Dar es Salaam GMT +3
EY Street address: Mail address: Tanhouse Tower (4th Floor) P.O. Box 2475 Plot No. 34/1-Ursino South Dar es Salaam New Bagamoyo Road Tanzania Dar es Salaam Tanzania
Indirect tax contacts
Silke Mattern +255 (22) 292-7868 silke.mattern@tz.ey.com
Grace Mulinge +255 (22) 292-7868 grace.n.mulinge1@tz.ey.com
Beatrice Melkiory +255 (22) 292-7868 beatrice.melkiory@tz.ey.com
This chapter refers to Mainland Tanzania throughout, not Tanzania Zanzibar.
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Value-added tax (VAT)
Date introduced 1 July 2015 (effective date of VAT Act, 2014; VAT originally took effect on 1 July 1998)
Trading bloc membership Southern African Customs Union (SADC) East African Community (EAC) African Continental Free Trade Area (AfCFTA)
Administered by Tanzania Revenue Authority (TRA) (www.tra.go.tz)
VAT rates
Standard 18%
Other Zero-rated (0%) and exempt
VAT number format 00-111111-A
VAT return periods Monthly
Thresholds
Registration TZS100 million in a year
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and services in Tanzania by a taxable person
• Reverse-charge services received by a taxable person in Tanzania
• The importation of goods from outside Tanzania
C. Who is liable
A person that makes supplies of taxable goods and services in Tanzania in the course of further ance of economic activity is liable for VAT.
VAT registration is required on the attainment of annual turnover of TZS100 million from the supply of taxable goods and services. A taxable person must notify the Tanzania Revenue Authority of its liability to register for VAT within 30 days of becoming liable.
If the business activities of a taxable person change, the taxable person must notify the Commissioner within 14 days after the date of the change.
Exemption from registration. Businesses whose supplies mainly consist of exempt supplies (such as supplying specified agricultural, fisheries, beekeeping and dairy implements, and specific unprocessed agricultural products) are not required to register for VAT, since their turnover will not generally meet the registration threshold. However, a person supplying zero-rate supplies is required to be registered for VAT if the registration threshold is met. Tanzania does not have any provision to exempt such suppliers from registration.
Voluntary registration and small businesses. The VAT law in Tanzania provides for voluntary registration for intending traders who expect to reach the registration threshold in a period of 12 months or half of the registration threshold in a period of 6 months. Also, irrespective of wheth er the registration threshold is met or not, suppliers of professional services are required to be registered for VAT.
Group registration. Group VAT registration is not allowed in Tanzania. However, if an economic activity is carried on in divisions or branches, a taxable person shall have a single registration that covers all economic activities undertaken by that person’s divisions or branches. Based on Section 36 of the VAT Act, 2014, branches/divisions are not supposed to be registered separately. The single registration will cover all economic activities undertaken by that person in branches or divisions. In addition, with respect to the duration for registration, the normal rules on registration threshold are applicable. That is, a person’s annual turnover from all economic activities must be TZS100 million to be eligible for registration.
Non-established businesses. A “non-established business” is a business that does not have a fixed establishment in Tanzania. The law requires a non-established business to appoint a resident person in Tanzania to act on its behalf in matters relating to VAT ( see the Tax representatives subsection below). A permanent establishment or branch of a foreign business must register for VAT if it makes taxable supplies of goods or services. A person importing goods or services from a nonresident must pay the Tanzanian VAT due.
Tax representatives. Where a non-established business carries on economic activities in Tanzania without having a fixed place making taxable supplies, the non-established business must appoint a resident VAT representative in Tanzania to act on its behalf in matters relating to VAT. Upon acceptance of the VAT representative appointed by the Commissioner, the VAT representative will perform on behalf of the taxable person all activities required under the VAT act 2014, including the following:
• Applying for registration, canceling registration and fulfilling other obligations in relation to registration
• Paying any VAT or fine, penalty or interest imposed on the nonresident
The non-established business must notify the commissioner, in writing, that a VAT representative has been appointed. A resident person who is a VAT representative of more than one non-estab lished business must register separately for VAT with respect to each non-established business.
