While the year of income for tax purposes is the calendar year, an entity may apply to use its own accounting period rather than the calendar year.
A statement of estimated tax payable, which contains an estimate of the chargeable income and the tax payable thereon, is due for submission within three months from the beginning of the accounting period. A final tax return must be furnished within six months from the end of the accounting period.
WHT returns must be submitted every month. The due date for filing the WHT return is the seventh day of the month following the month to which the tax relates.
Payment of tax
Instalment tax is payable in four equal instalments not later than three months, six months, nine months, and 12 months from the beginning of the accounting period. Final tax is payable on the date on which the final return is due for submission, namely six months after the end of the accounting period.
WHT is due seven days after the month of deduction.
A late filing penalty applies monthly at an amount equal to the higher of (i) TZS 225,000 or (ii) 2.5% applied to unpaid tax. If estimated tax is significantly underestimated, a penalty may also apply.
Interest on late payment is charged at the Bank of Tanzania discount rate.
Tax audit process
The normal practice is for the TRA to carry out a review every two or three years.
Time limit set for the Commissioner to determine an objection
If no determination is issued within six months of an objection, the underlying tax assessment or decision will be treated as final/confirmed, and the taxpayer can appeal to the Board.
A 100% tax deposit on objection to tax decisions where there is a flight risk
The Commissioner can demand a deposit of 100% of assessed tax where the Commissioner has reasonable cause to believe that the objector intends to permanently leave the country.
Statute of limitations
There is a five-year time limit for the TRA to adjust an income tax return filed by a taxpayer. The five years runs from the due date of filing the final tax return.
Topics of focus for tax authorities
Currently, the topics of particular focus for the TRA include transfer pricing, VAT compliance, WHT on payments to both residents and non-residents, compliance on payroll taxes, and post clearance audits for importers and exporters of goods. They generally perform various reconciliations, including (i) sales declared in the VAT returns compared to the revenue in the financial statements and the sales per the EFDMS, (ii) payroll costs per financial statements compared to the amount of pay-as-you-earn (PAYE) remitted, (iii) expected WHT per the expenses in the financial statements compared to the amount remitted, and (iv) deposits in the bank account compared to the sales per the financial statements.
Taxable income and deductible expenditure is quantified in Tanzanian shillings. Upon request by the taxpayer, the Commissioner has the power, by notice in writing, to permit quantification in a foreign currency convertible to Tanzanian shillings.