Value-added tax (VAT)
VAT is chargeable on all taxable goods and services supplied in, or imported into, mainland Tanzania. The standard rate of VAT is 18%, but the export of goods and certain services is eligible for zero rating. Businesses with an annual taxable turnover of more than 100 million Tanzanian shillings (TZS) must register for VAT.
There is also mandatory registration for professional services providers (e.g. lawyers and accountants) and government entities/institutions carrying on economic activity. A non-resident who carries on economic activity in mainland Tanzania without a fixed place and makes taxable supplies in excess of the VAT registration threshold is required to appoint a VAT representative.
For imported goods, VAT is payable at the time of importation together with any customs and excise duties. VAT payable with respect to capital goods (as defined), which are imported or purchased in Tanzania, may be deferred, subject to certain procedures being followed. The Commissioner for VAT has the discretion to register (as intending traders) investors whose projects have not commenced production but who wish to be VAT-registered in order to reclaim the tax they incur on start-up costs.
For imported services, VAT is accounted for by registered businesses through a 'reverse-charge' mechanism, such accounting is only relevant where a taxpayer has exempt supplies of 10% or more of total supplies.
Depending on the industry, there are a number of exempt supplies. These include (this list is not exhaustive):
- Agricultural implements, agricultural inputs, livestock, basic agricultural products and food for human consumption; implements for fisheries and bee-keeping; dairy equipment, maize flour, and wheat flour.
- Food, clothing, and shoes donated to non-profit organisations for free distribution to orphanages or schools for children with special needs in mainland Tanzania.
- Goods imported by non-profit organisations for the provision of emergency and disaster relief (conditional).
- Goods imported by religious organisations for the provision of health, education, water, and religious services (conditional).
- Educational services provided by a relevant approved educational institution; education materials.
- Laboratory equipment and reagents imported by a registered educational institution and to be used solely for educational purposes.
- Goods eligible for relief under the East African Customs Management Act (where imported by a registered and licensed explorer or prospector for exclusive use in oil, gas, or mineral exploration or prospecting activities).
- Various goods imported by a natural gas distributor (including compressed natural gas [CNG] plants equipment, natural gas pipes, transportation and distribution pipes, CNG storage cascades, CNG special transportation vehicles, natural gas metering equipment, CNG refuelling of filling, gas receiving units, flare gas system, condensate tanks and leading facility, system piping and pipe rack, and condensate stabiliser).
- Healthcare, medicine, or pharmaceuticals products, including food supplements or vitamins supplied to the government; articles designed for people with special needs; funeral services.
- Firefighting vehicles imported by the government and firefighting equipment.
- Sale of vacant land.
- Lease, license, hire, or other form of supply, to the extent that it is a supply of the right to occupy and reside in residential premises.
- Water (except bottled or canned water or similarly presented water).
- Solar equipment (in particular, solar panels, modules, solar charger controllers, solar inverters, solar lights, vacuum tube solar collectors, and solar batteries). Wind generators and liquid elevators are no longer included in the list of exemptions (unlike the 1997 Act).
- All unprocessed vegetables and unprocessed edible animal products, including live fish, fruits and nuts, cereals, and seeds, as well as raw soya beans.
- Vitamins and food supplements (micronutrient compound) that have been approved by the Minister for Health, Community Development, Gender, Elderly, and Children.
- Water treatment chemicals, as approved by the Minister responsible for health.
- Aviation insurance.
- Dam liner.
- Insurance for workers compensation.
- Pasteurised goat and cow milk, excluding milk with additives and long-life milk.
A business that only makes exempt supplies is unable to register for VAT and, consequently, unable to recover the VAT incurred on inputs.
Export of goods and certain services is zero-rated (i.e. taxable at a rate of 0%).
Registered businesses must submit VAT returns, and pay any tax due, on a monthly basis.
The VAT Act has broadened restrictions on claiming input tax. For example, one cannot claim VAT paid on entertainment, sporting, social, or recreational clubs or associations, nor on spare parts and repair or maintenance costs in respect of passenger vehicles. The VAT Act also restricts claiming of input tax incurred on exportation of raw minerals (with effect from 20 July 2017), raw agricultural products, raw forestry products, raw aquatic products, and raw fauna products (with effect from 20 July 2019).
The input tax claim time limit is six months. However, this time limit starts to run not only by reference to the date of the tax invoice/fiscal receipt but also by reference to the date of the time of supply.
Input tax incurred in the six months prior to VAT registration can be claimed no later than in the third VAT return submitted following registration.
A company with taxable supplies of more than 90% of total supplies is entitled to full input tax credit.
A company with taxable supplies less than 10% of total supplies is not entitled to claim any input tax incurred.
A company with taxable supplies between 10% and 90% of total supplies is entitled to partial input tax recovery. Two methods of apportionment, namely the average method and direct attribution method, can be used. Imported services are not taken into account as supplies when determining the allowance of input tax for partial exemption purposes.
