Court: Court of Appeal of Tanzania Civil Appeal No. 10 of 2024

Judges: Sehel, Rumanyika & Ismail, JJA

Date: September 2023 (appeal decided in November 2025)

Case Summary: Village Supermarket Limited v. Tanzania Revenue Authority

Background;

Village Supermarket Limited (the respondent) is a company incorporated in Tanzania. Initially, its shares were directly owned by individual shareholders but In 2017, Village Supermarket Group (Mauritius) acquired 99.9% of the shares in Village Supermarket Limited (Tanzania). Following this transaction, the Tanzania Revenue Authority (TRA) assessed corporate tax of TZS 168,557,337.60 million, arguing that the transfer constituted a change in underlying ownership of 50% or more under Section 56(1) of the Income Tax Act, Cap 332 R.E. 2023. TRA maintained that this change triggered a deemed realization of assets.

Village Supermarket Limited disputed the assessment, contending that the share transfer did not alter the beneficial ownership or economic control of the company, since the ultimate owners remained the same individuals.

Issue The central issue was whether the transfer of shares to Village Supermarket Group (Mauritius) constituted a change in underlying ownership of 50% or more under Section 56(1), thereby triggering corporate tax liability, despite the ultimate beneficial owners remaining unchanged.

Decisions of TRAB and TRAT The Tax Revenue Appeals Board (TRAB) ruled in favor of Village Supermarket Limited, nullifying the tax assessment. TRAB reasoned that although shares were transferred to a Mauritian company, the ultimate beneficial owners remained the same individuals. Section 56, it held, should be interpreted by considering economic reality rather than mere legal form.

The Tax Revenue Appeals Tribunal (TRAT) reaffirmed TRAB’s decision, agreeing that beneficial ownership had not changed and therefore no tax liability arose.

Decision of the Court of Appeal: The Court of Appeal reviewed the meaning of key statutory terms. A “change in control” which Under Section 56 of the Income Tax Act, occurs when 50% or more of underlying ownership changes compared to any time in the previous three years. In such cases, the entity is deemed to have realized its assets and liabilities immediately before the change.

“Realization of assets” which under Section 39 of the Act its the disposal of an asset through sale, transfer, exchange, or other means. Realization may be actual (where a transaction physically occurs) or deemed (where the law treats a transaction as if realization occurred).

The Court held that “underlying ownership” under Tanzanian law refers to legal ownership of shares, not beneficial ownership. Once the individual shareholders transferred 99.9% of shares to the Mauritian company, they ceased to be the legal owners. The Mauritian company became the new legal owner, and since ownership changed by more than 50%, Section 56 was automatically triggered.

The Court of Appeal allowed the appeal by the Commissioner General of TRA, overturning the decisions of TRAB and TRAT. The tax assessment of TZS 168,557,337.60 million was reinstated against Village Supermarket Limited. The Court emphasized that when Section 56 applies, the company is deemed to have realized its assets regardless of whether an actual sale occurred.