TAXATION ISSUES

FROM TRA WEBSITE

11/4/2022

ABDULKARIM SADICK 0712176446

COMPILED BY
WHAT IS ELECTRONIC FISCAL DEVICE? (EFD)

Electronic Fiscal Device (EFD) means a machine designed for use in business for efficient
management controls in areas of sales analysis and stock control system and which conforms to
the requirements specified by the laws.

Types of Electronic Fiscal Devices (EFDs)

Electronic Tax Register (ETR)

The device is used by retail business that issue receipts manually.

Electronic Fiscal Printer (EFP)

The device is used by computerized retail outlets. It is connected to a computer network and
stores every sale transactions or details made in its fiscal memory.

Electronic Signature Device (ESD)

The device is designed to authenticate by signing any personal computer (PC) produced financial
document such as tax invoice. The device uses a special computer program to generate a unique
number (Signature) which is appended to and printed to every invoice issued by the user’s
system.

Electronic Fiscal Pump Printer (EFPP)

The device is designed for use in Petrol Stations. It is connected to a pump and printed every
receipt during the sale transactions.

NOTE:

You are obliged to issue receipt or invoice on each sale and notify any changes/malfunctioning
of the machine to Commissioner within 24 hours. The supplier of the machine will install,
configure and attend the malfunctioning of the machine within 48 hours

EFD SECOND PHASE

Implementation of the second phase of Electronic Fiscal Devise (EFD) begun since year 2013,
with the aim to expand the number of traders who shall use the EFD system to issue receipts or
tax invoice in every transaction made. The second phase includes non VAT registered traders
administered under The Tax Administration Act 2015,

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Implementation of the second phase of EFD shall include the following groups;

1. Persons who are not VAT registered with a turnover ranging from TSHS 11 million and
above per year;

2. Traders trading in the Region’s prime areas, identified on the basis of rent payable;

3. Traders dealing with selected business sectors such as Spare Parts, Hardware, Mini
Supermarkets, Petrol stations, Mobile phone shops, Sub wholesale shops, Bar and
Restaurants, Pharmaceutical Stores; Electronic Shops etc.

The system is ongoing and the Authority shall gradually be registering traders basing on traders
business prosperity, experience and capacity

EFD OFFENCES

Any person who;

 Fails to acquire and use an electronic fiscal device upon commencement of business
operations or expiry of the period specified by the Commissioner.

 Fails to issue fiscal receipt or fiscal invoice upon receiving payment for sale of goods or
service.

 Issues a fiscal receipt or fiscal invoice that is false or incorrect in any material particulars.

 Uses electronic fiscal device in any manner that misleads the system or the
Commissioner.

 Tempers with or causes electronic fiscal device to work improperly or in manner that
does not give a correct or true document.

Commits an offence and shall be liable on conviction to a fine not less than 200 currency points
and not more than 300 currency points or to imprisonment for a term not exceeding three years
or to both.

These offences shall not apply to a person who is exempted by any tax law to acquire or use an
electronic fiscal device.

Where any amount of tax has been evaded in any of the offence, a person involved shall be liable
upon conviction in addition to a fine twice the amount of tax evaded or imprisonment for a term
not exceeding three years.

A person who fails to demand or report a denial of issuance of a fiscal receipt or fiscal invoice
upon payment for goods or service commits an offence and shall be liable on conviction to a
less than 2 currency points and not more than 100 currency points.

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WHY EFDs IS PREFERRED?

It has in-built Fiscal Memory which cannot be erased by mechanical, chemical or

electromagnetic interferences; BENEFIT OF EFD

 Automatic self-enforcing Issuing of daily “Z” report after every 24 hours;

 Transmits tax information to TRA system automatically;

 It has irreversible date mechanism

 Issues fiscal receipts/invoice which is uniquely identifiable;

 It can be used as a stand-alone and configured into a network;

 It has at least 48 hours power backup, and it can use external battery in areas with no
electricity supply;

 It saves configured data and records on permanent fiscal memory automatically

 It has tax memory capacity that stores data for at least 5 years or 1800 day transactions

 Avoids conflict during audit and assessment of tax.

 Simplify and ease objection and appeals

Law governing tax Objections and Appeals

Objections and Appeals is governed by Tax Administration Act (2015) and Tax Revenue
Appeals Act, Cap.408 as revised from time to time.

INTRODUCTION TO OBJECTION AND APPEALS

Tanzanian tax laws allow any person who feels aggrieved to request a formal change to an
official decision regarding tax assessment made by the Commissioner General. A taxpayer who
feels that the Commissioner General misapplied the law, came to an incorrect factual finding,
abused his powers, was biased, considered evidence which he should not have considered or
failed to consider evidence that he should have considered in making an assessment, may object
against such an assessment.

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DEFINITION OF KEY TERMS

Assessment of Tax: Is an assessment of tax as determined or ascertained in each respective tax

law.

Disputed Assessment:Is an assessment made by the Commissioner General and the taxpayer
disagrees with such tax findings.

Tax not in dispute: Means the amount that ought to be charged where the assessments or a tax
decision is amended in accordance with objections and the whole of duty or any tax assessed on
import.

ADMINISTRATION OF OBJECTIONS

Procedures on objections
A person who is aggrieved by a tax decision made by the Commission General may object the
decision by filling notice of objection in a prescribed form ITX 389.01.E Notice of Objection

to the Commissioner General within 30 days from the date of service of the tax decision. An
objection to a tax decision shall be made in writing stating the grounds upon which it is made
and such objection to a tax decision shall be accompanied by relevant document or information
which the tax payer intends to rely upon to support his objection. Such objection shall not be
admitted unless the taxpayer has paid amount of tax which is not in dispute or one third of the
assessed tax whichever the amount is greater.

The tax not in dispute and in case customs duty of the whole of duty or any tax assessed on
imports shall be payable at the time of filing the notice of objection and if the due date occurred
earlier than the period of thirty days the tax not in dispute shall be payable on that due date.

Upon application by taxpayer within fifteen days from the date of the issue of the tax decision,
and where the Commissioner General is satisfied that there exist good reason warranting
reduction or waiver, he may waive the amount to be paid or accept the lesser amount. Where a
taxpayer files an objection and makes statutory payment, the liability to the remaining assessed
tax shall be suspended until the objection is finally determined.

A person who has a reasonable ground to warrant extension of time to file an objection against
the tax decision may apply for an extension of time within 7 days before expiration of the time
limit for lodging the notice of objection. Where the Commissioner General is satisfied by the
reason started in the application made, he shall grant the extension of time and save the notice of
his decision to the applicant. The extension granted shall not exceed 30 days.

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Where and to whom the objection should be lodged?

 To the Regional Office where the taxpayer is registered

 Commissioner for Customs and excise,

 Commissioner for Large Taxpayers.

Appellant machineries

Basically there are three appellate machineries where a taxpayer may appeal in case he disagrees
with Commissioner General’s decision.

 Appeal to the Board

The law provides that, any person who is aggrieved by the final determination of the assessment
of tax by Commissioner General may appeal to the Board. The Board shall accept the objection
under the following conditions: -

1)A notice of appeal is served upon the Commissioner General within thirty days following the
date on which a notice of final determination of assessment of tax is served on the appellant;
2)The appeal is lodged with the Board within forty-five days following the date on which the
notice of final determination of assessment of tax is served on the appellant; and
3)The notice should give all details relating to the tax assessment and further correspondences
made between the Commissioner General and the taxpayer.

 Appeal to the Tribunal.

Any part who is aggrieved by the decision of the Board may appeal against the decision to the
Tribunal. The appeals to the Tribunal shall be under the following conditions: -

The appellant shall serve the opposite party notice of intention to appeal within fifteen days
following the date on which the decision of the board was made and the appeal should be made
within thirty days from the date of the decision of the board,
The Board or Tribunal, may extend the limit of time set by the law if it is satisfied that the failure
by a party to give notice of appeal, lodge an appeal or to effect service to the opposite party was

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occasioned by the following reason; absence from the United Republic, sickness or other
reasonable cause, subject to such terms and conditions as to costs as it may consider just and
appropriate.

 Appeal to the Court of Appeal

Any person who is aggrieved by the decision of the tribunal may prefer an appeal to the Court of
appeal and such appeal to the Court of Appeal shall lie on matters involving questions of law
only and the provisions of the Appellate Jurisdiction Act and the court of appeal rules made
thereunder shall apply mutatis mutandis to appeals from the decision of the Tribunal.

Where an objector prefers an appeal to the Board, to the Tribunal and the court of appeal, any tax
deposited as required by the law, shall continue to remain deposited with Commissioner General
pending the final determination of the appeal.

What are the due dates for payment of duties and taxes?
IncomeTaxes

 Withholding taxes are payable within seven (7) days after the end of calendar month.

 Taxes payable in installments (Provisional assessed tax) payable on quarterly basis e.g in
case of taxpayers whose accounting periods ends on 30th December the installments shall
be due by the end of March, June, September and December.

