Background
Many countries around the world are now implementing rules and regulations on disclosure of beneficial owners and Tanzania is amongst one of them.
Through the passing of various legislation, such as the Finance Act Number 8 of 2020 (hereinafter referred to as “the Finance Act of 2020”),rules on disclosure of beneficial owners were introduced to theCompanies Act Number 12 of 2002 (hereinafter referred to as “the Companies Act”). In addition, the Finance Act 2020 amended the Anti-Money Laundering Act, Chapter 423, Revised Edition of 2019, the Trustees’ Incorporation Act, Chapter 318, Revised Edition of 2002 and the Income Tax Act, Chapter 332, Revised Edition of 2019 (hereinafter referred to as “the Income Tax Act”) by establishing provisions relating to beneficial ownership rules.
The main aim of disclosing a beneficial owner of an asset or interest in an entity is to curtail and/or prevent offences such as money laundering, tax evasion, and other illegal practices, and to also increase transparency in legal business activities within a particular jurisdiction.
Concept of Beneficial Owners
A beneficial owner is a person and/or group of individuals who enjoy the benefits of ownership even though the title thereof belongs to someone else, who, either directly or indirectly, has or have the power to vote or influence the underlining transactional decisions through the arrangement made. These arrangements (as stated under section 3 of the Income Tax Act), include an action, agreement, course of conduct, dealing, promise, transaction, understanding or undertaking, whether express or implied, whether or not enforceable by legal proceedings, and whether unilateral or involving more than one person.
The Finance Act of 2020 has defined a beneficial owner as a natural person who: -
The above definition has also been incorporated under section 4 adding to section 3 of the Anti-Money Laundering Act, section 7 adding to section 2 of the Companies Act, section 25 (c) adding to section 3 of the Income Tax Act, and section 76 by adding section 1A to the Trustees’ Incorporation Act.
Beneficial Ownership Requirements under the Companies Act
There shall be delivered a statement in the prescribed form (Company Form 14b found under the Companies (Forms) Rules) containing the subsequent particulars that are accurate and up to date records of beneficial owners as stated under section 8 of the Finance Act which amends section 14 (2) (b) of the Companies Act, of such company which shall include:-
Register of Beneficial Owners
Companies in Tanzania are now required to have a register for beneficial owners and to notify the Registrar of Companies (hereinafter referred to as “the Registrar”), who shall also establish and maintain a register of beneficial owners at the Companies Registry as stated in section 16 of the Finance Act of 2020. This means that, the information held by the Registrar will be available generally to specific competent authorities in Tanzania and public access to such information is limited unless stated otherwise. The various competent authorities include, the Tanzania Revenue Authority (hereinafter referred to as “the TRA”), the Financial Intelligence Unit, Government institutions responsible for overseeing the economic empowerment of Tanzanian nationals, and any other national competent authority.
Through the register, the TRA can now have more insight into the economic reality of all corporate arrangements in respect of various entities when undertaking tax audits, assessments and investigations. Income tax, including the withholding tax, is now chargeable and payable by both the beneficial owners and/ or non-resident through their agents or representatives who receive income be it directly or indirectly, as long as it derives in Tanzania.
Consequences of failing to make the requisite disclosures
It is mandatory for persons seeking to register new companies in Tanzania to ensure that their respective beneficial owners (if any) are identified and their details and/or particulars are submitted to the Registrar at the time of incorporation. A person who fails to file beneficial ownership detail commits an offence and thus liable to a fine of not less than TZS 5 million but not exceeding TZS 10 million.
The Registrar has the power to refuse to register any document of a company that is required to be registered under the Companies Act if he is not satisfied that the company has provided accurate and up to date information on the beneficial owners of the company, which, in turn, may prevent a company from taking certain essential corporate actions.
Conclusion
Anonymity, in certain circumstances, enables many illegal activities to be performed or to take place as they may go unnoticed by law enforcement authorities. Such illegal activities include tax evasion, corruption, money laundering, financing of terrorism. etc. Thus, there are valid reasons as to why it is important to implement different laws to identify beneficial owners’ information that will be available and accessible by certain Government authorities.
By Nuruh Mwandambo - Legal Intern
Note: This is not a legal opinion and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.
