The decision of the Court of Appeal of Tanzania in Commissioner General Tanzania Revenue Authority v BRAC Tanzania Finance Limited [2026] TZCA 33 is one of the most significant tax judgments in recent years. At its core, the case required the Court of Appeal (the Court) to determine whether a non-deposit-taking microfinance service provider falls within the meaning of a “financial institution” for the purposes of excise duty under the Excise (Management and Tariff) Act, Cap. R.E. 2023 (the Excise Act).
Although the dispute turned on statutory interpretation, the Court’s decision carries far-reaching implications for Tanzania’s financial services industry and the development of principles governing their interpretation. The case not only settles the immediate dispute between the Tanzania Revenue Authority (TRA) and BRAC Tanzania Finance Limited (BRAC), but also reshapes the tax position of the broader microfinance sector.
The Statutory Framework: Taxation and Financial Regulation in Tanzania
To appreciate the significance of the Court’s decision, it is necessary to consider the broader statutory framework governing financial institutions and the imposition of excise duty in Tanzania.
Excise duty in Tanzania is imposed under the Excise Act. Section 126(12)(a) provides that excise duty at the rate of 10% is chargeable on fees or charges payable by a person to a financial institution for services provided by that institution. At the material time, however, the Excise Act did not define the term “financial institution”, thus creating an interpretive gap that lies at the heart of the dispute.
By contrast, several other statutes within Tanzania’s financial regulatory framework contain definitions of the term. The Income Tax Act, Cap. 332 R.E. 2023 (the Income Tax Act) defines a financial institution as a bank or financial institution approved under the Bank of Tanzania Act, Cap. 197 R.E 2023 or the Banking and Financial Institutions Act, Cap. 342 R.E 2023 (the Banking Act). The Bank of Tanzania Act defines a financial institution as an entity engaged in banking business, whose size, location or permitted activities are limited to the terms and conditions of its licence. The Banking Act regulates banking and deposit-taking financial institutions.
The statutory framework has been further reshaped by the Microfinance Act, 2018, Cap. 407 R.E 2023 (the Microfinance Act), which introduced a four-tiered regulatory regime for microfinance service providers. Section 5 of the Microfinance Act classifies institutions into Tier 1 (deposit-taking microfinance institutions), Tier 2 (non-deposit-taking microfinance service providers such as individual money lenders), Tier 3 (savings and credit co-operative societies (SACCOS)) and Tier 4 (community microfinance groups). While Tier 1 institutions are regulated under the Banking Act, Tier 2 institutions fall exclusively within the regulatory framework established by the Microfinance Act.
It was at the intersection of these statutes that the dispute emerged. The central question was whether a Tier 2 non-deposit-taking microfinance service provider, regulated under the Microfinance Act rather than the Banking Act, qualifies as a “financial institution” for the purposes of section 126(12)(a) of the Excise Act.
Factual Background of the Case
BRAC is licensed by the Bank of Tanzania as a Tier 2 non-deposit-taking microfinance service provider under the Microfinance Act. Its principal business involves extending micro-credit facilities to low-income individuals and micro-entrepreneurs. Unlike deposit-taking financial institutions, BRAC does not accept deposits from the public.
In 2021, the Commissioner General of the TRA issued an assessment against BRAC for excise duty amounting to TZS 1,259,705,687, together with interest, on the basis that it constituted a “financial institution” within the meaning of section 124(6A)(a) of the Excise Act (now section 124(12)(a)). The assessment was based on the TRA’s position that BRAC provided financial services for consideration and therefore fell within the category of institutions subject to excise duty.
BRAC objected to the assessment, but the objection was dismissed. BRAC subsequently appealed successfully to the Tax Revenue Appeals Board (the Board), which allowed the appeal. The TRA further appealed to the Tax Revenue Appeals Tribunal (the Tribunal). Both the Board and the Tribunal held that, as a Tier 2 non-deposit-taking microfinance service provider regulated under the Microfinance Act, rather than the Banking Act, BRAC did not qualify as a “financial institution” for the purposes of the Excise Act. The TRA was aggrieved by those decisions and appealed to the Court of Appeal (the Court).
The Central Legal Question Before the Court
The dispute turned on a deceptively simple but legally intricate question i.e. whether a Tier 2 non-deposit-taking microfinance service provider constitutes a “financial institution” for the purposes of excise duty under the Excise Act.
The absence of a statutory definition in the charging legislation required the Court to determine whether the term “financial institution” should be construed narrowly i.e. limited to deposit-taking institutions regulated under the Banking Act, or broadly so as to include all entities licensed to provide financial services.
The TRA argued that the term “financial institution” must be interpreted within the broader financial legislative framework. Since the Excise Act did not define the term, it was permissible and indeed necessary to look to related statutes such as the Income Tax Act and the Bank of Tanzania Act.
On this basis, the TRA contended that BRAC was licensed by the Bank of Tanzania to conduct financial services and therefore fell within the meaning of a “financial institution”. The absence of the deposit-taking activity was immaterial. What mattered in TRA’s view was that BRAC was authorised to carry on regulated financial business and derived income through the provision of financial services.