Reverse charge. The reverse charge is applicable for imported services for supplies made by nonestablished businesses-to-business (B2B) customers in Tanzania (i.e., the customer is VAT regis tered in Tanzania). The customer (i.e., the recipient of the service) will be assumed to be the service supplier, and so the input tax will be the same as the output tax for the service imported. The obligation to account for VAT on imported services lies with the person whose taxable sup plies are less than 90% of its total supplies.
Domestic reverse charge. There are no domestic charges in Tanzania.
Digital economy. Nonresident providers of electronically supplied services for business-to-con sumer (B2C) supplies are required to register and account for VAT in Tanzania. The nonresident provider must appoint a VAT representative, if it does not have a fixed establishment in Tanzania.
Nonresident providers of electronically supplied services for B2B supplies are not required to register and account for VAT in Tanzania. The customer is liable to self-account for the VAT via the reverse-charge mechanism (see the Reverse-charge subsection above).
There are no other specific e-commerce rules for imported goods in Tanzania.
Online marketplaces and platforms. Generally, Tanzania does not have specific VAT rules for online purchases of goods and services. The online marketplaces and platforms fall within the same rules as ordinary purchases of goods and services. For domestic purchases, these will be subject to VAT at 18%, unless the goods or services in question are exempt. Where the pur chases involve importation of goods, VAT on importation may be applicable. In case the online platforms involve the acquisition of imported services by a taxable person, the person will be required to account for VAT (via the reverse-charge mechanism) on such imported services provided that the taxable supplies of such person are less than 90% of its total supplies.
Registration procedures. If a taxable person’s taxable turnover equals or exceeds TZS100 million, a taxable person is obliged to apply for the VAT registration within 30 days of becoming liable to make such an application. A taxable person or anyone that the company appoints can submit the application. The application should be accompanied by the following documents: copies of Memorandum and Article of Association, Certificate of Incorporation, business license, tax identification number (TIN) certificate, lease agreement and two passport-size photographs for one of the directors. Complete VAT Application Form No. ITX245.02.E together with a letter demonstrating that registration requirements have been met and submit either the hard copy or electronically within 30 days. Online registration is available at www.tra.go.tz. In practice, how ever, the registration process is still done manually and the same can be completed within 14 working days, if all the required documents are available.
Deregistration. A taxable person who ceases to be liable for registration must notify the Commissioner in writing within 14 days after ceasing to become liable. If the Commissioner is satisfied with the notice and if the payment of all VAT due is made, the commissioner cancels the registration, effective from the date of the notification.
The Commissioner will cancel the registration if satisfied that the following conditions exist:
• The taxable person is not carrying on an economic activity
• The taxable person has ceased to produce taxable supplies
• The taxable person’s taxable turnover falls below the registration threshold
The cancellation of registration shall be effective from the date set out in the notice of cancella tion/deregistration.
A taxable person whose registration is canceled must file a final VAT return and pay all taxes due within 30 days after the date of cancellation of registration.
Changes to VAT registration details. A taxable person is required to notify the Commissioner in writing within 14 days of any changes in its VAT registration details. Such changes may include but are not limited to changes on the taxable person’s name, business/trading name, address, contact details, places through which the taxable person carries on an economic activity, nature of the economic activities carried on by the taxable person, as well as registration status of the taxable person.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero-rate.
The term “taxable supplies” also refers to imported services, whereby the receiver of the ser vices makes taxable supplies that are less than 90% of its total supplies.
The VAT rates are:
• Standard rate: 18%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for the zero-rate or an exemption.
