Finance Act 2019
Some of the significant changes brought in by the Finance Act 2019 are:
- Reduced corporate income tax (CIT) rate for new investors in manufacturing of sanitary pads who have a performance agreement with the Tanzanian government from 30% to 25% for the first two years, from 2019/20 to 2020/21, to encourage local manufacturing.
- Extension of the tax amnesty period for a further six months to December 2019. However, this extension does not cater to new applications. The extension is to facilitate the Tanzania Revenue Authority (TRA) attending to submitted amnesty applications.
- Exemption of withholding tax (WHT) on fees relating to loans financing government projects. Payments such as interest and commitment fees on loans secured by the government from non-resident banks, financial institutions, and other governments are now exempt from WHT. This is to enable the government to secure loans at a lower cost (this change has a retrospective effect from 1 June 2017).
- Introduction of a tax ombudsman office. The office will be under the finance minister and is aimed to handle complaints against TRA officials regarding tax administration, including corruption, arbitrary assessments, and unlawful closure of businesses. Technical matters will still be dealt by the TRA.
The above changes (apart from the government loans WHT exemption) are effective 1 July 2019.
Tax Administration (Transfer Pricing) Regulations, 2018
Significant transfer pricing changes brought by the Tax Administration (Transfer Pricing) Regulations, 2018 are:
- Transfer pricing documentation to accompany the CIT return of any taxpayer whose transactions with associates exceed 10 billion Tanzanian shillings (TZS).
- Penalty of 100% of a transfer pricing adjustment rather than 100% of the underpaid tax. In particular, the Regulations link the penalty to the absolute adjustment rather than to the tax applied to the adjustment.
The transfer pricing changes are effective 21 November 2018.