 Final return of Income shall be filled and payable six (6) months after the end of the year
ofincome

 Jeopardy assessed tax is payable on the date specified on the notice of assessment

 Adjusted assessed tax is payable within 30 days from the date of assessment

 Value Added Tax(VAT)VAT return is due and payable on or before 20th day of the
month following the moth of the business. If the 20th day follows on the Saturday,
Sunday or public holiday the return shall be lodged on the first working day following the
Saturdays, Sunday or Public day.

STARTING BUSINESS

On this page you will find links to guide on the basic issues you need to do when you start up a
business as an individual, a partnership, trust or a limited company.

What you need to do when you want to start a business?

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Individual
An individual whether resident or nonresident is required to visit nearby TRA offices (regional,
district or tax centers) and fill TIN application form to apply for Taxpayer Identification
Number. If the individual has National Identity Number (NIN) the application can be made
online by visiting TRA Website www.tra.go.tz, select Online TIN Registration and follow steps
as the system directs . However, if the individual is requesting Business TIN, the Online TIN
applicant must visit physically nearby TRA office (having lease agreement/title deed,
introduction letter from local Authority) to collect TIN Certificate and provisional tax assessment
and Tax Clearance).

After obtaining TIN certificate the applicant will be required to apply for business license from
the Trade office in District, Municipal, City and the Ministry of Trade and Industry depending on
the type of business.

Who is a resident individual?

A person qualifies to be a resident in the United Republic of Tanzania when: -

 Has a permanent home in the United Republic and present in any part of the year of
income.

 Is present in the United Republic during the year of income for a period or periods
amounting in aggregate to 183 days or more.

 Is present in the United Republic during the year of income and in each of the two
preceding years of income for periods averaging more than 122 days in each of such year
of income.

 Is an employee or an official of the Government of the United Republic posted abroad

during the year of income?

Certificate of Registration:
An individual may opt to register the business name to the agency commissioned by Ministry of
Trade and Industry known as Business Registration and Licensing Authority (BRELA). The
registered name can be obtained before or after application for TIN. The registered business
name shall be indicated on the TIN certificate together with an individuals’ name showing the
owners name trading as (T/A).

A Corporation (limited Company)

Starting a corporation requires a person to apply for the Certificate of incorporation from
Business Registration and Licensing Authority (BRELA). The Directors of the company are
required to draw Memorandum and articles of association and submit the certificate of
incorporation, lease agreement/title deed and introduction letter from local authority.

The Certificate of incorporation shall be attached to the TIN application enclosed with
Memorandum and Articles of Associations when a person makes application to TRA.

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The limited company shall apply for TIN certificate by filling TIN application forms as follows:
• Application for the company.
• Application for each shareholder/directors, in case any director has already issued with TIN
certificates for other purpose he/she cannot make another application. The same TIN number will
be used.
• For noncitizen directors are required to fulfill all immigration procedure and obtaining business
permit from the Immigration Department working under Ministry of Home Affairs.

Partnership
The partners have to register for the firm at BRELA and acquire the certificate of registration.
After being issued with the certificate the partners visit TRA along with partnership deed which
shows the number and names of partners with their respective distribution ratio.
• In applying for TIN the partnership firm shall apply for its certificate by submitting the copy of
certificate of registration obtained from BRELA, partnership deed, lease agreement/title deed
and introduction letter from local authority.
• Each individual partner shall apply for TIN, in case any partner has already issued with TIN
certificate for other purpose he/she cannot make another application. The same TIN will be used.

Trust
Trust is an arrangement under which the trustees hold assets but excludes partnership and a
company.
A trust has to register for the firm at RITA and acquire the certificate of registration and draw a
trust deed which shows the names and addresses of trustees. Each trustee shall apply for a TIN,
in case any trustee has already been issued with TIN certificate for other purpose he/she cannot
make another application. The same TIN will be used.

INTEREST, PENALTIES & OFFENCES

Failure to comply with various provisions of tax laws requirements may attract penalties and
interest in tax recovery. This section provides a brief description of Interest and Penalties
involved and the way they are administered.

Interest
1. Interest for underestimating tax payable
Installment payers who estimate their income tax payable for the year of income are expected to
show high level of accuracy in estimation. Failure to estimate tax within the allowed limits
results into underestimation, which shall attract interest.
This applies where an instalment payer’s estimate or revised estimate of income tax payable for a
year of income under section 88 of the Income Tax Act is less than eighty percent (80%) of the
correct amount.
The amount if interest that an installment payer shall pay for each period shall be calculated at
the statutory rate and compounded monthly, applied to the excess of-

 the total amount of income that would have been paid by way of installments during the
year of income to the start of the period had the person's estimate or revised estimate

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 equaled the correct amount; over

 the amount of income tax paid by installments during the year of income to the start of
the period.
Note; The instalment payer shall be liable for interest for each month or part of a month
from the date the first instalment for the year of income is payable until the due date by
which the person shall file a return of income for the year of income under section 91(1)
of the Income Tax Act.

2. Interest for failure to pay tax.

If any amount of tax imposed under any tax law remains unpaid after due dates as required by
the respective tax law or regulation, attracts interest. The interest shall be charged at the statutory
rate on the amount of tax outstanding at a given time.
In case, a withholding agent fails to pay the withholding tax due, he may not recover from the
withholder an interest payable due to this failure
Interest payable under this section or under any other tax law shall not be affected or waived for
the reason of delay due to court proceedings or any other dispute resolution process

Penalties
1. Failure to maintain documents
Failure to maintain proper documents as required by a tax law attracts a penalty for each month
or part of the month during which the failure continues. The penalty in case of individual shall be
1 currency point and for a body corporate shall be 10 currency points.
The amount of tax attributable for a certain period and the manner of apportionment of tax
assessed shall be determined by the commissioner on a just and reasonable basis

2. Penalties for failure to file tax return

Failure to file return or pay tax on due dates attracts penalty for each month or part of month
during which failure continues.
The amount of penalty is taken as the higher of the following:
• 2.5% of the amount of tax assessed with respect to the tax return less tax paid by start of the
period towards that amount, or
• In case of an individual, 5 currency points, and for a body corporate is 15 currency points
Note:
The penalties apply separately for a failure to file an estimate/provisional return and for a failure
to file a final return.

3. Penalty for making false or misleading statements

False or misleading statements may result to tax shortfalls and this attracts penalties. The
penalties are as follows:
• where the statement or commissions is made without reasonable excuse, penalty shall be 50%
of the tax shortfall
• where the statement or omission is made knowingly or recklessly, penalty shall be 100% of the
tax shortfall.
Note:

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The penalty shall be increased by 10% for the second or subsequent repetition and shall be
reduced by 10% if the person voluntarily discloses the statement prior to its discovery by tax
officer or the next tax audit of the person
A person is said to make a false or misleading statement if he makes a statement to a tax officer
which is false or misleading in a material particular or omits to include in the statement made to
the tax officer, any matter or thing without which the statement is misleading in a material
particular.

4. Penalty for aiding and abetting.

A person who aids, abets, counsels or induces another person to commit an offence contravenes
the provisions of the law. Upon conviction, this person shall be liable for a penalty of 100% of
the tax shortfall.

Offences
Contravening the provisions of tax laws may result to offences. This involves procedures until
conviction of a person and the respective tax recovery mechanisms for various offences are
provided by the Tax Administration Act, 2015.

CHARITABLE ORGANIZATION

Means a resident entity of a public character that satisfies character that satisfies the following
conditions:

(a)The entity was established and functions solely as an organization for:

(i)The relief of poverty or distress of the public;

(ii)The advancement of education; or

(iii)The provision of general public health, education, water or road construction or maintenance;
and

(b)The entity has been issued with a ruling by the Commissioner under section 11 of the Tax
Administration Act currently in force stating that it is a charitable organization or religious
organization.

Note

Exemptions for Zanzibar is applicable only from (a-d) and g) above.

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ELETRONIC TAX STAMPS

Application of Electronic Tax Stamps (ETS)

The use of Electronic Tax Stamps (ETS) for excisable goods was introduced to replace the
physical paper stamps that were heavily linked to incidents of tax evasion and counterfeiting.
This is one of the Government’s moves geared towards improving tax administration in the
country. Introduction of ETS will enable the Government to address longstanding challenges in
administration of tax in excisable goods. ETS provides advantages to the Government,
Manufacturers/Importers and Consumers through the following:
i). Safeguard Government Revenue by deterring counterfeiting
ii). To protect consumers as it enables authentication of tax stamps using mobile phones
iii). To create a tax compliance mechanism covering all traders in the segment to enhance fair
competition

iv). Enable tracking and tracing of goods right from the production lines and customs entry
points to the final points of sale
v). Enabling accounting for the production of excisable goods manufactured or imported;

GOODS FOR WHICH ETS APPLY

ETS use is applicable for selected excisable goods and the list of such goods may be changed
from time to time to improve administration. Currently, ETS apply for the following goods
manufactured or imported into the United Republic of Tanzania:
i). Wine and spirits
ii). Mineral and aerated water
iii). Cigarettes
iv). Film and music products
v). Juices
vi). Beverages
vii). Beer
viii). Liqueurs and cordials
ix). Perfumed products
x). Petroleum jelly
xi). Lubricants
xii). Disc and Tapes
xiii). Smart Cards

Note:
For administrative reasons, the effective date use of ETS by manufacturers and importers is
rolled over on phases. The effective date for first phase was 15thJanuary, 2019 where it included
Cigarettes, Wines, Spirits, Beer and other alcoholic beverages. The effective date for second

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phase of ETS use was 15th August, 2019 and it includes sweetened or flavored water and other
non-alcoholic beverages.