Examples of goods and services taxable at 0%
• Exports of goods
• Supplies of goods and supplies of immovable property to an address outside Tanzania
• Exports of taxable services to an address outside Tanzania
• Supplies of goods to a tourist or visitor by a licensed duty-free vendor who holds documentary evidence that the goods have been removed from Tanzania
• Supply of ancillary transport services for goods in transit through mainland Tanzania, where the service is an integral part of the international transport service and in respect of goods stored at the port, airport or a declared customs area for not more than 30 days while awaiting onward transport
A special relief remains in place for taxable persons who entered into a binding agreement relat ing to exploration and prospecting of minerals, gas or oil with the government of Tanzania before 1 July 2015, the effective date of the VAT Act, 2014.
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Agricultural, horticultural or forestry machinery for soil preparation or cultivation, except lawn mower or sports ground rollers and parts
• Agriculture implements (e.g., liquid and powder sprayers, spades, shovels, mattocks, picks, hoes, forks, tractor trailers)
• Agriculture inputs (e.g., fertilizers, pesticides, fungicides, herbicides, rodenticides, fungicides)
• Fishery implements (e.g., nets, vessels, factory ships and other vessels for processing or preserv ing fishery products)
• Beekeeping implements (e.g., beehives, honey strainers, beehive smokers)
• Crop agricultural insurance
• Dairy equipment (e.g., milking machines, cream separators, milking machines)
• Medicine or pharmaceutical products including food supplements or vitamins supplied to the government entities
• Articles designed for people with special needs (e.g., spectacle lenses, sunscreen for use by albinos)
• Educational materials (e.g., dictionaries, encyclopedias, other printed books, instructional chats, diagrams)
• Health care services (e.g., medical, dental, nursing, convalescent, rehabilitation) provided by an institution approved to provide such services, under the supervision or control of a person who is registered as being qualified to perform the services under Tanzania laws or whose qualifica tions to perform the services are recognized in Tanzania
• Transportation of persons by any means of conveyance other than taxicab, rental car or boat
• Petroleum products and equipment for natural gas (e.g., petrol, diesel, kerosene, compressed natural gas (CNG) plants equipment, natural gas pipes, transportation and distribution pipes)
• Intermediary services (e.g., financial services supplied free of charge, insurance premiums for aircraft)
• Import of goods by a registered and licensed explorer or prospector for exclusive use in oil, gas or mineral exploration or prospection activities, if also relieved from customs duties
• Educational services
• Immovable property (e.g., sale of vacant land)
• Tobacco not stemmed or stripped
• Preparations of a kind used in animal feeding
• Fertilized eggs for incubation
• A motor vehicle designed for use by persons with disability
• Importation of an ambulance by a registered health facility other than a pharmacy, health labo ratory or diagnostic center
• Financial services for which no consideration is charged
In addition to the above list, certain VAT exemptions may be available upon application to the tax authority on the following supplies:
• Importation of raw materials to be used solely in manufacture of long-lasting mosquito nets
• Importation by or supply to a government entity of goods or services to be used solely for implementation of a project funded by the government; or funded by a concessional loan, a non-concessional loan or a grant through an agreement between the government of Tanzania and another government, donor or lender of a concessional loan or a non-concessional loan; or funded by a grant agreement duly approved by the Minister for Finance entered between a local government authority and a donor, provided such agreement provides for VAT exemption on goods or services
• Importation or supply of goods or services for the relief of natural calamity or disaster
• Importation by or supply of goods or services to an entity having an agreement with the gov ernment of Tanzania for the purpose of operating or executing a strategic project, provided such agreement provides for VAT exemption on goods or services
• Importation by or supply of goods by a nongovernmental organization having an agreement with the government of Tanzania solely for a project implemented by the respective nongovern mental organization, provided such agreement provides for VAT exemption on goods or services
• An entity having an agreement with the government of Tanzania for the purpose of operating or executing a strategic project
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Tanzania.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” The tax point is the earliest of the following events:
• The time when the invoice for the supply is issued by the supplier
• The time when the consideration for the supply is received in whole or in part
• The time of supply, which is one of the following: The time at which the goods are delivered or made available.
The time at which the services are rendered, provided or performed. The time at which the immovable property is “created, transferred, assigned, granted, sup plied to the customer” or “delivered or made available,” whichever is earliest.
