Finance Act 2022
Some of the significant changes brought in by the Finance Act 2022 include the following:
- Issuance of Taxpayer Identification Number (TIN) - The Tanzania Revenue Authority (TRA) is required to issue TIN to individuals with National Identification Number.
- Requirement to maintain primary data server in Tanzania has been extended by one year i.e. effective date is 1 July 2023.
- Goods storage facility - Every owner of a storage facility who intends to keep goods for business purposes is required to register the facility with the Commissioner General and to keep records of all stored goods and report to the Commissioner on a monthly basis.
- Taxation of digital services:
- Introduction of taxation on digital transactions (limited to electronic services) at the rate of 2% of the gross payment received excluding VAT
- Definition of “equity” for thin capitalisation has been limited to paid up share capital at the end of the year of income.
- Amendment of the definition of residence for corporations to include scenarios where management and control are exercised in the United Republic of Tanzania (URT) via electronic means
- The Minister for Finance has been granted power to exempt special strategic investment approved by the National Investment Steering Committee from income tax.
- Exemption from capital gain tax on transactions involving free carried interest to the Government and transfer of projects assets to a Joint Venture Company.
- Exemption from tax on amount derived from gain on realisation or transfer of shares to Government through the Treasury Registrar.
- Companies operating in both mainland Tanzania and Zanzibar - the Act allows a tax credit to be claimed for income tax paid in either jurisdiction. In addition, the Act provides for the Minister (upon consultation with the Minister responsible for Finance in Zanzibar) to determine the presumptive income tax rates in Zanzibar.
- Payments with a source in the URT:
- Expansion of the scope of natural resource payments with a source in the URT to include payment for harnessing, generating or utilising land, air or water natural resources for generation of power or anything of value whether the respective natural resource is located alongside the border or within the country
- Payments made by an individual other than payments made in conducting a business in respect of a service rendered by a non- resident through a digital marketplace
- Transportation business - A resident person engaged in transportation business is required to pay an advance tax with an amount ranging between TZS 180,000 up to TZS 2,790,000 per vehicle based on the type of vehicle used: if for transportation of goods, by reference to load capacity, and if for passengers, by reference to seating capacity and extent of luxury. See below table. The operator is also required to issue receipts by electronic means.
Category of vehicles
Category A: Goods vehicles
Load vehicle between:
0 - 1 Tonne
1 - 5 Tonnes
6 - 10 Tonnes
11 - 15 Tonnes
16 - 20 Tonnes
21 - 25 Tonnes
Load vehicle above 25 Tonnes
Category B: Passenger vehicle
Bus and other similar vehicle with
seating capacity below 10
Bus with seating capacity above 10
but below 16 passengers
Bus with seating capacity from 16 up to 30 passengers
Bus with seating capacity up to 32
Semi luxury bus
- Financial services
- Controlled foreign company (CFC) rules - in determination of unallocated income of a resident financial institution, there should be included as part of the total distributions made, the “distributions which are treated as not-distributable as determined by the Bank of Tanzania”.
- Alternative financing - defined as “any financial arrangement approved by the Bank of Tanzania other than conventional financial arrangements”. The margin on such an arrangement will be treated as interest.
- Media - Reduction of withholding tax rate to 10% (from 15%) on royalty payment relating to the use of cinematography film, video tape sound recording or any other like medium, whether paid to a resident or non resident.
Value-added tax (VAT)
- The Minister for Finance now granted powers to grant VAT exemption on goods and services for implementation of special strategic investments approved by the National Investment Steering Committee under the Tanzania Investment Act. The Minister shall grant this exemption by order published in the Gazette upon approval by the Cabinet.
- Non-governmental organisations (NGO) having an agreement with the government which provides for VAT exemption; may, upon application to the Commissioner General be granted VAT exemption on importation and supply of goods and services solely for projects implemented by the NGO. The Finance Act has now introduced a requirement for Ministerial approval of the imports and supplies in order to receive the exemption.
- VAT exemption on air charter services to apply until 30 December 2022. Further to that, such supplies will no longer be exempt from VAT.
- One year exemption on supply of double refined edible oil from locally grown seeds by a local manufacturer and a supply of raw materials of specified HS Codes and packaging materials to be used solely and directly by the local manufacturer.
- Various additions to the exemption schedule to the VAT Act (i.e., exemptions that do not require application) in relation to the agricultural sector including on standing trees, fishing hooks, reels and lines, dairy packaging materials etc.
- Several other deletions and amendments to the exemptions schedule to the VAT Act.
- VAT deferment on capital goods now extended to certain agricultural vehicles such as tractors and semi-trailers by inclusion of the relevant HS codes (87.16 and 8701.20.90) for these items within the definition of the term “Capital Goods”. However, the Act now includes a condition that these items must be locally manufactured or assembled in a customs bonded warehouse.
- Non-resident providers of digital services required to register under the VAT Act, can now do so without imposing an obligation under the Income Tax Act 2004. The VAT Act is also amended to enable a non-resident to apply for VAT registration if it is impractical to appoint a VAT representative in accordance with procedures prescribed in respective regulations.
- Introduction of definition of “alternative financing arrangement” as “any financial arrangement approved by the Bank of Tanzania other than conventional financial arrangements”. The Minister for Finance is empowered to make regulations prescribing the manner and procedure of dealing in loans, including alternative financing.
Other taxes and levies
- Electronic communications: Scope of electronic money transactions (EMT) levy extended to also include transfers from bank account to mobile money account. Exemption from the EMT levy for transactions involving payment of salaries by employers. The EMT levy upper limit revised to TZS 4,000.
- The scope of the 5% excise duty on pay to view services (previously applied to services supplied by cable and satellite) is expanded to include those provided using terrestrial, or other technology services.
- Introduction of a 10% tax on the amount of winnings from sports betting.
- Workers Compensation Fund (WCF) - Change of WCF rate from 0.6% to 0.5% for private companies.