DOUBLE TAXATION AGREEMENTS

1. Canada - Tanzania Income and Capital Tax Treaty (1995)

2. Denmark - Tanzania Income and Capital Tax Treaty (1976)

3. Finland - Tanzania Income and Capital Tax Treaty (1976)

4. India - Tanzania Income Tax Treaty (1979)

5. Italy - Tanzania Income Tax Treaty (1973)

6. Norway - Tanzania Income and Capital Tax Treaty (1976)

7. South Africa - Tanzania Income Tax Treaty (2005)

8. Sweden - Tanzania Income and Capital Tax Treaty (1976)

9. Tanzania - Zambia Income Tax Treaty (1968)

INCOME TAX FOR INDIVIDUALS

Individuals are categorized in two groups, small individual traders who are not required to
maintain audited accounts and the medium individual traders who are required to maintain
audited accounts. Small traders are taxed by presumptive tax system, whereas medium are
taxed based on the annual profit determined from the audited accounts.

A. Presumptive tax system

This is a tax system where individuals are taxed based on their annual turnover. The Taxpayers
under this system are not obligated to prepare and submit audited accounts to the TRA.
However, he may opt not to apply the system and prepare audited accounts and pay tax based on
profits.

Conditions which qualify to be in Presumptive tax system.

 The Taxpayer must be a resident individual

 The annual turnover of the business does not exceed the threshold of TSHS 100 million.
 He must conduct business only for the year of income hence not be engaged in any other
activities such as employment or investments. Under the presumptive tax system,
individual’s income must be derived solely from business sources. If income is derived

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 from other sources such as employment and/or investment the presumptive scheme
cannot be used.
 The individual’s income for any year must consist exclusively of income from business
with sources in the United Republic of Tanzania.

Rates of tax under presumptive tax System.

Under this system, tax payable is established based annual turnover shown by taxpayer’s records.
In absence of complete records, annual turnover will be estimated based on the best judgment of
the commissioner. The turnover bands and their tax rates are as stipulated below:

Individuals who prepare audited accounts.

This is a group of taxpayers whose annual turnover is above Tshs 100,000,000 and are required
to prepare audited accounts/financial statements in respect of their business.

Rates of tax for individuals who prepare Audited Accounts

Taxpayers under this category are taxed basing on their profits. The rates applicable for this
category are as follows:

FILING OF TAX RETURNS AND PAYMENT OF TAX.

The statement of estimated tax payable.

The statement of estimated tax payable is a provisional return which a taxpayer is required to
complete and file to the Commissioner within three months from the beginning of the year of
income (which for individuals shall be calendar year).

The taxpayer is supposed to pay the estimated tax in a maximum of four installments each falling
due after three months. The Due dates are as follows:

 On or before 31stMarch
 On or before 30thJune
 On or before 30thSeptember
 On or before 31stDecember

FILING OF FINAL RETURNS.

A taxpayer must file a final tax return to TRA within six months after the end of each tax year.
The taxpayer must file return in the period between 1st January and 30th June

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Forms: ITX201.01.E Return of Income – Individual

WHAT RECORDS SHOULD BE MAINTAINED BY A TAXPAYER?

The Income Tax Act requires every individual who is liable to pay tax in the United Republic of
Tanzania, to maintain all documents necessary to enable an accurate determination of the tax
payable.

These documents shall be retained for a period of at least five years from the end of the year of
income or years of income to which they are relevant, unless the Commissioner specifies
otherwise by notice in writing.

Where any document is not written in an official language of the United Republic of Tanzania,
the Commissioner may, by notice in writing, require the taxpayer to provide an official
translation of communication or document within fourteen days, at the individual’s expense, a
translation into an official language by a translator approved by the Commissioner in the notice

WHAT ARE THE CONTENTS OF RETURN FORM?

The return form consists of seven pages and there are other supplementary pages for calculation
of the following types of income and gains:

 Gains from realization of shares and securities in a corporation

 Gains from realization of assets excluding shares, securities or trading stock
 Repatriated income of an individual’s domestic permanent establishment
 Income from general insurance business
 Income from life insurance business
 Income from mining operations

Submitting the return

Completing the figures in the return

Do not include cents – round down revenue figures, and round up tax credits and tax deductions
to the nearest shilling.

Submitting the return

Do not delay submitting the return to TRA, even if you do not have all the information you need.
Where some of the information is missing estimate the amount and indicates which information
is estimated at the time of filing that needs confirmation

When is an individual required to file the return of income?

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An individual is required to file a return of income with the Commissioner no later than six
months after the end of each year of income

The Commissioner may extend the due date for filing a return of income upon an application by
the person in writing and on such terms and conditions as the Commissioner considers
appropriate.

Under the presumptive system an individual is not obliged to file any return of income but
instead can pay by installments if the assessed amount exceeds TSHS 50,000 per year

What are the important aspects to consider when completing your return of income?

The return requires you to specify your chargeable income. This would include:

 Your total income

 Any repatriated income of your domestic permanent establishment
 If you were non-resident during the year of income and tax paid by withholding and
installment for which tax credit is available for the year of income

You must check the business or investment financial information pages sent with the return to
ensure all the pages required for your various types of business or investment income and gains
have been received. If any pages are missing or you require supplementary pages, these should
be requisitioned from your nearest TRA Office or through the Call Centre

You are responsible for filing a correct return. The filed return may be checked to ensure it is
correct and there are penalties chargeable for supplying false information or omitting income. If
you need assistance in completing your return, contact your nearest TRA Office or the Call
Centre

If you require an extension to the due date for filing the return, you should make an application
for the Commissioner’s approval before the statutory due date

When you have completed your return, make sure that you have filled in all the information
requested. Once you have done this, sign and date the declaration and send the completed
form to TRA. Send the form with any supporting calculations, supplementary pages and audited
accounts (financial statements). It is a good idea to keep a copy of the completed return for your
own records

WHAT RECORDS SHOULD BE MAINTAINED BY A TAXPAYER?

The Income Tax Act requires every individual who is liable for tax in the United Republic of
Tanzania, to maintain all documents necessary to enable an accurate determination of the tax
payable.

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These documents shall be retained for a period of at least five years from the end of the year of
income or years of income to which they are relevant, unless the Commissioner specifies
otherwise by notice in writing.

Where any document is not written in an official language of the United Republic of Tanzania,
the Commissioner may, by notice in writing, require the individual to provide, at the individuals
expense, a translation into an official language by a translator approved by the Commissioner in
the notice

Submitting the return

Do not delay submitting the return to TRA, even if you do not have all the information you need.
Where information is missing estimate the amount and indicates which information is estimated
at the time of filing that needs confirmation.

CORPORATION TAX

Introduction:

This guide provides basic overview of Corporation Tax. It explains the meaning of “Corporation
Tax”, who is liable and what is to be done when you are subject to Corporation Tax
requirements. It also explains common income tax terms such as “Self-Assessment”, “Year of
Income” and “Taxable Profits”. The guide also outlines how Corporate tax is calculated, what
are the applicable tax rates and when to pay.

What is a Corporation Tax?

Corporation Tax is a tax charged on the taxable incomes (Profits) of entities such as limited
companies and other organizations including clubs, societies, associations and other
unincorporated bodies.

Taxable incomes (profits) for charging Corporation Tax include:

 Profits from business undertakings

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  Profits from conducting investments (except such dividends which are taxed differently
as final taxes)
 Tax paid out of turnover of companies with perpetual unrelieved losses for three
consecutive years.

Which Entities (Persons) are required to pay corporation tax.

 Limited Companies
 Trusts
 Clubs
 Non-Governmental Associations

 Co-operative Societies
 Charitable Organizations
 Domestic Permanent Establishment (Branches of non-resident companies)
 Political Parties
 Government Agencies

 A newly established entity dealing in manufacture of Pharmaceutical or leather products

and having a performance agreement with Government of the united Republic of
Tanzania shall be taxed at the rate of 20% for five consecutive years from the year of
commencement of production

Are Partnerships required to pay corporation tax?

Partnerships are not liable to pay corporation tax. However, the partners are charged income tax
on the profits distributed from partnership basing on the agreed sharing ratio.