Deposits and prepayments. There are no special time of supply rules in Tanzania for deposits and prepayments. As such, the general time of supply rules apply (as outlined above). However, VAT on a taxable supply for which a deposit or prepayment has been made becomes payable when the deposit or prepayment is made.
Continuous supplies of services. For supplies of continuous supplies of services each periodic or progressive supply is treated as a separate supply for determination of the VAT amount.
Goods sent on approval for sale or return. For supplies of goods sent on approval for sale or return, goods are considered to be supplied at the time when they are delivered or made available.
Reverse-charge services. The time of supply for services is the time when the services are ren dered, provided or performed.
Leased assets. The time of supply for supply of leased assets is the earlier of when the property is transferred or made available to the customer.
Imported goods. VAT on imported goods is charged and payable when the custom duty, tax or levy is payable in accordance with the customs law. VAT on imports of capital goods may be deferred.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services supplied for business purposes. A taxable person claims input tax by deducting it from output tax, which is VAT charged on supplies made.
The time limit for a taxable person to reclaim input tax in Tanzania is six months. Taxable persons must claim input tax within six months from the date of the fiscal receipt.
Input tax credit is only available where the goods or services in which the input tax was incurred, were acquired or imported into mainland Tanzania by a person in the course of economic activ ity and for the purpose of making taxable supplies.
Input tax includes VAT charged on goods and services purchased in Tanzania and VAT paid on imports of goods and services for which input tax is deductible.
Nondeductible input tax. VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by a taxable person). In addition, input tax may not be recovered with respect to certain business expenses.
The following lists provide some examples of items of expenditure for which input tax is not deductible and examples of items of expenditure for which input tax is deductible if the expen diture is related to a taxable business use.
Examples of items for which input tax is nondeductible
• Purchase of a passenger vehicle or of spare parts, repair services or maintenance services for a passenger vehicle, unless the person’s economic activity involves hiring out or providing transport services in passenger vehicles (with seating capacity of more than 16 persons) and the vehicle was hired for that purpose
• Business entertainment unless involved in the ordinary course of the person’s economic activ ity
• Membership or right of entry for any person in a club, association or society of a sporting, social or recreational nature
Examples of items for which input tax is deductible (if related to a taxable business use)
• Purchases of goods for furtherance of economic activity
• Payments for services, such as audit fees
• Advertising
• Consultancy fees
• Accommodation
Partial exemption. A supplier of both taxable and exempt supplies is required to apportion input tax incurred in respect of supplies made by them. A taxable person may claim the whole of input tax directly attributable to taxable supplies but is not allowed to claim input tax directly attribut able to exempt supplies.
VAT directly related to making exempt supplies is not recoverable. A taxable person that makes both exempt and taxable supplies cannot recover input tax in full. This situation is referred to as “partial exemption.”
Under the Tanzanian VAT law, there is only one method for calculating the amount of credit recoverable for input tax purposes if a taxable person supplies both taxable and exempt goods, services or immovable property.
The following are the bases of recovery of input tax:
• If taxable supplies are greater than 90% of total supplies, credit is allowed for all of the input tax
• If taxable supplies are less than 10% of total supplies, credit is not allowed for any of the input tax
• In all other cases, there will be partial recovery of the input tax
Approval from the tax authorities is not required to use the partial exemption standard method in Tanzania. Special methods are not allowed in Tanzania.
Capital goods. Capital goods are defined in Tanzania as goods for use in the person’s economic activity that have a useful economic life of at least one year and are neither consumables/raw material nor imported for the principal purpose of resale.
Input tax credit for capital goods is only allowed where a person incurs input tax on capital goods for purposes of making taxable supplies only. Input tax incurred for purposes of making exempt supplies is not recoverable.
Where a person incurs input tax on capital goods partly for the purpose of making taxable supplies (that is input tax incurred for the purpose of making both taxable and exempt supplies), a person will be required to apportion the part of the input tax that relates to taxable supplies in accordance with the formula provided under the law and claim the credit thereof. The claim for input tax credit is available within six months from the date of the fiscal receipt.