The TRA further argued that tax liability must be determined by reference to the substance of the activity and the legislative intent of the taxing statute, rather than by narrow reliance on the supervisory classifications designed for prudential regulation purposes.
BRAC advanced a strict statutory construction approach and relied on established judicial authority, emphasising that tax statutes must be interpreted strictly and that no tax can be imposed by implication. BRAC cited earlier decisions of the Court, including Commissioner General (TRA) v Mamujee Products Ltd & Others and Commissioner General Tanzania Revenue Authority v Ecolab East Africa (Tanzania) Limited, where the Court reaffirmed the principle that nothing should be read into a taxing statute that is not expressly stated or necessarily implied. BRAC contended that, in banking law, deposit-taking is the defining characteristic of a “financial institution”. Since it does not accept deposits and is not regulated under the Banking Act, it should not be classified as a “financial institution” for the purposes of excise duty.
The Court’s Reasoning
The Court began by reaffirming the orthodox principle that tax statutes must be strictly interpreted. On settled jurisprudence, the Court reiterated that there is no equity about a tax, nothing may be implied and tax liability must arise from clear and unambiguous statutory language.
However, the Court emphasised that strict interpretation does not entail an artificial isolation of statutory terms from their broader legal and statutory context. Where a charging provision employs a term without definition, courts may look to related legislation to ascertain its established legal meaning.
The Court rejected the Tribunal’s reliance on the Microfinance Act as determinative of tax classification. While the Microfinance Act governs regulatory supervision and categorisation of microfinance entities, it is not a taxing statute and does not, by itself, define tax liability.
The Court instead turned to the Income Tax Act and the Bank of Tanzania Act. When read harmoniously, these statutes indicated that a “financial institution” includes entities licensed to carry on financial services, irrespective of whether they engage in deposit-taking. The Court emphasised that the statutory distinction between deposit-taking and non-deposit-taking institutions serves a prudential and regulatory function. It is not intended to operate as a criterion for tax exemptions or exclusions.
The Court further examined the historical development of section 124(6A) which is now section 124(12) of the Excise Act. It observed that the Excise Act was originally concerned primarily with goods, but successive amendments progressively expanded its scope to include services, particularly in the financial and telecommunications sectors. This evolution reflected the growing importance of service taxation in Tanzania’s fiscal policy. The Court reasoned that excluding non-deposit-taking microfinance entities from excise duty would be inconsistent with, and would undermine the statutory objective of broadening the tax base in line with, the continued diversification of financial services.
The Court accordingly held that BRAC qualifies as a “financial institution” for the purposes of excise duty under section 124(6A)(a), now section 124(12) of the Excise Act. Accordingly, the Court allowed the appeal, setting aside the decision of the Tribunal, and reinstated the TRA’s assessment with costs.
Implications of the Decision
The judgment underscores a critical doctrinal point in tax jurisprudence i.e. tax liability is determined by substance rather than regulatory labels. The fact that an entity is classified differently for prudential or supervisory purposes does not shield it from tax exposure where its activities fall within the scope of a charging provision. From a revenue administration perspective, the decision strengthens TRA’s position in assessing excise duty across a wider spectrum of financial service providers. Given the rapid growth of Tanzania’s microfinance sector, this ruling potentially expands the excise duty base significantly.
Moreover, microfinance institutions, particularly Tier 2 entities, must now reassess their tax compliance frameworks. The decision signals that licensing by the Bank of Tanzania to provide financial services is, by itself, sufficient to attract excise duty liability, regardless of deposit-taking status.
The case exposes a legislative gap that clearer drafting could have avoided. The absence of a definition of “financial services” in the Excise Act created ambiguity and contributed to prolonged litigation. The subsequent amendment of the Excise Act introduced by the Finance Act, 2025 which introduced the definition of “financial institutions” to mean a bank or financial institution established or licensed under the Bank of Tanzania Act or the Banking Act, including a microfinance service provider falling under Tier 1 recognised under the Microfinance Act, suggests legislative acknowledgment of this gap.
Finally, the most jurisprudentially significant aspect of the decision lies in its balanced approach to statutory interpretation. The Court did not depart from the orthodox strict interpretation of tax statutes. Instead, it clarified that strict interpretation operates within the broader statutory scheme. Undefined terms must be construed consistently with related legislation, so as to ensure coherence and harmony within the legal system.
Conclusion
The decision of the Court is a transformative authority in Tanzanian tax law. It clarifies the scope of excise duty as applied to financial services, reinforces harmonised statutory interpretation and signals a broader construction into defining “financial institutions” for tax purposes, including non-deposit-taking institutions.
The case provides clarifications that regulatory categorisation does not confer tax immunity. Where an entity is licensed to provide financial services and derives income from such activities, it may fall within the excise duty net. The judgment therefore stands not merely as a resolution of a single dispute, but as an important precedent shaping the taxation framework applicable to Tanzania’s evolving financial services sector.
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