Businesses entitled to VAT refunds can claim any remaining credit six months after a refund first became due, subject to all intervening returns being rendered. Any claim for a VAT refund must be supported by an auditor's certificate. Businesses in a consistent refund position (e.g. exporters) can apply for approval to lodge their refund claims on a monthly basis.
Zanzibar has its own VAT Act, but it is similar to the Mainland Tanzania Act.
Tanzania is a member of the East African Community, which became a Customs Union on 1 January 2005 on the implementation of the East African Customs Union Protocol. This protocol provides for a common external tariff (CET), elimination of internal tariffs, rules of origin, anti-dumping measures, a common customs law, and common export promotion schemes.
The import duty rates applicable under the CET are as follows:
|Raw materials, capital goods, agricultural inputs, pure-bred animals, medicines
|Finished final consumer goods
|Machinery and spare parts imported by licensed mining companies and used in mining activities
|Machinery, spares, and inputs imported by licensed company for direct use in oil, gas, and geothermal exploration
Tanzania is also a member of the Southern African Development Community (SADC). Where goods are subject to a lower rate of duty from another trade bloc, such as the SADC, the lower duty rate applies until such a time as the trading arrangements between the trading blocs are harmonised.
Excise duty rates apply as follows:
||Rate for FY 2018/19 (TZS)
|Sugared mineral water, sugared carbonated drinks, and sugared aerated water (locally manufactured/imported)
||58 per litre/61 per litre
|Other not containing sugar, including club soda (locally manufactured/imported)
||58 per litre/64.05 per litre
|Malt beer (locally manufactured/imported)
||765 per litre/803.25 per litre
|Clear beer (with 100% local unmalted barley)
||450 per litre
|Wine with more than 25% imported grapes
||2,466.45 per litre
|Wine with domestic grapes content exceeding 75%
||200 per litre
|Spirits, vodka, and whiskies
||3,655.05 per litre
|Cigarettes without filter containing more than 75% domestic tobacco
||12,447 per mil
|Cigarettes with filter containing more than 75% domestic tobacco
||29,425 per mil
|Other cigarettes not mentioned above
||55,896.75 per mil
||28,232.40 per kg
|Motor spirit (gasoline) premium
||379 per litre
|Motor spirit (gasoline) regular
||379 per litre
|Gas oil (diesel)
||255 per litre
||0 per litre
||425 per litre
|Other medium oil and preparation
||9.32 per litre
|Industrial diesel oil
||392 per litre
|Heavy furnace oil
||0 per litre
||669 per m³
||0.79 per kg
|Music and film products
||50 per unit
||Rate for FY 2018/19 (%)
|Satellite and cable television broadcasting
|Electronic communication services
|Charges or fees by a telecommunication service provider for money transfer service
|Charges or fees by a financial institution for services provided by such institution
|Disposable plastic bags
|Liquefied petroleum gas (LPG)
|Motor car with cylinder capacity exceeding 1,500cc but not exceeding 2,000cc
|Motor vehicle with engine size greater than 2,000cc but not exceeding 3,000cc
|Old passenger motor vehicles (more than five years)
|Old motor vehicles (eight years but not more than ten years)
|Old motor vehicles (more than ten years)
|Imported used spare parts (for vehicles, motorcycles, domestic and electrical appliances)
|Imported furniture (per unit)
|Aircraft (including helicopters, aeroplanes) but excluding commercial aircraft, yachts, and other vessels for pleasure or sport
Fuel levy is charged on petroleum and diesel at a rate of TZS 313 per litre.
Petroleum levy is charged on petroleum and diesel at TZS 100 per litre and on kerosene at TZS 150 per litre.
Examples of instruments giving rise to stamp duty obligations include conveyances, leases, share transfers, and issue and transfer of debentures. For most of these instruments, the applicable stamp duty rate is 1% of the consideration.
The ‘infrastructure levy’ applies at the rate of 1.5% of the value of imported goods (cost, insurance, and freight [CIF]). The levy is not applicable to imported goods that have relief or exemption under the East African Community Customs Management Act 2004 (EACCMA 2004) and goods in transit.
Payroll taxes and social security contribution
Apart from individual income tax (deducted at source by the employer), payroll taxes include:
- Skills and development levy at 4.5% of payroll cash costs.
- 20% social security contribution, which is normally split equally between employer and employee (i.e. 10% each).
- Workers compensation fund tariff charged at 1% or 0.5% of cash sums paid to employees. The tariff is payable on a monthly basis (1% for private sector and 0.5% for public sector).
Under the gaming tax, gaming prize winners are taxed at 20% of the prize offered.
The TRA levies a property tax based on the value of a premises. The rates vary depending on the value and location of the property. For unvalued properties, TZS 10,000 is payable for a normal building and TZS 50,000 per storey for a storey building.
The local government is entitled to charge a 0.3% service levy based on turnover generated in the relevant district.
For agricultural produce and livestock, there is a cess levy, currently capped at 3% of the producer price. However, there is an exemption from cess levy on the transportation of crops of less than one ton from one local government authority to another.