Subject to any provision to the contrary in the Income Tax Act, income is to be calculated in accordance with generally accepted accounting principles (GAAP). Local GAAP is in accordance with International Financial Reporting Standards (IFRS). Corporations must apply an accrual basis of accounting.
Trading stock is valued at the end of the year at the lower of cost and market value. No explicit method is stated for determining inventory cost, and, so far, for tax purposes, such cost will match the cost determined in accordance with GAAP. Special rules apply for the valuation of long-term work in progress.
There is no separate capital gains tax in Tanzania. Instead, income tax is charged on the taxable profit arising on a gain arising from the realisation of an 'investment asset' (a term that [subject to certain exceptions] includes shares, interests in land and buildings, and a beneficial interest in a trust). The gain is determined as the difference between costs incurred and sale proceeds.
Dividend income will be included in calculation of taxable income unless it is exempt or a final withholding payment.
Dividend payments are taxed by way of WHT, and this is a final tax. The normal rate of WHT on dividends is 10%.
Where a dividend is paid by a resident corporation to another resident corporation holding 25% or more of shares and voting rights in the corporation paying the dividend, the WHT rate is 5%.
Dividends paid by a company listed on the DSE are subject to 5% WHT (regardless of whether they are paid to a resident or non-resident).
Interest income will be included in calculation of taxable income unless it is exempt or a final withholding payment.
The term 'interest' is defined as payment for the use of money and includes payment made or accrued under a debt obligation that is not a repayment of capital, as well as any gain realised by way of a discount, premium, swap payment, or similar payment.
Interest payments made by residents are taxed by way of WHT at 10%.
Royalty income will be included in calculation of taxable income unless it is exempt or a final withholding payment.
Royalty payments made by residents are taxed by way of WHT at 15% (regardless of whether it is paid to a resident or non-resident), except for payment relating to the use of cinematography film, videotape, sound recording, or any other like medium, where the applicable rate is 10%. WHT on royalty payments to a non-resident is a final tax.
The term 'royalty' means any payment made by the lessee under a lease of an intangible asset and includes payments for:
- the use of, or the right to use, a copyright, patent, design, model, plan, secret formula or process, or trademark
- the supply of know-how, including information concerning industrial, commercial, or scientific equipment or experience
- the use of, or right to use, a cinematography film, videotape, sound recording, or any other like medium
- the use of, or right to use, industrial, commercial, or scientific equipment
- the supply of assistance ancillary to a matter referred to in paragraphs (i) to (iv), or
- a total or partial forbearance with respect to a matter referred to in paragraphs (i) to (v), but excludes a natural resource payment.
A resident person's foreign-source income or loss (from employment, business, and investment) is calculated as that person's worldwide income or loss less any income sourced in Tanzania and plus any loss sourced in Tanzania.
A resident person may claim a foreign tax credit on any foreign tax paid by the person on foreign income. However, such credit should not exceed the Tanzanian tax rate applicable to that income. Any unrelieved amount of foreign tax credit may be carried forward (subject to 'change in control' provisions as detailed in the Group taxation section). An election may be made to relinquish foreign tax credit and claim a deduction for the amount of foreign income tax.
There are no provisions for the deferral of the taxation of foreign income.