WHAT IS THE YEAR OF INCOME?

For income tax purposes year of income means a calendar year of twelve months period
(meaning the period starting from 1st January to 31st December). However an entity may apply in
writing to the Commissioner for approval to change the entity’s year of income from calendar
year or twelve month period to another twelve month-period previously approved. Year of
income is important for tax accounting purposes.

WHAT IS A TAX RETURN?

Tax return is a statement filled to TRA which declares the estimated income and tax payable or
the final income and tax payable for each year of income.

Under the income tax law, a company is required to submit tax returns even if it has no taxable
income
Statement of estimated tax payable
Every registered company and individuals who are required to prepare the audited account shall
file to TRA a statement which shows the estimated tax payable in each year of income.

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DUE DATES

The statement of estimated tax payable shall be submitted to TRA office either of the following
dates depending on your accounting period:

 On or before 31st March

 On or before 30th June
 On or before 30th September
 On or before 31st December

The payment of first instalment tax is due when the statements of estimated tax payable
(provisional returns) are submitted, and then other instalments shall be paid on due dates above.

Late payment of tax: Shall be charged interest at the prevailing statutory rate at the time of
imposition plus 5% per annum

Final return of income:

The final returns shall be submitted within six months from the end of the accounting period.
The return must be prepared or certified by a Certified Public Accountant in Public Practice who
is approved by the National Board of Accountants and Auditors (NBAA)

Due date for self assessment tax

The due date for the payment of tax as per return (Self assessed final tax) is the due date of
submitting the return.

PAYE

Understanding PAYE

PAYE stands for Pay-As-You-Earn. It is a withholding tax on taxable incomes of employees.

Under this system, an employer is required by law to deduct income tax from
an employee's taxable salary or wages.

Employee means:

An employee means an individual who is a subject of an employment conducted by an employer.

It includes a permanent employee, part time, manager, director and casual employees.
Employees may be employed by one or more employers (Primary and Secondary Employment).

Employer means:

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An employer means a person who conducts, has conducted or has prospect of conducting the
employment of an individual.

Full time service director means:

Means a person at a managerial position and is in full time service in a corporation.

Administration of PAYE

An employer is required to withhold income tax from salaries, wages and all other payments
forming taxable income paid to an employee

What should be included in determining the income from employment?

Gains or profits included in calculating income from employment

The employment income includes;

 Payments of wages, salary, payment in lieu of leave, fees, commissions, bonuses, gratuity
or any subsistence travelling entertainment or other allowance received in respect of
employment or service rendered
 Payments providing any discharge or reimbursement of expenditure incurred by the
individual or an associate of the individual
 Payments for the individual's agreement to any conditions of the employment
 Retirement contributions and retirement payments
 Payment for redundancy or loss or termination of employment
 Other payment made in respect of employment including benefits in kind quantified in
accordance to the prescribed rules
 Other amounts as may be required to be included
 Annual director’s fees payable to a director other than a full time service director.

Gains or profits excluded from calculation of income from employment

The following gains or profits from employment are excluded in calculating income from
employment:

(a) Exempt amounts and final withholding payments;

(b) On premises cafeteria services that are available on a non-discriminatory basis;

(c) Medical services, payment for medical services, and payments for insurance for medical
services to the extent that the services or payments are -

 Available with respect to medical treatment of the individual, spouse of the individual
and up to four of their children; and

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  Made available by the employer (and any associate of the employer conducting a similar
or related business) on a non-discriminatory basis;

(d) Any subsistence, travelling, entertainment or other allowance that represents solely the
reimbursement to the recipient of any amount expended by him wholly and exclusively in the
production of his income from his employment or services rendered;

(e) Benefits derived from the use of motor vehicle where the employer does not claim any
deduction or relief in relation to the ownership, maintenance or operation of the vehicle;

(f) Benefit derived from the use of residential premises by an employee of the Government or
any institution whose budget is fully or substantially out of Government budget subvention;

(g)Payment providing passage of the individual, spouse of the individual and up to four of their
children to or from a place of employment which correspond to the actual travelling cost where
the individual is domiciled more than 20 miles from the place of employment and is recruited or
engaged for employment solely in the service of the employer at the place of employment;

(h) Retirement contributions and retirement payments exempted under the Public Service
Retirement Benefits Act;

(i) Payment that it is unreasonable or administratively impracticable for the employer to account
for or to allocate to their recipients;

(j) Allowance payable to an employee who offers intramural private services to patients in a
public hospital; and

(k) Housing allowance, transport allowance, responsibility allowance, extra duty allowance,
overtime allowance, hardship allowance and honoraria payable to an employee of the
Government or an institution the budget of which is fully or substantially paid out of
Government budget subvention.

BENEFITS IN KIND

These are non-cash benefits which employee may enjoy from the employer. Benefits in kind are
quantified by the prescribed rules and included into taxable income of an employee. They are
quantified in the following rules:

a)Provision of Premises/Housing to an employee:

Benefit in kind related to premises/housing is taken as the lower of the Market Value Rent of the
premises and the higher of the following:

15% of the employee’s total annual income and

The expenditure claimed as deduction by the employer in respect of the premises.

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Note:

If an employee contributes to part of rent paid on premises, the amount of quantified benefit will
be reduced by the amount of rent paid by the employee.

b) Provision of Motor vehicle to an employee:

The quantifications for Benefits in kind from a motor vehicle are based on engine size and age of
a vehicle provided. The following annual amounts are applied:

Engine size Engine size up to 5 Greater than 5 years

years old (TSHS) old (TSHS)
Not exceeding 1000cc 250,000 125,000

Above 1000cc not 500,000 250,000

exceeding 2000cc

Above 2000cc not 1,000,000 500,000

exceeding 3000cc

Above 3000cc 1,500,000/= 750,000

Note:

The Motor vehicle benefit is not applicable where the employer does not claim deduction in
respect of the ownership, maintenance or operation of the vehicle

c) Provision of loan to an employee

When an employer provides a loan to an employee and the loan is at the interest rate below
statutory rate, the amount of benefit in kind is taken as the difference of the following:

The amount of interest that would have been paid if the interest on loan would be charged at
statutory rate, and

The amount of interest paid on the loan at the rate provided.

Exception

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Where an employer provides a loan whose term is less than twelve months and the aggregate
amount of the loan and similar loans outstanding at any time during the previous twelve-month
period do not exceed three months’ basic salary of an employee, then the amount of benefit in
kind is nil.

d) Other benefits in kind

The market value will apply in determining other benefits in kind.

Secondary employment

When a person is employed in more than one employment position then employment positions
selected by an employee to be regarded as not the main source of income are called secondary
employments.

All employers are supposed to withhold income tax but secondary employers are required to
withhold in different manner from primary employer.

Responsibility of an employee with secondary employment:

 To select, among employment positions, which one will be a primary employment and
the other ones are secondary employments.
 To timely notify a primary employer and other employers that are the employee’s
secondary employers.

Responsibility of the employer:

 To withhold tax at the highest rate of the individual income tax rates applicable.
 Enquire all employees, at a minimum of six-month period intervals, whether the
employment is a secondary employment or not.
Note:

If withholding at the highest personal income tax rate will cause hardship to the employee, he
may apply to the Commissioner to allow a lower rate at which the secondary employer must
withhold tax

Local staff working to High Commissions, Embassies and diplomatic missions

In general High Commissions, Embassies and Diplomatic missions are not obliged to pay any
tax, as covered under The Diplomatic and Consular Immunities and Privileges Act. In this
regards those bodies are not bound to operate PAYE schemes. Although some other bodies opt to
operate in order to keep their records properly and help their employees to avoid wasting time in
complying with their tax affairs so as to enable them concentrate with their duties at their offices.

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Therefore, if a local employee is employed in these institutions, and the institutions opt not to
operate PAYE system, he shall do the following:

 Register as taxpayers by acquiring Taxpayer Identification Number (TIN).

 File a statement of estimated income at the beginning of the year based on his monthly
income.
 File final returns.

Taxation of nonresident employees.

For nonresident employees (e.g. temporary employees from abroad) tax is withheld at a flat rate
of 15% of the gross income from employment. This is effectively a final withholding and the
amount withheld satisfies the employee’s income tax liability with respect to the employment
Specific rates applicable to certain categories of employees

Some categories of employees have special treatment different from how normal employees,
these are non-residents employee and directors other than full time service directors: -

Non-residents:

For nonresident employees (e.g. temporary employees from abroad) tax is withheld at a flat rate
of 15% of the gross income from employment. This is effectively a final withholding and the
amount withheld satisfies the employee’s income tax liability with respect to the employment.

Directors other than full time service directors:

Tax is withheld at a rate 15% to fees paid to directors other than full service director. The tax
payable is non-final withholding tax.

What documents to be maintained by the employer?

