Tanzania

Finance Act 2023

Some of the significant changes brought in by the Finance Act 2023 include the following:

Tax administration 

• Definition of a primary data server has been amended to include 'a physical server, virtual or any other server which stores data that is created or collected by a taxable or liable person in the ordinary course of business'. The implementation date for maintaining a primary data server in Tanzania has been pushed to 1 January 2024 (from 1 July 2023).
• Introduction of new definitions for the below terms:
  • 'Storage facility' to mean 'a warehouse, go-down or any other storage facility, which is used to keep own or other persons’ goods for business purposes, provided that such warehouse, go-down or other facility is not part of a shop, factory, industry, or farm'.
  • 'Owner' means a person who establishes or operates and is in control of the facility and possession of the storage facility or a person to whom the storage facility has been leased or sublet to.

  The above terms are relevant for the requirement by an owner of a storage facility to register the facility with the Tanzania Revenue Authority (TRA) and provide a monthly report of the nature and value of stock of goods stored in the facility (a requirement introduced by Finance Act 2022 effective July 2022).

• Application for a tax refund: Timeline of three years is extended to overpayments resulting from a tax decision or any other decision made.

• Companies in extractive and construction sectors are required to disclose to the Commissioner General of the TRA the names of all contractors and subcontractors within 30 days from the date of execution of a contract.

• Amendment of electronic fiscal device (EFD) offence penalties:
• Failure to use an EFD or issue a fiscal receipt: Higher of (i) 20% of the value of goods sold or service rendered or (ii) 100 currency points (currently 1.5 million Tanzanian shillings [TZS]).
• Failure to demand a receipt or report a denial of issuance of receipt: Higher of (i) 20% of the value of tax evaded or (ii) 2 currency points (currently TZS 30,000).

Taxpayer portal (upgraded e – filing system)

The TRA has upgraded the e-filing portal (now called the ’taxpayer portal‘) effective February 2023. The followings tax returns are filed in the taxpayer portal (new additions include withholding tax [WHT] and digital service tax returns):

• Corporate income tax (CIT) returns.
• Employment tax returns (both pay-as-you-earn [PAYE] and skills and development levy [SDL] returns).
• WHT returns.
• Digital service tax returns.
• Value-added tax (VAT) returns.

Income tax 

• Change in control provisions (section 56 ITA 2004) will not apply where the change is (i) a result of allotment of new membership interest of the entity or (ii) a sole result of transfer of membership interest of a resident entity to another resident person.

• Payments having a source in the United Republic of Tanzania would include 'payments received by a non-resident in respect of an electronic service consumed by or attribute to an individual in the United Republic regardless of the place of payment, provided that the consumption of the services by an individual is not made in the course of doing business in Tanzania'.

• Extension of the monthly return filing deadlines for non-resident service providers of electronic services from the 7th to 20th day of the following month.
• Resident individuals who do not have records of the costs are to be subjected to capital gains tax on realisation of interest in land or buildings at rate 3% of the higher of the incomings from the realisation or the approved asset value (instead of 10% on the profits).
• Removal of the requirements for individuals (tenants) to withhold tax on rental payments unless such payments are made in conducting business.
• Introduction of final WHT at the rate of 2% to buyers of precious metals, gemstones, and other precious stones supplied by the holder of primary mining licences or an artisanal miner.
• Introduction of a final WHT at 10% on payments made to resident persons in respect of verified carbon emission reductions.
• Exempt amounts: The followings amounts are exempt from income tax:
• Gains derived from internal restructuring of mining companies pursuant to the requirements of a framework agreement entered between the government and an investor to form a partnership entity.
• Amounts derived from investments made by the National Health Insurance Fund on fixed deposits, treasury bonds, treasury bills, or dividends.

• Transportation sector:
• Entities engaged in the business of transporting passengers or goods are no longer required to pay advance income tax per vehicle (a requirement that was introduced in July 2022). Instead, there is a fixed tax liability applicable to individuals engaged in such business (including tour and private hire service) whose turnover is not more than TZS 100 million in a year.

• Mining sector:
• Mineral royalty cost incurred by mining companies is non-deductible for CIT purposes.
• The royalty rate for salt has been reduced to 1% (from 3%).
• Refineries are no longer required to pay 1% inspection fee.

Value-added tax (VAT)

• Increase VAT registration threshold from TZS 100 million to TZS 200 million per annum, and the intention is to gradually increase the threshold to TZS 500 million per annum.
• VAT deferment on specified capital goods is now extended to domestically manufactured capital goods.
• Cessation of VAT deferment on imported capital goods from 1 July 2026.

• Exemptions:

• Exemption on importation of raw materials of heading 39.02 and 39.07 to be used in the manufacture of packaging materials of pharmaceutical products, subject to having a performance agreement with the government.
• Exemption on importation of moulds by a local manufacturer of pharmaceuticals for exclusive use in manufacturing pharmaceutical products in Mainland Tanzania.
• Exemption on importation of prefabricated structures or supply of locally manufactured prefabricated structures of H.S Code 9406.20.90 to be used solely in poultry farming, subject to having a performance agreement with the government.
• Exemption on the supply of automobile accessories used in the conversion of motor vehicle fuel systems to natural gas or electricity systems to persons engaged in the conversion of such motor vehicles.
• Exemption on the supply of aircraft, aircraft engines, aircraft parts, and aircraft maintenance to a local operator of air transportation has been extended to local supplies.
• Exemption on raw materials (benzalkonium chloride and glutaraldehyde) of HS Code 2916.32.00 for the manufacture of insecticides and acaricides that have been approved by the relevant Minister.
• Extension of exemption on a supply of double-refined edible oil from locally grown seeds by a local manufacturer for another one year up to 30 June 2024.
• Exemption on supply of precious metals, gemstones, and other precious stones extended to those sold at refineries, buying stations, or mineral and gem houses designated by the Mining Commission under the Mining Act, Cap. 123. The exemption has also been amended to exclude the limitation on supplies by small scale miners.
• Exemption on the sale by a real estate developer of a house with a value not exceeding TZS 50 million.

• • VAT exemption on air charter services to apply until 30 June 2026.

• Zero rating:

• • Garments manufactured using domestically produced cotton for a period of one year, up to 30 June 2024.

• Extension of zero rate on locally manufactured fertiliser for another year, up to 30 June 2024.

Excise duty

• Amendment of the adjustment period of specific excise duty rates in accordance with projected inflation rate and other key macroeconomic indicators from annually to every three years.
• Inflationary adjustments of fixed excise duty tariffs for non-petroleum products as follows:  
• Beer and tobacco products, except for malt beer made from 100% locally grown barley, which remains the same: 20%. 
• Other non-petroleum products, except for domestically manufactured wines, spirits, and confectionery products: 10%. 
• Imposition of excise duty on cement at the rate of TZS 20/kg.

Other taxes and levies

• Reduction of SDL to 3.5% (from 4%).
• Removal of requirement to file an SDL return if there is no levy payable.
• Removal of mobile money transaction levy on sending and receiving monies electronically.
• Abolishment of the daily SIM card/airtime levy.
• Increase road and fuel toll by TZS 100 per litre (of petrol and diesel).

• Amendment of the property rates from TZS 12,000 to TZS 18,000 for a normal building, and from TZS 60,000 to TZS 90,000 per storey for a storey building.

• Include all district councils’ areas as rateable areas with exceptions such as public libraries, public museums, cemeteries, etc.
• Obligation to evaluate, assess, collect, and account for property rate shall be vested to local government authorities from 1 January 2024.