Where capital goods are imported, a taxable person may apply for VAT deferment, provided that the VAT payable on each unit of the capital goods should be at least TZS10 million. Once the application is approved, VAT on imported capital goods will not be payable. Unless revoked, the deferment lasts for the period of 10 years from the date of approval. Capital goods for which the VAT deferment may be applied are goods classifiable under Chapters 84, 85 and 90 of Annex 1 to the Protocol on the Establishment of the East African Community Customs Union.
The basis for input tax calculation for local supplies shall be the cost of the supply while for imports the base is the sum of costs, insurance, freight, import duty and other duties charged on importation (such as railway development levy and customs processing fee).
Refunds. A taxable person may claim a refund where the excess of input tax over output tax has been carried forward for more than six months and is no less than TZS100,000. The Commissioner-General of the Tanzania Revenue Authority must make a written refund decision within 90 days after the filing of a VAT refund claim. The refund decision shall state the amount of refund allowed and the period during which the refund shall be made. If excess credits arise in successive periods, the taxable person may apply to the commissioner for refunds to be made monthly.
Each VAT refund claim filed with the commissioner must be approved and supported by a cer tificate of genuineness issued by an auditor registered with the National Board of Accountants and Auditors (NBAA).
Repayments are made if the taxable person qualifies for a refund and has filed all VAT returns. The filing of VAT refund claims can be made within a period of three years after the VAT return is submitted.
Nonprofit organizations are no longer eligible to obtain a refund of input tax credit incurred on the acquisition or importation of taxable goods and services.
Pre-registration costs. A decreasing adjustment is allowed for input tax incurred on goods possessed by a taxable person that were purchased or imported within six months before registration. The goods must have been acquired in the course of economic activity and for the purpose of resale.
The Commissioner must be notified in writing about the adjustment and the taxable person must make the decreasing adjustment in any of the first three tax periods after registration.
Bad debts. Where all or part of the amount payable to the supplier for a taxable supply has been overdue for more than 18 months and the supplier has, in its books of account, written off the amount unpaid as a bad debt, the supplier shall be allowed a decreasing adjustment equal to the amount that remains unpaid after the tax period.
For a decreasing adjustment to be applicable, both conditions must be met that the amount unpaid must be overdue for more than 18 months and the supplier must have written off the amount from the books of account.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Tanzania.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Tanzania is not recoverable.
H. Invoicing
VAT invoices. A supplier of taxable goods and services must issue a fiscal receipt to the pur chaser at the time of supply.
A tax invoice must be fiscalized (i.e., issued through an electronic fiscal device purchased from a supplier designated by the Commissioner), indicate the date, details of the supplier [name, address, taxable person identification number (TIN), VAT registration number (VRN)], descrip tion of services or goods supplied, consideration payable, and if the consideration is greater than TZS100,000, it must include the details of the buyer [i.e., name, address, TIN and VRN]). It must also contain features (barcodes) that will enable automatic verification by the electronic financial data management system.
A tax invoice that is short of the requirements shall not be used to support a claim for input tax or any refund claim.
Periodic statements. Financial service providers are required to issue periodic statements to their customers for supplies made each month. The periodic statement must be issued within 10 days following the end of the month to which the tax period relates. The periodic statements are treated as tax invoices.
A periodic statement that is short of the requirements must not be used to support a claim for input tax or any refund claim.
Credit notes. Credit notes and adjustment notes may be used to reduce the VAT charged on sup plies of goods or services. Adjustment notes must show the same information as fiscal receipts and the nature of or reason for the adjustment.
Electronic invoicing. There are no specified rules with regards to electronic invoicing or managing digital copies of invoices. As such, most taxable persons use paper (fiscal) invoices as required by the law.
Simplified VAT invoices. Simplified VAT invoicing is not allowed in Tanzania. As such, full VAT invoices are required.