Documents includes an account, assessment, book, certificate, claim, note, notice, order, record,
return or ruling and may take an electronic form

The employer is required to keep the following documents: -

 Wage sheets and salary vouchers; and

 Any other books, documents and records whatsoever relating to the calculation or
payment of amounts to employees or tax withheld from such payments.

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The employer must maintain these documents for a period of five years from the end of the year
of income or years of income to which it relates unless the Commissioner otherwise specifies by
notice in writing.

How lump sum payments are treated?

Lump sum payments to employees may take the form of gratuities, leave pay, compensations,
bonus, commissions etc. which may cover several months of the year or the whole of a year.
Lump-sum payments other than terminal payments should be included in the year of payment
and be taxed on the basis of the adjusted monthly pay for the year.

Terminal Lump sum payments which include redundancy and other payments for loss or
termination of office shall be spread over a period of six years or actual years of employment and
shall be taxed as income for these year.

How contributions made to approved retirement funds are treated?

The amounts of contributions made by employee/employer to the approved retirement funds are
reduced from the gross pay when calculating the PAYE. The amount of this reduction is equal to
the lower of-

 The total of the employee; or employer contributions where it is included in calculating

the monthly pay made to approved retirement funds; and
 The statutory amount of the fund.

SKILLS DEVELOPMENT LEVY (SDL)

Introduction:

Skills and Development Levy: is a levy imposed under Section 14 of the Vocation Education
Training and collected by TRA.

Chargeability: SDL is charged based on the gross emolument of all payments made by the
employer to the employees employed by such employer in the particular time (month). It is
important to understand that SDL is due and payable by an employer.

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The gross emoluments are a sum of amount from salaries, wages, payments in lieu of leave,
fees, commissions, bonuses, gratuity, any subsistence travelling, entertainment or other
allowance received by employee in respect of employment or service rendered.

Where in any case an employer pays emoluments to any employee at intervals of less than a
month or at intervals of greater than a month, such payments shall apply as if such employee was
entitled to monthly payments and the monthly chargeable emoluments of such employee in
respect of any month shall be deemed to be the chargeable emoluments that would have accrued
to the employee had the emoluments been payable monthly.

Who is liable for SDL?

Any employer who employs ten or more employees shall pay SDL from gross emoluments.

Applicable rates:

The rate applicable for SDL is 4% of the total emoluments paid to all employees during the
month.

The employee includes permanent employees, part time employees, secondary employees, casual
laborers etc.

Employer’s obligation:

To calculate the amount of the levy and pay the amount to Commissioners account to the
respective Tax Region in which such employer is registered.

The SDL payments shall be made using form ITX 300.01.E - Employment Taxes Payment
Credit Slip.

To prepare a monthly return and submit to the TRA office on or before the 7thday of the month
following the month of payroll.

To prepare and remit half year certificate which tally with the monthly returns submitted during
the period.

The Skills and Development Levy shall not be charged to: -

(a) A Government department or a public institution which is wholly financed by the

Government;

(b) Diplomatic Missions;

(c) The United Nations and its organizations;

(d) International and other foreign institutions dealing with aid or technical assistance;

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(e) Religious institutions whose employees are solely employed to-

 Administer places of worship;

 Give religious instructions or generally to administer religion;
 Provide public health

(f) Charitable organizations;

(g) Registered educational institutions, including-

 Nursery, primary and secondary schools;

 Vocational, educational and training schools; and
 Universities and higher learning institutions.

(h) Local government authority;

(i) Farms employers whose employees are directly and solely engaged in farming and shall not
include employees who are engaged in the management of the farm or processing of farming
products.

WITHHOLDING TAX

Introduction:

Withholding tax is the amount of tax retained by one person when making payments to another
person in respect of goods supplied or services rendered by the payee. A person receiving or
entitled to receive a payment from which income tax is required to be withheld is a withholdee
while a person required to withhold income tax from a payment made to a withholdee is referred
to as the Withholding Agent.

Payment subject to Withholding Tax.

Withholding tax applies to specific payments including payment that is to be included in

calculating the chargeable income of an employee from the employment, payment of investment
return including

 Dividend
 Interest,
 Natural Resource Payment,
 Rent Or Royalty,

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  Payment In Respect To Service Fee And Contract Payments
 Payment In Respect To Supply Of Goods To The Government And Its Institutions.

Statement and Time for payment of tax withheld.

Every withholding agent shall pay to the Commissioner within seven days after the end of each
calendar month any income tax that has been withheld.

Withholding Tax Certificate

Certificates are obtained in the Revenue Gateway System and can be printed by Withholder or
withholder as the case may be after making payment.

Categories of withholding taxes:

The law has divided withholding taxes in to two major categories namely: -

 Final withholding taxes

 Non final withholding taxes

Final withholding taxes are taxes in which the withholdee cannot claim any tax credit when
calculating the income tax payable for a year of income.

Non final withholding taxes: are taxes which the withholdee is entitled for a tax credit an
amount equal to the tax treated as paid for the year of income in which the amount is derived.

Withholding Tax rates

Description of Payment Rate for Rate for Non

Resident Resident
(i)Dividends from the Dar es salaam Stock 5% 5%
Exchange listed corporations

(ii) Dividend from resident corporation to another

resident corporation where the corporation receiving the 5% NA
dividend holds 25% or more of the shares in the
corporation

Dividends from other corporations 10% 10%

Interest 10% 10%
Royalties 15% 15%
Other Withholding payments from Investment Returns. 15% 15%
Rental Income 10% 15%
Technical services fees (mining) 5% 15%
Transport (Non-resident operator/ charterer without N/A 5%

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 permanent establishment).
Insurance Premium N\A 5%
Natural Resources Payment 15% 15%
Service Fees 5% 15%
Directors Fee (Non full time Directors) 15% 15%
Commission to agents by service providers on money 10% N/A
transfer through mobile phones.
Payments for goods supplied to Government and its 2% of gross N/A
institutions by any person. payment

CAPITAL GAIN TAX

Capital Gain from Realisation of Interest in Land or Buildings

Realisation of interest in land and Building

A person who owns an interest in land or building shall be treated as realising the asset when the
person parts with ownership of such interest including when it is sold, exchanged, transferred,
distributed, cancelled, redeemed, destroyed or surrendered and in the case of interest of an entity
when it ceases to exist, immediately before the entity ceases to exist.

The Income Tax Act requires a person who derives a gain from the realisation of an interest in
land or buildings situated in the United Republic, to pay income tax by way of single instalment.

What is single instalment?

Income tax payable by way of single instalment in the case of realisation of interest in land or
buildings is the amount of tax paid once before the Titles are transferred from one person to
another. The Registrar of Titles shall not register such a transfer without the production of a
certificate from TRA certifying that the single instalment has been paid or is not payable. The
seller is required to declare the transfer of interest in land or building by completing form
ITX 204.01.E

(a) 10% of the gain for a resident person

(b) 20% of the gain for a non-resident person

However, the Income Tax Act, provides that an instalment payer shall be entitled to tax credit for
a year of income of an amount equal to the income tax paid by way of single instalment for the
year of income

Exemptions

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a)If the residence has been owned continuously by the individual for three years or more and
lived in by the individual continuously or intermittently for a total of three years or more; and the
interest was realised for a gain of not more than shillings 15,000,000

b) An interest in land held by an individual that has market value of less than shillings
10,000,000 at the time it is realised and has been used for agricultural purposes for at least two of
the three years prior to realisation
The applicable rates

(a) 10% of the gain for a resident person

(b) 20% of the gain for a nonresident person

However, the Income Tax Act, provides that an instalment payer shall be entitled to tax credit
for a year of income of an amount equal to the income tax paid by way of single instalment for
the year of income

Exemptions

a) If the residence has been owned continuously by the individual for three years or more and
lived in by the individual continuously or intermittently for a total of three years or more; and the
interest was realized for a gain of not more than shillings 15,000,000

b) An interest in land held by an individual that has market value of less than shillings
10,000,000 at the time it is realized and has been used for agricultural purposes for at least two of
the three years prior to realization

How capital gain is calculated?

Capital gains income is calculated as follows: -

Value of consideration received or accruing as a result of the realization of the interest in land or
buildings

less

cost of acquisition

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less

expenditure incurred on any improvement to the asset

less

expenditure incurred wholly and exclusively in connection with the realization

What is the realization expenditure?

These are expenditure incurred wholly and exclusively in connection with the realization of
interest in land and building, such as stamp duty, registration charges, legal fees and brokerage

Tax on capital gains in case of companies

Gains derived by companies as single instalment payers is to be finally taxed at corporation tax
rate, which is currently 30%
Capital gain tax on realization (Sale) of Securities

What is a security?

A security is a tradable financial asset (investment assets) of any kind. Securities are broadly
categorized into: -

 Equity securities (e.g. Ordinary and preference shares)

 Debt securities, (e.g. bonds and debentures)
 Derivative securities, (e.g., forwards, futures, options and swaps).

