This year, the Tanzanian Appeal Tribunal issued a landmark Transfer Pricing ruling that directly affects mining, intra-group services, and tax administration. In the case Tanzania vs. Williamson Diamonds Limited (Case 2025/TZCA 720, Civil Appeal No. 436 of 2023), the Court upheld the tax adjustments made by the Tax Administration and consolidated key criteria on the burden of proof, documentation, and appraisal in related-party transactions.
Background
Williamson Diamonds Ltd., operator of one of Tanzania’s principal diamond mines, sold rough diamonds and contracted technical and management services with related entities abroad. Following an audit, the tax authority considered that these transactions did not reflect Arm’s-Length conditions. It proceeded to increase the tax base, deny certain deductions, and issue new tax assessments.
Williamson Diamonds challenged these decisions before the Tax Appeals Board and the Tax Appeals Tribunal, arguing that its practices were consistent with the Mining Development Agreement and the Income Tax Act, and that the transactions had a commercial basis. It argued that the export prices were consistent with the market and the service commissions were legitimate and deductible expenses.
The tax authority, on the other hand, criticized the lack of adequate documentation and comparable analysis, claiming that the diamonds had been undervalued and the intra-group commissions had no evidence of real profits and market equivalence.
Appeals Tribunal Decision
The Appeal Tribunal endorsed the tax authority, arguing that the latter could reallocate and adjust income and deductions among related parties to prevent evasion. Furthermore, it concluded that Williamson Diamonds had not demonstrated that its transactions complied with the Arm’s Length Principle. Specifically, the Court noted the absence of reliable comparables for diamond sales and a lack of evidence regarding the services provided by the related entities.
Williamson’s actions were deemed insufficient and unsubstantiated. Therefore, the Court dismissed the appeal and upheld the previous Tribunal’s ruling in favor of the Commissioner General of Revenue in Tanzania.
Relevance and Practical Lessons
This ruling reinforces several essential principles in Transfer Pricing audits in developing jurisdictions:
- Clear and enforceable burden of proof: Once the authority makes reasonable adjustments, the taxpayer must demonstrate compliance with Arm’s Length standards.
- Importance of technical documentation: Price studies, international comparables, and supporting documentation are essential requirements in Transfer Pricing audits.
- Application of the Arm’s Length Principle: The international standard must prevail even in industries with operational complexity, such as diamond mining.
- The binding nature of the ruling in the African context: The case establishes a technical precedent and contributes to the creation of solid regional case law.
Regional Background
Tanzania has consolidated its TP regulations since 2018, aligned with the OECD’s BEPS Project, requiring documentation such as Master File, Local File, and Country-by-Country Reports (CbCR). The country has a solid approach to mining, as evidenced in previous litigation, such as African Barrick Gold (2020), where tax adjustments were also confirmed for deviations in intra-group reports.
Conclusion
The Appeal Tribunal’s ruling in Tanzania vs. Williamson Diamonds sets a new standard for the implementation and control of Transfer Pricing in Africa. For multinationals, it means that efficient defense of their intra-group policies requires rigorous technical preparation, robust evidence, and alignment with international standards.
Transfer Pricing Advice with International Scope and Verified Experience
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Source: TPCases