Self-billing. Self-billing is not allowed in Tanzania.
Proof of exports. Goods exported from Tanzania are zero-rated. However, to qualify for zero rating, exports must be supported by evidence that proves the goods left Tanzania. Suitable evidence includes the following documents:
• A sales invoice
• A bill of lading, road manifest or airway bill
• Export permit
• In addition to the above, any other evidence requested by the commissioner
Foreign currency invoices. Foreign currency invoices are treated in the same manner as invoices in the domestic currency, which is the Tanzanian shilling (TZS). The tax authorities do not require the use of a standard exchange rate to convert the value of foreign invoices into TZS. In practice, the tax authorities accept the rate used by the taxable person if the rate is within the range of prevailing market exchange rates or if the exchange rates provided by the Central Bank of Tanzania.
Supplies to nontaxable persons. It is a mandatory obligation for suppliers to use an electronic fiscal device to issue invoices (i.e., fiscal receipts) for all supplies made irrespective of whether the customer is a taxable person or not. Noncompliance with the requirement to issue invoices through an electronic fiscal device is subject to penalties.
Records. A taxable person is required to maintain records of all accounts, documents, tax returns, as well as other records that are required to be maintained under other tax laws, including but not limited to:
• Tax invoices and adjustment notes issued and received by the person
• Customs documentation relating to imports and exports of goods by the person
• Records relating to supplies of imported services to the person, whether or not those supplies were taxable supplies
• A VAT account that records, for each tax period, all the output tax payable by the person in that period, or the input tax credit the person is allowed in that period, and all the increasing and decreasing adjustments that the person is required or entitled to make in that period
• Records showing the deposit of amounts paid to the Commissioner General under the VAT Act
There are no restrictions as to the location where a taxable person can keep and maintain records. Documents can be maintained outside or inside Tanzania, provided they can easily be accessible once requested by the TRA. However, the Finance Act 2021 outlined that every taxable or liable
person that maintains documents in electronic form must maintain a primary data server in Tanzania. A “primary data server” is defined as a server that stores data that is created or col lected by a taxable or liable person in the ordinary course of business. The abovementioned server must be accessible by the Commissioner General for the purpose of tax administration in the manner and time prescribed under the Tax Administration Act 2015. This change is due to take effect from 1 July 2022.
Record retention period. A taxable person is required to maintain documents for a period of at least five years from the end of the tax period to which they relate; or until a later date on which the final decision is made in any audit, recovery proceedings, dispute, prosecution or other pro ceedings under the VAT Act relating to that tax period.
Electronic archiving. The records can be archived in whichever method that is convenient to the business, either electronically or paper. There is no limitation on the methods of document reten tion.
I. Returns and payment
Periodic returns. The VAT period is one month. Returns must be filed within 20 days after the end of the tax period. A nil return must be filed if no VAT is payable (either because the taxable person has made no supplies or because input tax exceeds output tax in the period). If the normal submission date falls on a public holiday or a weekend, the VAT return must be submitted on the next working day after that day.
An electronic document is considered filed by a person and received by the commissioner when a document registration number is created using the person’s authentication code.
The due date for filing the return is on the 20th day of the month after the end of the period to which the return relates. Where the 20th days falls in a weekend or public holiday, the return may be filed on the subsequent working day.
Periodic payments. Payment of VAT is due in full on the same date as the submission, i.e., within 20 days after the end of the tax period. Payments can be made online through a TRA revenue gateway system.
Electronic filing. Electronic filing is mandatory in Tanzania for all taxable persons. Taxable per sons are required to file monthly VAT returns by using the TRA web-based system. Daily reports (z-reports) are filed electronically to record all transactions.
On 3 February 2022, the TRA issued a public notice on the deployment of an VAT e-filing system that will be rolled out on 1 March 2022. The upgrade aims to simplify the filing processes to improve taxable persons’ filing of VAT returns. The new e-filing system does not automatically capture any carried forward credits for the period of February 2022, and as such, any taxable persons with carryforward input tax credits up to February 2022 are required to apply for a refund or notify the respective TRA office of their position for audit or verification of the credit amount.
