There are no provisions for tax consolidation or group relief in Tanzania.
With respect to transactions between related parties, there is an obligation to 'quantify, apportion, and allocate amounts' for income tax purposes on an arm's-length basis. The Transfer Pricing Regulations and Guidelines require:
- Any taxpayer whose transactions with associates exceed TZS 10 billion to file the CIT returns together with transfer pricing documentation.
- Any other taxpayer with related-party transactions to have transfer pricing documentation in place and provide this within 30 days from the date of request by the TRA.
- The penalty for any adjustment made during an audit is 100% of that 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.
There is a thin capitalisation restriction on the amount of deductible interest for what are termed 'exempt-controlled resident entities', where the debt-to-equity ratio exceeds 7:3. There are specific definitions of 'debt' and 'equity' for the purposes of thin capitalisation.
Controlled foreign trusts and corporations
There are provisions that relate to the treatment of unallocated income of controlled foreign trusts and corporations.
Change in control provisions
The change in control provisions are triggered at the moment the underlying ownership of an entity changes by more than 50% as compared to any time during the previous three years. Where there is such a change, the consequences are that:
- the accounting period of the entity is split at the point of such a change, so that the parts of the year of income before and after the change are treated as separate years of income, and
- there is deemed realisation of assets and liabilities at market values.
In certain cases, such a change can also result in the forfeiture of unutilised tax losses and tax credits.
The Commissioner has to be notified immediately before and after the change in control has occurred.
Other anti-avoidance provisions
Other anti-avoidance provisions exist to address the following:
- Income or dividend stripping arrangements.
- Income splitting.
Taxing right on an agent of a non-resident person or of a beneficial owner
A new taxing right on a “representative assessee” will apply in respect of income of a non-resident person or “beneficial owner” for whom the “representative assessee” acts as an agent.
Activities that can create the categorisation of “agent of a non-resident person or of a beneficial owner” include: employment; any “business connection”; receipt of income for the other party; acting as a trustee.
The definition of the term “beneficial owner” includes reference to aspects (whether direct or indirect) of “substantial control”, “substantial economic interest in or…substantial economic benefit”.
The term “business connection” includes reference to:
- Conclusion of or significant role leading to conclusion of contracts;
- Maintenance of stock of goods or merchandise;
- Habitually securing orders;
- Carrying on business or investment through an entity or an arrangement for the benefit of the other party (directly or indirectly).