Taxation of net gains on sale of securities

The net gains on sale of securities is treated as investment income to be included in

determining the total income of the person during the year of income as provided by the Income
Tax Act, 2004. The total income of an entity is charged at the rate of 30% while the resident
individual tax rates will be applied on the total income of resident individuals.

The total income is the sum of investment income, business income and employment income

What are the net gains from sale of investment assets?

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Gain from the sale of investment asset is the excess of market value over the cost of asset

The net gain from the sale of investments assets is the sum of all gains from sale of
investment assets reduced by: -

Total of all losses from sale of investment assets

Any unrelieved losses during the year and
Any unrelieved losses for the previous year

What is the cost of asset (Security)?

The cost of asset is the sum of expenditure incurred in acquiring the asset including

Exempted Securities

The Shares listed on the Dar es Salaam Stock Exchange provided that the shares are owned by a
resident or a non-resident person who controls less than 25% of the controlling shares of the
company

Limits on investment losses

If a person makes a loss from any investment, it can offset

Income from other investments and it cannot offset income from any business.

Limits on capital gains

If a person makes a loss when selling an investment asset, it can offset only gains from selling
other investment assets.

Foreign investment losses can offset only foreign investment income, losses on the sale of
investment assets can offset only against the sale of foreign investment assets.

EXCISE DUTY

Excise Duty is a duty charged on specific goods and services manufactured locally or imported
on varying rates. It is charged in both specific and ad valorem rates.

Items charged under specific rates include:

Wine, spirits, beer, soft drinks, mineral water, fruit juices, Recorded DVD,VCD,CD and audio
tapes, cigarettes, tobacco, petroleum products and Natural gas.

Items charged under ad-valorem rates include:

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Money transfer services, electronic communication services, pay to view television services,
imported furniture, motor vehicles, plastic bags, specified aircrafts, firearms, specified cases,
cosmetics and medicaments.

Ad-valorem rates are: 0%, 5%, 10%, 17%, 15%, 20%, 25%,30% and 50%.

Liability to pay excise duty.

Excise duty shall become due and payable in respect of:

(a) Any scheduled article imported, by the importer thereof at the time immediately before the
article ceases to be subject to customs control or at such other time as may be directed by the
Minister in the Gazette,

(b) Any scheduled article manufactured in the United Republic of Tanzania, by the
manufacturer:

 Upon sale of the article by him, or

 Upon the article ceasing to be subject to customs control, or
 Upon removal of the article from the premises where it manufactured, whichever first
occurs.

(c) Any scheduled article manufactured or imported by any person free of duty and which is
subsequently sold to any other person, by the purchaser at the time of the sale of the article by
him;

(d) Any electronic communication service supplied by electronic communication service

provider at the time when such mobile, fixed or wireless phone is in use or when payment is
received for the service whichever time shall be the earliest.

(e) Any pay-to-view satellite television service provider when the service is supplied

Submission of returns by manufacturers of scheduled articles

Scheduled articles are those goods specified in the Fourth Schedule to Excise (Management and
Tariff) Act, Cap 147.

Initial returns

Every manufacturer of the scheduled article shall, within 21 days of commencing manufacturing
of the scheduled article or of an article manufactured by him becoming liable to duty, whichever
is the earliest, submit to the Commissioner a return giving details of the manufacture by him of
the scheduled article, its price and all other particulars as may be prescribed. When change

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occurs in any of the facts the particular of which have been given in the return the manufacturer
shall notify the Commissioner of the change in writing within 15 days following the change.

Monthly returns

Every manufacturer of a scheduled article shall submit to the Commissioner a monthly return
giving particulars of the following:

 The quantity or the number of scheduled articles sold by him during one month;
 The price at which the articles have been sold;
 Any other matters as may be prescribed.

Time of submission of monthly returns

Monthly returns shall be submitted not later than the last working day of the month following the
month to which the return relates

Penalty for failure to submit of monthly returns

Any person who fails to submit a return within the prescribed time, shall pay a penalty of one
hundred thousand shillings or one per centum of the tax payable in respect of the period covered
by the return, whichever is greater and a further two hundred thousand shillings or two per
centum of the tax payable in respect of the period covered by the return, whichever is greater
shall be payable for each month or part of a month thereafter.

Excise Duty on Motor vehicles; Excise Duty on Motor vehicles is charged based
on cylinder capacity as follows:

Description of vehicle Applicable Rate

Of cylinder capacity not exceeding 1000 0%

Of cylinder capacity exceeding 1000 but not exceeding 2000 cc 5%

Of cylinder capacity exceeding 2000 10%

Importation of used motor vehicles and spare parts

In addition to excise duty on motor vehicle charged based on cyclinder capacity,imported used
motor vehicles are charged extra Excise duty as follows

 Used vehicles excluding agricultural tractors aged 8 years but not more than 10 years
charged at the rate of 15%
 Used motor vehicles aged more than 10 years from the year of manufactures charged at
the rate of 30%.

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  Used buses aged more than 5 years from the year of manufactures charged at the rate of
10%.
 Used spare parts for motor vehicles and motor cycles the rate is 25%

Tax stamps on film and music products

The excise duty was introduced on film and music products with effect from July 2012. The law
requires all products whether imported, exported or locally produced and distributed for
commercial purposes to be affixed with tax stamps administered under Excise (Management and
Tariff) Act, Cap 147.

The devices required to be affixed with tax stamps are audio visual devices used to carry and/or
store sound, pictures or other types of music and cinema including video tape, audio tape, DVD,
VCD and CD.

The stamps are issued by the Tanzania Revenue Authority (TRA) for the purposes of controlling
music and film products rights infringement.

Types of applicable tax stamps:

There are four types of tax stamps identified by colour

a) Green colour for imported films

b) Violet colour for locally produced films

c) Blue colour for imported music

d) Pink colour for locally produced music

CONDITIONS TO BE FULFILLED TO ACQUIRE TAX STAMPS:

Any person who wishes to order tax stamps must fulfill the following conditions:

 Shall be registered and be issued approval by Licensing Authority (The person shall be
registered and issued Taxpayer Identification Number TIN)
 Apply for stamps by using forms issued by TRA, form A for imported products and form
B for local products.

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  Attach documentation which indicates that the products either belongs to the applicant or
is permitted by the owner to produce and/or distribute such products. The attachments
includes contract between owner and the applicant which allows the applicant to collect
tax stamps for production and/or distribution of film or music products.
 Any other documents which the Commissioner may require the applicant to produce to
support the application.

Applicable tax rate:

The rate for tax is $ 7 Per 1000 stamps, the amount shall be remitted upon submission of
monthly return. Each set carries two stamps, one to be affixed on the container in a way that
when it is opened the stamp will be torn or rendered unusable and the other stamp will be affixed
on the device.

Licensing authorities which register and issues approval of production, distribution,

import and export of film and music products:

a) National Arts Council (BASATA) - the council deals with registration and approval of all
music products to persons who deal with music. The council also monitors and censors music
content. All music products shall initially pass to BASATA and be issued with clearance for
further processes.

b) Tanzania Film Censorship Board (TFCB) - the board deals with registration and approval of
all film products to persons who deal with film. The board also monitors and censors music
content. All film products shall initially pass to TFCB and be issued with clearance for further
processes.

c) Copyright Society of Tanzania (COSOTA) – the society is responsible for copyrights

protection. Therefore a product shall be approved by COSOTA before acquisition of tax stamps.
All music and film products cleared by BASATA and TFCB respectively shall then be passed to
COSOTA for copyright clearance before collecting tax stamps from TRA.

ACCOUNTING FOR TAX STAMPS

The applicant shall be required to account for usage of tax stamps on monthly basis. He shall
submit a monthly reconciliation summarizing the usage of stamps issued during the month and
those carried from previous months. The reconciliation statement shall be under the following
headings:

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  Stamps in stock at the close of the previous month brought forward for use in the current
month.
 Stamps applied on products during the month
 Stamps spoiled or damaged during usage as certified by the Authorized Officer
 Stamps unaccounted for in the reconciliation statement and therefore deemed lost
 Stamps in stock at the end of the month carried forward for use in the following month

Computation and payment of excise duty

Excise duty shall be calculated based on stamps applied (used/affixed) to music and film
products during the month and stamps unaccounted for in the monthly reconciliation hence
deemed lost.

Payment of excise duty shall be on monthly basis and shall be submitted during submission of a
monthly reconciliation.
Excise Duty on Electronic Communication

Excise duty on electronic communication services is charged at the rate of 17% of the dutiable
value.

