Arusha. The Court of Appeal has ruled that BRAC Tanzania Finance Limited is a financial institution and must therefore pay excise duty and Value Added Tax (VAT) under the country’s tax laws.
The court held that although the entity is a non-deposit-taking lending institution, its operations fall within the legal definition of a financial institution because they resemble banking activities.
The ruling was issued on Thursday, May 21, 2026, by a three-judge bench comprising Shaaban Lila, Sam Rumanyika and Latifa Mansoor.
The civil appeal No. 204/2025 was filed by the Commissioner General of the Tanzania Revenue Authority (TRA) against the company, challenging a decision of the Tax Revenue Appeals Tribunal (TRAT).
The court held the distinction between deposit-taking and non-deposit-taking institutions did not exclude BRAC from being classified as a financial institution, given that its core function is lending and provision of financial services to the public.
Justice Mansoor noted the court overturned earlier decisions of the Tax Revenue Appeals Board (TRAB) and TRAT, which had held that BRAC was not liable to pay excise duty as a financial institution.
The court ruled that the company falls within the scope of a financial institution and is liable to excise duty under Section 124(6A) of the Excise Duty Act.
Origin of the dispute
The dispute arose in 2022 after TRA carried out a tax audit on the company for the 2021 income year.
After the audit, TRA issued an excise duty assessment notice on December 16, 2022, demanding payment on fees and charges arising from its financial services.
BRAC objected on January 13, 2023, arguing it was not a financial institution under the law but a microfinance institution registered under the Microfinance Act of 2018.
It maintained that, as a non-deposit-taking microfinance provider, its services should not attract excise duty since it does not conduct banking business or receive public deposits.
However, TRA dismissed the objection on June 12, 2023, insisting that BRAC was a financial institution liable for the tax.
Dissatisfied, BRAC appealed to TRAB, which ruled in its favour, finding that it was not a financial institution for excise duty purposes.
TRA later appealed to TRAT but again lost, with the Tribunal upholding the same position.
Appeal before the Court of Appeal
Following the setbacks, the TRA Commissioner General appealed to the Court of Appeal on five grounds.
Among them was that TRAT erred in law by holding that BRAC Tanzania Finance Limited was not a financial institution liable for excise duty under Section 124(6A) of the Excise Duty (Management and Tariff) Act.
TRA argued that BRAC’s activities fall within taxable financial services subject to excise duty and VAT under Tanzanian tax laws.
It further submitted that TRAT misinterpreted Section 3 of the Banking and Financial Institutions Act, 2006 by failing to recognise that BRAC’s operations amounted to financial business.
TRA insisted that licensing under the Bank of Tanzania meant the entity should be treated as a financial institution, regardless of whether it took deposits.
It added that tax liability should be determined by the nature of activities performed, not the classification of the institution.
Presenting the case, the State Attorney argued that the Excise Duty Act does not define “financial institution”, making it necessary to rely on related legislation.
He cited Section 3 of the Income Tax Act, which defines a financial institution as one licensed under the Bank of Tanzania Act or the Banking and Financial Institutions Act.
He told the court that BRAC, licensed by the Bank of Tanzania to conduct microfinance business, therefore qualified as a financial institution.
He added that BRAC provides loans to small-scale traders in both urban and rural areas across Mainland Tanzania and Zanzibar.
However, counsel for BRAC opposed the interpretation, arguing that the institution is a second-tier microfinance service provider and not a financial institution under banking laws.
He said it does not receive public deposits and is regulated under the Microfinance Act, which distinguishes between deposit-taking and non-deposit-taking entities.
He maintained that only deposit-taking institutions fall within the scope of banking and financial institutions law.
Court determination
Delivering the judgment, Justice Mansoor held the court agreed with TRA that, although the Excise Duty Act does not define “financial institution”, the term can be interpreted using related tax and financial legislation to ensure consistency.
The court held that it was appropriate to rely on definitions in the Income Tax Act and the Bank of Tanzania framework.
It noted that BRAC is licensed by the Bank of Tanzania to conduct microfinance activities involving lending and financial services to the public and small businesses.
The judges said these activities fall within the broader definition of financial business under financial laws.
They rejected BRAC’s argument that being non-deposit-taking excluded it from taxation, stating that classification alone cannot determine tax liability.
The court emphasised that liability depends on the nature of activities performed rather than institutional labels.
It therefore ruled that BRAC is a financial institution liable to pay excise duty under Section 124(6A) of the Excise Duty Act and VAT under Section 13(1) of the VAT Act.
The court allowed TRA’s appeal, set aside the decisions of TRAB and TRAT, and ordered the company to pay costs.
“Accordingly, this appeal is allowed. We hold that the respondent is a financial institution whose activities constitute financial institution services and is therefore liable to pay excise duty under Section 124(6A) of the Excise Duty Act and Value Added Tax under Section 13(1) of the VAT Act, Cap 148,” emphasised the judgement.
