Tanzania: Rendering of intra-group services and transfer pricing audits

Tanzania’s transfer pricing guidelines help taxpayers determine whether their related-party transactions conform to the arm’s length principle.

Tanzania’s transfer pricing guidelines

Tanzania’s transfer pricing guidelines help taxpayers determine whether their related-party transactions—especially intra-group services—conform to the arm’s length principle.

Intra-group services

Over the years, inter-group (or intercompany) services have been among the most challenging related-party transactions for taxpayers audited by the Tanzania Revenue Authority. The type of intra-group services rendered among related parties is highly dependent on the structure adopted by the group of companies, with a majority of intercompany services conducted under centralized group structures. Common services provided among related parties are management and support, procurement and logistics, IT, human resources, strategy and planning, marketing, and advertisement services.

During a transfer pricing audit, before the prices for intra-group services are tested for conformity to the arm’s length principle, the tax authority first conducts tests to confirm:

  • Whether intra-group services have been rendered
  • Whether the provision of such services has conferred an economic benefit or commercial value to the business that enhances its commercial position

Many taxpayers fail to prove a test as whether intra-group services have in fact been rendered—the “rendering test”—to the satisfaction of the tax authority. As a result, the expense incurred for such services may be disallowed outright for tax purposes, and penalties may be imposed regardless of the fact that the transaction prices meet the arm’s length principle. 

Transfer pricing guidelines

The transfer pricing guidelines (2020) provide clarity and examples of information that taxpayers must submit to the tax authority to satisfy the “rendering test.” With this clarity, taxpayers can engage in intra-group services with their related parties, being fully aware of the information that will be needed when time comes for a transfer pricing audit.

The guidelines also provide that of the information required to demonstrate the rendering of services (depending on the facts and circumstances) are the service provider’s employee profiles detailing the employees names, titles or positions; academic qualifications; and work experience. The employees’ profiles enable the tax auditors to confirm the technical ability of the personnel rendering the intra-group services, and also demonstrate the recipient’s stated need for these services.

  • When services were rendered physically by a related party, the taxpayer will be required to submit details on experts’ visits to support the business operations of a person, as part of the rendering test (such as names, visit dates, duration and purpose for each visit, passport copies, permits, and hotel reservations to prove their accommodation).
  • As part of the rendering test, the tax auditors may request that the taxpayer provide copies of correspondences between the service provider and the recipient. The information enables the tax auditors understand the full extent of the service, from requisition up to the point in time when the final deliverable is provided. The correspondence requested may include emails, telephone notes, and work reports.

KPMG observation

If a taxpayer does not provide the necessary evidence or provides only limited evidence, it may be concluded that no services were rendered or that only limited services were rendered. This fact is considered in the determination of the fees paid to compensate the related party rendering the services.

Therefore, as the tax authority makes efforts to reduce ambiguity that comes with the transfer pricing audit requirements, taxpayers need to consider how to be proactive and prepare for such audits by maintaining information that will provide clear justification for the arrangements and transfer prices applied in their transactions for those engagements with their related parties.

Read a May 2021 report [PDF 228 KB] prepared by the KPMG member firm in Tanzania



The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.