Electronic communication service: Is any service of any description provided by a person or a

company by means of any transmission, emission or reception of signs, signals, writing, images
and sounds or intelligible information of any nature, by wire, optical, visual or other
electromagnetic means or systems, including-

voice, voice mail, data services, audio text services, video text services, radio paging and other
emerging electronic communication services;

fixed telephone services including provision of access to and use of the public switched or non-
switched telephone network for the transmission and switching of voice, data and video, inbound
and outbound telephone service to and from national and international destinations;

cellular mobile telephone services including provision of access to and use of switched or non-
switched networks for the transmission of voice, data, video and Value Added Services, inbound
and outbound roaming service to and from national and international destinations;

carrier services including provision of wired, optical fiber or wireless facilities and any other
technology to originate, terminate or transit calls, charging for interconnection, settlement or
termination of domestic or international calls, charging for jointly used facilities including pole
attachments, charging for the exclusive use of circuits, a leased circuit or a dedicated link
including a speech circuit, data circuit or a telegraph circuit;

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provision of call management services for a fee including call waiting, call forwarding, caller
identification, multicalling, call display, call return, call screen, call blocking, automatic
callback, call answer, voice mail, voice menus and video conferencing;

private network services including provision of wired, optical fiber, wireless or any other
technologies of electronic communication link between specified points for the exclusive use of
the client;

data transmission services including provision of access to wired or wireless facilities and
services specifically designed for efficient transmission of data; and

communication through facsimile, pager, telegraph, telex and other electronic communication
services."

Persons Liable to Pay Excise Duty on Electronic Communication

The duty on electronic communication services shall become due and payable by electronic
communication service providers. These providers are legally required to collect the duty and
submit the same to TRA in the prescribed manner
Excise Duty on Charges and Fees

Excise Duty on Charges and Fees Paid to Financial Institutions and Telecommunication
Service Providers

Banks and other financial institutions

With effect from 1st July 2014 the Excise Duty on charges or fees payable by any person to banks
or any non-bank financial institution was introduced by amending section 125 of the Excise
(Management and Tariff) Act Cap 147. Any bank or financial institution is required to pay to
TRA 10% of the total amount collected from customers or clients in the form of charges or fees
including money transfer service fee

Telecommunication service providers

With effect from 1st July 2014 the Excise Duty on money transfer fees payable by any person to
any Telecommunication Service Provider was introduced by amending section 125 of the Excise
(Management and Tariff) Act Cap 147. Any Telecommunication Service Provider is required to
pay to TRA 10% of the total amount collected from customers or clients in the form of money
transfer service fee only

Persons Liable to pay the Excise duty

The duty imposed by the Act on money transfer fee shall become due and payable by banks,
financial institutions, and telecommunication service providers. It should be noted that, the
customers of the banks or Telecommunication Company are not liable to pay the duty.

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Due date for payment of duty

The Duty should be paid not later than the last working day of the month following the month in
which the Duty falls due. Banks, financial institutions and telecommunication companies are
therefore required to remit the duty to TRA timely. And shall submit to the TRA a monthly
showing the particulars:-

 The quantity or number of excisable services provided during the month

 Any other matters as my be prescribed

Payment

The Excise Duty is payable not later than the last working day of the month following the month
in which the Duty falls due. Payment will be made using the newly introduced On-line Order
Form for electronic transfer of tax revenue to Bank of Tanzania under the Revenue Gateway
System (RGS). The GFS Code for this tax type is 11429900.

Penalty for failure to Submit returns

Any person who fails to make a return within the time prescribed shall pay a penalty of one
hundred thousand shillings or one per centum of the tax in respect of the period covered by the
return, whichever is greater, and a further two hundred thousand shillings or two per centum of
the tax payable in respect of the period covered by the return, whichever is greater, shall be
payable for each month or part of the month thereafter.

Notification to TRA

The bank, non-bank financial institution and the Telecommunication Service Provider is required
to submit to TRA within 21 days a return giving details of the excisable service provided, its
price and all other particulars as may be prescribed. In case of any changes the taxpayer shall
notify the TRA on such changes within 15 days following the change

STAMP DUTY

Know about Stamp Duty

The Stamp Duty Act, 1972 came into operation on July 1, 1972. It repealed the Stamps
Ordinance. Its objectives were designed to consolidate and amend the law relating to stamp duty,

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by introducing minor amendments, most of which were of procedural nature .Provisions relating
to composition agreements were clarified. Special provisions relating to offences were
incorporated.

What Instrument is chargeable with Stamp Duty?

The instrument specified in the schedule which is executed in Tanganyika (Tanzania mainland)
or if executed outside Tanganyika relating to any property or any matter or thing performed in
Tanganyika, must be charged with duty of amount that is specified or calculated in the manner
specified in the schedule in relation to such instrument unless it is exempted.

The Stamp Duty Act specifies the persons to pay stamp duty where in most cases it is payable by
the person drawing, making, or executing the instrument.When a person is in doubt as to whether
or not an instrument is required to be stamped or as to the amount of the Stamp Duty payable in
respect of any instrument, he can refer the matter to the Stamp Duty Officer for adjudication.

Administration of Stamp Duty

Time when instrument must be stamped

All chargeable instruments executed by any person in Tanzania Mainland shall be stamped
within thirty days of execution:

Where any such instrument is brought to a proper officer for adjudication, is supposed to be
stamped within thirty days, the period from the presentation of the instrument to the proper
officer until the notification to the person who Presented it of the decision of the proper officer,
shall been excluded in computing the said period of thirty days; and every receipt,
acknowledgement of a debt, promissory note and bill of exchange shall be stamped on the date
of execution or the date of the instrument.

WHAT IS VAT?

VAT stands for Value Added Tax. It is a consumption tax charged on taxable goods, services
immovable property of any economic activity whenever value is added at each stage of
production and at the final stage of sale. VAT is charged on both locally produced goods and
services and on imports. Value Added Tax is charged by persons registered for VAT only.

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WHAT IS THE SCOPE OF VAT?

The VAT shall be charged on any supply of goods, services and immovable property of any
economic activity in Mainland Tanzania where it is a taxable supply made by a taxable person in
the course of economic activity carried by him. The importation of taxable supply from any place
outside Mainland Tanzania shall be charged VAT and normal Customs Laws and procedures
shall apply. All supply consumed or enjoyed outside Mainland Tanzania shall be zero-rated upon
proof. VAT is chargeable on the taxable supplies of goods and services. The rates are 18% for
standard rated supplies, and 0% for exports of goods and services
How should I register for VAT?

Registration for VAT is mandatory to every person upon attaining the registration threshold of
100 million in the period of twelve months and above or 50 million in period of six months
ending at the end of the previous months. This condition applies to all types of registration
except for professional service providers, Government entity or institution which carries on
economic activity and an intending traders after fulfillment of sufficient evidence such as
contracts, tenders, building plans, business plans and bank financing.

A person who is required to be registered shall make an application to Commissioner General

within thirty days (30) but an intending trader may make such application at any time.

If the Commissioner General is satisfied that a person is required to be registered with VAT and
there is a good reason including protection of Government revenue but has not applied for it,
shall register and notify such person not later than 14 days after the day on which registration is
done regardless of the turnover.

Registration process; Application for VAT registration manually by filling

form ITX245.02.E Application for Registration for VAT.

VAT Registration Certificate; Upon registration, a taxpayer shall be issued with a Certificate
of Registration stating the name and principal place of business of the taxable person, the date on
which the registration takes effect, his Taxpayer Identification Number and his VAT registration
number.

A person shall show his Taxpayer Identification Number and his VAT registration number in any
return, notice of appeal or other documents used for official VAT purposes and display his
certificate of registration in a noticeable position at his principal place of business.

VAT RETURNS AND TAX PAYMENT

What is a VAT return?

A VAT return is a form used to submit tax payments to TRA. Currently VAT registered traders
are supposed to submit returns to TRA online through e-filing or in paper form.

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VAT is payable on 20th day of the following month of the business that is a due date of
submitting the return. If the 20th day falls on the Saturdays, Sunday, or public holiday the return
shall be lodge on the first working day following the Saturdays, Sunday or Public day.

Rate Structure

What are the applicable rates under VAT?

VAT is chargeable on the taxable supplies of goods and services. The rates are as follows: -

S/N. VAT Rates Description of goods/ supplies and VAT Rate

services
1 Supply of taxable goods and services in Mainland 18%
Tanzania
2 Importation of taxable goods and services into 18%
Mainland Tanzania
3 Export of goods and certain services from the United 0%
Republic of Tanzania
4 A supply of ancillary transport services of goods in
transit through mainland Tanzania include:
I.An integral part of the supply of an international 0%
transport services
II.In respect of goods stored at the port, airport, or a 0%
declared customs area for not more than thirty days
while awaiting onward transport.

How does VAT works?

Each registered person in the chain between the first supplier and the final purchaser or user is
charged tax on taxable supplies made to him (input tax) and charges tax on taxable supplies
made by him (output tax). He pays to the TRA the excess of output tax over input tax, or
recovers the excess of input tax over output tax from the Authority. The broad effect of the
scheme is that businesses are not affected by VAT except in so far as they are required to
administer it, and the burden of the tax falls to the final consumer.

VAT REFUND

What is a VAT refund?

