Taxman eyes slice of Vodacom share transfer worth Sh500bn

Dar es Salaam. The taxman is eying a significant income from the Sh499.8 billion sale of Vodacom shares held by Tanzanian tycoon Rostam Aziz in a deal that was transacted yesterday.

Mr Aziz’s 588 million shares – held under ‘Mirambo Holdings’ – were finally sold at the Dar es Salaam Stock Exchange (DSE) yesterday.

This comes almost ten months after Vodacom Tanzania shareholders unanimously approved the sale of Mirambo Holdings’ stake to Vodacom Group of South Africa in November 2018.

Tanzania Revenue Authority’s (TRA) Taxpayer Services and Education director Richard Kayombo said when a sale is executed, the beneficiary is required to pay capital gains tax to the government.

He said, however, that there were procedures to be followed in the process, including a confirmation that the sale had indeed been effected.

“It is after completion of the procedures that the beneficiary, who in actual fact is the seller, finally pays the dues to the government,” he said, declining to issue estimates on how much would be expected from the transaction.

Tax experts say being a resident of Tanzania, Mirambo Holdings would be subjected to a ten per cent capital gains tax from the transaction.

“In line with Section 90 of the Income Tax Act, a resident of Tanzania is required to pay ten per cent in capital gains tax to the government,” said Mr Straton Makundi, a partner at Auditax International.

To arrive at the right amount to be taxed, the taxman will have to work with Vodacom Tanzania to ascertain the value of the firm’s share at the time Mirambo Holdings acquired the shares several years ago.

That value should then be deducted from the current value (i.e Sh850/share) to come up with the actual gain (rise in value) of the share during the period.

“It is this gain that will be taxed - but after deducting such expenses as amount spent on lawyers and brokers, among others,” said Mr Makundi.

Ascertaining the amount of tax payable will also depend on whether the transaction involved the sale of a stake that is over 25 per cent of the company’s total shares or not.

This is because there are some exemptions to apply - but only when the sold stake is less than 25 per cent of the listed firm’s shares.

Prior to yesterday’s transaction, Mirambo Holdings held 588 million ordinary shares which accounted for 26.25 per cent of Vodacom Tanzania shares.

DSE market reports showed yesterday that Vodacom transacted a total of 588 million shares yesterday on what is termed as ‘All or Nothing’ (AoN) Market board. An AoN order is an order to buy or sell a stock that must be executed in its entirety - or NOT executed at all. AoN orders that cannot be executed immediately remain active until they are executed, or cancelled.

The shares were transacted at a price of Sh850 each in one deal.

That was a 6.3 per cent rise from the price per share of Sh800 which was applied during Vodacom Tanzania’s Initial Public Offering (IPO).

The stock market broker who was involved in the transaction, Mr Juventus Simon of Orbit Securities Ltd, told The Citizen yesterday that the transaction went smoothly - and that it had the blessings of all relevant regulatory entities in the country.