Payments on account. Payments on account are not required in Tanzania.
Special schemes. No special schemes are available in Tanzania. Annual returns. Annual returns are not required in Tanzania.
Supplementary filings. No supplementary filings are required in Tanzania. However, a supplier of financial services is required to issue periodic statements to customers that shall be deemed to be tax invoices. The periodic statement must be issued within 10 days following the end of the month to which the tax period relates.
Correcting errors in previous returns. A taxable person may apply to the Commissioner to correct genuine omissions or incorrect declarations made in VAT returns. The application must be made within three years after the end of the relevant tax period. Correction of minor errors where the VAT amount does not exceed TZS1 million is through making an increasing or decreasing adjustment in the VAT return for the tax period in which the error is discovered.
Digital tax administration. Daily reports. Daily reports (z-reports) issued by an electronic fiscal device) are submitted electronically to the TRA to record all transactions. The are no exemptions as to issuance of daily z-reports. All taxable persons with an electronic machine for issuance of tax invoices are required to issue daily z-reports to capture all sales made during a particular day. The reports are to be issued even on days where no sales are made, except for weekends and public holidays. In addition, the reports are electronically submitted to TRA using the electronic machine by keying certain functions on the machine.
J. Penalties
Penalties for late registration. Traders that meet the registration threshold but do not register are liable for a fine of from 100 to 200 currency points (one currency point equals TZS15,000) where failure is made knowingly or recklessly, and a fine of from 50 to 100 currency points in any other case.
Notwithstanding any penalties imposed for late registration, a person is liable to pay interest on the VAT due. In addition, serious failures may lead to criminal proceedings that could result in a custodial sentence.
A taxable person who ceases to be liable for registration must notify the Commissioner in writing within 14 days after ceasing to become liable. Failure to make such notification, where such failure is made knowingly and recklessly punishable by a fine of 100 to 200 currency points.
Penalties for late payment and filings. The late filing of a VAT return or failure to pay tax by the due date is subject to a penalty of 2.5% of the amount of tax assessable with respect to the tax return less tax paid by the start of the period or 15 currency points, whichever is higher. The penalty is payable for each month or partial month for which the failure continues.
Penalties for errors. A person is liable for penalty upon making a false or misleading statement. The penalty is where the statement or omission is made without reasonable excuse, 50% of the tax shortfall or where the statement or omission is made knowingly or recklessly, 75% of the tax shortfall.
In case of second or subsequent errors or omission, the penalty will be increased by 10%. Where a taxable person makes a voluntary disclosure, a penalty will be reduced by 10%.
Failure by a taxable person to notify the Commissioner for any changes to its VAT registration details/status may attract a penalty. Where such failure is made knowingly and recklessly, the same is punishable by a fine of 100 to 200 currency points. In any other case, the penalty ranges from 50 to 100 currency points. Serious failures may lead to criminal proceedings that could result in a custodial sentence.
Penalties for fraud. The penalties for fraud are the same as those for penalties for errors, as out lined above.
Personal liability for company officers. A manager of a company that fails to pay tax on time is jointly and severally liable with the company for payment of the tax, if the person is a manager or was a manager of the entity at the time the default occurred. The liability does not extend to a manager who exercised a degree of care, diligence and skill that would have been exercised to prevent the fault.
A manager includes a director, persons who participate in senior management decisions of the entity, partner, trustee, as well as any other person whose directions and instructions affects an entity.
Statute of limitations. The statute of limitations in Tanzania is five years. The time limit for the tax authority to review a taxable person’s information and issue a tax assessment is five years from the due date of filing the tax return. However, the law allows the tax authority to go beyond the five-year limit in cases of fraud, neglect or omission by the taxable person. A taxable person may, no later than three years after the end of the calendar month to which a return relates, request the Commissioner General to amend the return for purposes of correcting any genuine omissions, errors or incorrect declarations made in the return.