Money paid back to the trader. A taxable person will be entitled to a refund of VAT when in a
particular prescribed accounting period when his tax liabilities are not exhausted by allowable

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deductions or where its returns for prescribed accounting periods regularly result in excess
credits. The refund once is processed is paid to the taxpayer through Interbank Settlement
System (TISS) or through his or her bank account.

A taxable person may apply for a refund where a person has over paid a net amount payable for a
tax period, the application may be logged through form VAT ITX260.02E accompany with:

Certificate of genuineness

The certificate of genuineness referred to under VAT regulation shall be issued by an auditor
who has been registered by National Board of Accountants and Auditors and who is registered as
a tax consultant with Tanzania Revenue Authority

Computation of the refund amount;

 Checklist for the applicant’s value added tax repayment.

 And any other information as Commissioner General may require.

Upon receipt of the refund claim the Commissioner General make decision on the application on
the basis of the information provided without under takeng an audit or investigation, and shall

Within ninety days of it receipt makes decision on the application and informs the applicant on
the amount to be refunded, and the period upon which such a refund shall be made.

VAT REFUND DIPLOMATS AND INTERNATIONAL BODIES

Application for refund to diplomats and international bodies shall be made to the Commissioner
General in form ITX 262.02.E

For the purpose of justifying diplomatic status or status of an international body; the application
should be endorsed by the Ministry responsible for foreign affairs and international cooperation.

Be accompanied by tax invoices related to the taxable supplies on which refunds claim is made.

Can the VAT refund be offset against the unpaid tax?

Yes. Any refund may be offset against other taxes, penalties and interest owing to Tanzania
Revenue Authority by the taxable person, but the Commissioner General shall inform the taxable
person in writing.

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Is interest payable on the delayed refunds?

Yes. Refunds must be made within 30 days after the due date for lodgment of the return for the
last prescribed accounting period in the half year or receipt of the last outstanding tax return due
for any prescribed accounting period falling within that half year, whichever is later unless the
Commissioner believes there is a revenue risk. For regularly repayment traders, refunds will be
made within 90 days after the due date for lodging the return for the prescribed accounting
period, or the date of receipt of the return, whichever is later.

Where the refund is not made within this period, interest is paid to the taxable person at the
commercial bank lending rate determined by the Central Bank

What are the requirement for a VAT refund be effected?

A VAT refund, cannot be affected unless the applicant has submitted among others the following
documents and or attachments:

1. Certificate of genuineness issued by an auditor who has been registered by NBAA and who
is registered as a tax consultant with TRA.

A checklist of details of issues regarding the refund application must be properly filled and
completed by the applicant.

For a case of Regularly Repayment traders the following documents are vital to be submitted

 Single Bill of Entry

 Bill of Lading
 Airway bill
 Road consignment note
 Landing certificate
 EFDs receipts/invoices
 Brief working from the auditor as to how the claimed amount has been arrived at
including the summary of purchases and sales

NOTE: Input Tax shall not be deducted /credited after six months from the date of the tax
invoice/EFDs receipts.

VAT Relief

VAT relief to Investor under EPZ, SEZ and Mining, Oil & Gas Companies
An investor licensed under export processing or special economic zone Acts is entitled to VAT
special relief. Mining, oil & gas companies are entitled to VAT relief provided that the Company

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has a binding agreement with the Government which provides for VAT relief. In order to enjoy
such both Investors and entitled mining companies are obliged to fill form: ITX263.02. E. The
form can be obtained from any TRA nearest office or you may download through TRA website.

Deferment of Capital goods

Deferment means a postponement of payment of the value added tax in respect of capital goods.

Deferment on imported capital goods is not automatic as is upon application by the applicant; the
application is subject to scrutiny and approval by the Commissioner. The VAT embodied on
each unit of the imported item/good must have VAT element exceeding 20,000,000.

The deferment is due within ten years. Goods imported whose VAT is less than 20,000,000/-
shall be treated as normal and shall follow normal rules of calculation of taxes by Customs laws
and procedures.

When the trader imports capital goods, the differed tax shall be treated as output tax and input
tax of the importer at the time of importation and shall be accounted on the same tax return.
Where the period of deferment elapses the differed tax shall not be paid. The deferment granted
must be for producing taxable goods and not exempt supplies

Online submission of VAT returns

What is online submission of return?

This is a system of submitting return to TRA through TRA Web.

What are procedures to be followed?

On line submission of VAT returns require the following steps:

Register for Electronic Filing:

In order to file returns electronically to TRA, the VAT registered taxpayer will be required
to click on the e-filing hyper link. This will take the taxpayer to the e-filing System linkage.

The taxpayer (Individual and Entity) will have to register into the System on initial access and
will be given an Electronic Filer Identification Number (e-fin).

The taxpayer will further be issued with an initial password to facilitate creation of his/her own
password, login and filing of returns.

Signature for the Company or Entity Filing the Return Electronically:

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On e- filing registration for a Company or any other Corporate Entity, the System will prompt
for a Taxpayer Identification Number (TIN) of one of the Directors’ and will hence check if the
Director has undergone biometric scanning before proceeding to retrieve the taxpayer’s general
information.

What happens if an e- Filer has not undergone biometric scanning?

If the e- filer’s signature has not been captured in the TRA AFIS System, then the e- filer is
required to arrange for signature capturing at the TRA office where the filer or the entity files its
VAT returns.

Advantages of submitting VAT return online

The web-based return system offers the following benefits:

Taxpayers will interact with TRA while at their houses or offices.

Elimination or reduction of queues at TRA offices during due dates

E-filing will result in fewer errors and creates simple and quicker processing of documents.

Taxpayers can save their records in their e-mail boxes or print hard copies for future reference.

VAT EXEMPTION ON PROJECTS FUNDED BY GOVERNMENT OR DONORS

VAT EXEMPTION

The Commissioner General may, upon application by an applicant in the prescribed form,
exempt value added tax on-

(a) Importation of raw materials to be used solely in the manufacture of long-lasting mosquito
nets.

(b) Importation by or supply to a Government entity of goods or services to be used solely for
implementation of a project funded by-

 The Government.
 A concessional loan, non-concessional loan or grant through an agreement between the
Government of the United Republic and another government, donor or lender of
concessional loan or non-concessional loan.
 A grant agreement duly approved by the Minister in accordance with the provisions of
the Government Loans, Grants and Guarantees Act entered between local government
authority and a donor: Provided that, such agreement provides for value added tax
exemption on goods or services.

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(c) Importation or supply of goods or services for the relief of natural calamity or disaster.

(d) Importation by or supply of goods or services to an entity having an agreement with the
Government of the United Republic for purpose of operating or executing a strategic project:
Provided that, such agreement provides for value added tax exemption on goods or services;

(e) An importation by or supply of goods or services to a non-governmental organisation having

an agreement with the Government of the United Republic solely for project implemented by the
respective non-governmental organization: Provided that, such agreement provides for value
added tax exemption on goods or services.

The Minister may, for better carrying out of the provisions of this section, make regulations
prescribing the manner of application, granting and monitoring utilization of exemption granted.
.
VATABLE GOODS BETWEEN MAINLAND AND ZANZIBAR.

Where in respect of any taxable supply of goods, the value added tax has been paid in Tanzania
Zanzibar at the rate lower than the rate applicable in Mainland Tanzania under this Act, the
difference in the value added tax shall be deemed to have not been paid and shall be collected by
Tanzania Revenue Authority from the taxable person upon transfer of goods to Mainland
Tanzania in accordance with the provisions of this Act.

Where in respect of any taxable supply of goods, the supply is made directly by a taxable person
in Mainland Tanzania to a recipient who is taxable person in Tanzania Zanzibar, the Tanzania
Revenue Authority shall collect the value added tax and remit it to Zanzibar Revenue Board.”

Where in respect of any taxable supply of goods, the tax has been paid in Tanzania Zanzibar
pursuant to the law for the time being in force in Tanzania Zanzibar, at the same rate as the rate
applicable in Mainland

PRIVATE RULING.

Application for Private Ruling to be Recognized as Charitable Organization

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A non-government organization or religious organization may apply to the Commissioner
General to be recognized as a charitable organization. It should be noted that an organization to
qualify to make an application under this category should be:

a) an entity of a public character which is established and functions solely as an organization for:
for:
(i) The relief of poverty or distress of the public
(ii) The advancement of education; or
(iii) The provision of general public health, education, water or road construction of
maintenance.

An application under this category should be made to the Regional Manager at the regional
office where the organization is registered.

The following should be attached to the application;

 Copy of applicant’s registration status

 Copy of applicant’s constitution and performance report
 Copy of introduction letter from District Commissioner where the applicant is operating
 Copy of applicant’s TIN certificate
 Copy of Financial statements for at least three current years

It should be well known that being ruled as a charitable Organization by the Commissioner does
not qualify an organization to any tax exemption or exemption to fulfill any submission
obligations required by the tax law, but it rather gives different arrangement of calculating tax
payable by such an organization.

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