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Tanzania - Indirect Tax Guide

Tanzania - Indirect Tax Guide

Explore the requirements and rules that apply to indirect taxes in Tanzania.

Explore the requirements and rules that apply to indirect taxes in Tanzania.

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General

Types of indirect taxes (VAT/GST)

VAT.

What is standard VAT/GST rate?

18 percent.

Are there any reduced rates, zero rates or exemptions?

Zero-rated supplies include:

  • export of goods and services
  • a supply of immovable property located outside Tanzania
  • supply of goods by a local manufacturer to Zanzibar
  • a supply of leased goods used outside Tanzania
  • intellectual property rights for use outside Tanzania
  • inter-carrier telecommunication services
  • services connected with temporary imports
  • supply of goods and services to non-resident warrantor
  • goods for use in international transport
  • goods used to repair temporary imports.

Exempt supplies include:

  • agricultural implements
  • agricultural inputs
  • livestock, basic agricultural products and foods for human consumption
  • fisheries implements
  • bee-keeping implements
  • dairy equipment
  • medicines or pharmaceutical products
  • articles designed for people with special needs
  • education materials 
  • health care
  • immovable property
  • education services
  • intermediary services (supply of financial services, insurance premiums for aircrafts, life or health insurance, insurance for workers compensation)
  • government entity or institutions
  • petroleum products
  • supply of water, except bottled or canned water or similarly presented water
  • supply of air charter services
  • gaming supply
  • funeral services
  • supply of arms and ammunitions to the armed forces
  • Revenue Stamps of HS Code 4907.00.90
  •  Electronic Cash Register Code 8470.50.00
  • transportation of person by any means of conveyance other than taxi cabs, rental cars or boat charter
  • supply of solar panels, modules, solar charger controllers, solar inverter, solar lights.

What are the general and specific place of supply rules, if applicable?

Place of supply/taxation for goods is in Tanzania if the following applies:

  • for local supplies: if delivered or made available in Tanzania
  • for imports: if cleared for home consumption, and
  • for inbound and outbound goods: if installed or assembled in Mainland Tanzania; transported or dispatched from Tanzania.

In case of immovable property, the place of taxation is where the property is located.

For services, the place of taxation is where the service provider is located.

VAT/GST registration

Who is required to register for VAT/GST?

A person making taxable supplies of goods, immovable property or services in the course or furtherance of economic activity, if taxable turnover exceeds or is likely to exceed100 million Tanzanian shilling (TZS) in a 12-month consecutive period; or TZS50 million in a 6-month consecutive period.

A person supplying professional services.

Is voluntary VAT/GST registration possible for an overseas company?

Yes.

Does an overseas company need to appoint a fiscal representative?

Yes, when such overseas company carries out economic activity in mainland Tanzania, without a fixed place in mainland Tanzania, and makes taxable supplies for which the overseas company is liable to pay VAT.

Is VAT/GST grouping* possible?

No.

VAT/GST compliance

How frequently are VAT/GST and other indirect tax returns submitted?

Monthly.

Can returns be filed and payments be made electronically?

Yes.

What are the exchange rate rules?

Exchange rates to be used are issued by the Bank of Tanzania.

VAT/GST recovery

Can an overseas company recover VAT/GST and other indirect taxes if not registered for VAT/GST locally?

No.

Is it a prerequisite that output tax be charged before input tax can be claimed?

No.

Are there any exemptions with the right to recover or deduct input VAT?

Input VAT cannot be deducted on:

  • entertainment, unless the person’s economic activity involves providing entertainment in an ordinary course of the person’s economic activity
  • an acquisition of a membership or right of entry for any person in a club, association or society of a sporting, social or recreational nature.

Note: The two above will not apply to acquisition or imports used to provide in-kind benefits to employees and the supply of taxable supply.

  • Passenger vehicles, unless the person’s economic activity involves dealing in hiring out, or providing transport services in passenger vehicles and the vehicle was acquired for that purpose.

For what period of time may input tax not previously claimed be claimed (i.e. prescription)?

For 6 months from the date of the tax invoice, fiscal receipt or other relevant evidence such as a single administrative document, proof of payment of tax, etc.

Where a VAT return reflects a refund due to the taxpayer, is the refund paid to the taxpayer or is the taxpayer required to utilize the refund as a credit against future payments?

A taxpayer can elect to have the amount refunded or to be utilized against future tax payments.

Invoices

Is a business required to issue tax invoices?

Yes, a business is required to issue a serially numbered true and correct tax invoice generated by an electronic fiscal device.

Is it possible/mandatory to issue invoices electronically?

Yes it is possible, but not mandatory.

Is it possible to issue recipient-created tax invoices?

Yes.

Audits

Do tax audits take place on a regular basis?

Audits are carried out to confirm the level of VAT compliance (e.g. if returns are filed on time, all input and output VAT are correctly reported in the VAT returns). Also, as per the VAT Act claiming of VAT refund will possibly trigger TRA audits.

Are audits done electronically in your country/territory (e-audit)? If so, what system is in use?

No.

What penalties can arise from non-compliance?

The following penalties are levied:

  • greater of TZS225,000 or 2.5 percent of the outstanding tax liability for each month the VAT return is filed late
  • interest is compounded in each month the outstanding tax remains unpaid, at a statutory rate, which currently is 7 percent per annum.

Note: There are other fines for non-compliance, they are provided under the Tax Administration Act, 2015.

Special indirect tax rules

Are there unique country/territory-specific indirect tax rules that differ from 'standard' indirect tax rules in other jurisdictions?

No.

Does a reverse charge mechanism apply?

Yes, it applies to all services supplied from outside Tanzania to a recipient in Tanzania and which would be taxable if supplied in Tanzania. The recipient must account for VAT on imported services.

Can VAT on reverse charges be claimed as input tax, to the extent that the expense on which the reverse charge VAT is accounted for, is used for taxable purposes?

Yes, provided input tax shall not be claimed unless the output tax has been accounted for in the same return.

Can non-residents appoint local agents in order to avoid reverse charge VAT by virtue of charging standard rate VAT and accounting for such VAT through the agent?

No, it is the recipient’s responsibility to account for VAT.

Are there indirect tax incentives available (e.g. reduced tax, tax holidays)?

No.

Rulings

Is it possible to apply for formal or informal advance rulings from the tax authority?

Yes.

Are rulings and decisions issued by the tax authorities publically available?

No.

Other indirect taxes

Are there other indirect taxes not commented on above?

Yes, this includes:

  • excise duty on locally manufactured goods and imports
  • import duty
  • stamp duty.

For further information please contact

David Gachewa
Director — Tax and Regulatory Services
KPMG in Tanzania
T: +255 22 212 2003
E: dgachewa@kpmg.co.tz

Nsanyiwa Donald
Associate Director – Tax and Regulatory Services
KPMG in Tanzania
T: +255 22 212 2003
E: ndonald@kpmg.co.tz

Footnote

*By ‘grouping’ we mean: either a consolidation mechanism between taxpayers belonging to the same group (payment and refund are compensated but taxpayers remain distinct) or a fiscal unity for VAT/GST purposes (several taxpayers are regarded as a single taxpayer).

Disclaimer

All information contained in this document is summarized by KPMG in Tanzania, a member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

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