Pharmaceutical firm in row with Tanzania over Sh1.5m tax refund

A Kenyan-owned pharmaceutical company is engaged in a protracted battle with Tanzanian authorities over a tax refund.

Zenufa Laboratories, which is based in Tanzania but is fully owned by Kenyan private equity firm Catalyst Principal Partners, has declared its intention of using legal means to recover TSh31.9 million (KSh1.5 million) owed to it by the Tanzania Revenue Authority (TRA).

In a letter signed by the drug firm’s Deputy General Manager George Marwa, and addressed to Tanzania’s Permanent Secretary for Finance and Planning, Zenufa is demanding a refund of 15 per cent import duty that it paid in excess.

According to the letter dated May 8, 2017, the drug firm was supposed to pay 10 per cent import duty on six containers of industrial sugar used in the manufacture of medicines.

But due to alleged wrong information from TRA and the Sugar Board of Tanzania, the company ended up paying 25 per cent import duty, with the excess tax amounting to TSh31.9 million.

“We have attached our complaint with the invoice, a packing list, bill of loading and assessment documents from the Tanzania Sugar Board for your perusal and kind action,” read the letter to TRA.

“It is our sincere belief that the requirement will be taken positively as we are still continuing to import sugar from abroad for our pharmaceutical medicine manufacturing.”

TRA was supposed to refund the over-payment but according to Zenufa Managing Director Hitesh Upreti, the authority has failed to do so despite numerous requests.

Zenufa manufactures over-the-counter and prescription drugs for the Tanzanian market. Its brands include Zenadol, Zenkof, Zn-vital and Dr Cold.

In a response from TRA dated November 17, 2017, and signed by TRA’s manager for Post Clearance Audit Juma Hassan, the Tanzanian authorities said they would not refund the money until they were fully satisfied with an audit they intended to perform.

“The Customs and Excise department received your request for refund of excess duty paid on industrial sugar. However, as a prerequisite we are obliged to perform audit at your industry before the application is further considered for approval,” read the letter.

According to Mr Upreti, the money may look little on face value, but TRA has failed to refund other substantial amounts in value added tax, which has continued to frustrate the firm’s operations.

“We have some other amounts in VAT refunds that have not been reimbursed. Our operations here are proving very difficult and we could be seeking legal redress,” said Upreti.