidence for any purpose by any person unless such instrument is duly stamped.
However, Section 47 (3) (a) and (b) read together with Section 45 (3) (a) and (b) of the Stamp Duty Act provide that, if a public officer fails to examine and impound any instrument required to be charged with stamp duty, he or she shall in no circumstances affect:-
- any proceedings under the Stamp Duty Act or any other written law;
- the chargeability, or otherwise, of such instrument, for the purpose of this section.
The Stamp Duty Act has provided for a long list of instruments that are charged with stamp duty. On the other hand, the Stamp Duty Act has given the Minister of Finance power to exempt a chargeable instrument from being charged with stamp duty. Hence, a tax payer may need to go an extra mile to see whether there is notice in a government gazette that exempts an instrument from stamp duty chargeability.
Breakthrough Attorneys’ tax team is aware that many a proceedings have been delayed and/or clogged because of non-adherence with simple requirements of the Stamp Duty Act. Conveyance transactions and court’s proceedings have been frustrated at times due to non- compliance of the requirements of the Stamp Duty Act..
In one of our Arbitration cases where the firm successfully represented a Zimbabwean all-African software company against a national health insurance leader, the health insurance company applied to the High Court for review of the Arbitrator’s Award, one of the grounds being “that the arbitrator erred for admitting into evidence and relying on the USAGE AND MAINTENANCE AGREEMENT while it was not stamped under the Stamp Duty Act”. As per our reference to S. 45 (3) and 47 (3) above, our team was able to convince the Court that since there was no objection to the admissibility of the document during arbitration proceedings, hence no question of admissibility before the Arbitrator, then the failure of the Arbitrator (See also S. 45 (4)) to check on the question of admissibility could not affect the award after it was arrived at.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.