Know how on value added tax (VAT) in Tanzania

Updated on July 20, 2022

1. WHAT IS VALUE ADDED TAX (VAT)?

In the case of VAT, the value of a transaction is taxed, not its profit. At each stage of the production process, a tax is levied on the taxable supply of products and services.

Taxes collected on the sale of things are referred to as “output tax,” but taxes levied on the purchase of goods, including imports, are referred to as “input tax.”

2. IS VAT A UNION MATTER?

According to the Constitution of the United Republic of Tanzania, VAT is not a union affair, and so Tanzania Mainland and Zanzibar are recognized as two separate jurisdictions for the purpose of charging, collecting, and paying VAT.

3. WHO IS RESPONSIBLE FOR VAT?

Only VAT-registered individuals are subject to paying VAT, which is levied on both locally produced goods and imported services.

Imports that are subject to VAT must be paid by the importer, regardless of whether the importer is registered for VAT or not.

The supplier must pay VAT if a taxable supply is made in Tanzania’s mainland. VAT should also be paid in cases where imported services are subject to taxable supply.

4. CAN A NON-RESIDENT BE LIABLE FOR VAT?

Yes. A person who does business in Tanzania but does not have an established place of business or who makes a taxable supply and is not a resident of the country may be compelled to account for VAT.

5. HOW CAN A NON-RESIDENT PERSON PAY FOR VAT?

To be subject to VAT, a non-resident must name a value added tax representative in the country’s mainland.

Taxpayers must have a Tax Identification Number (TIN), a statement of declaration of representative, and the ability to handle the VAT affairs of non-residents in order to represent them in VAT matters. A firm or an individual can serve as a representative.

The Commissioner General has the authority to accept a security from a non-resident.

6. WHAT IS THE TAX RATE?

Based on their “add-on” worth, products and services are rated (or incremental value).

Value-added tax is levied at the standard rate of 18 percent on the value of goods and services produced and imported.

However, when items and services are exported, the rate is zero-rated at 0%. Products and services that are used or enjoyed outside of Tanzania are exempt from paying any tax.

7. ON WHAT IS VAT CHARGED?

It focuses on the provision of goods and services made in Tanzania.

In addition to tangible goods and services, the phrase “supply” can also refer to intangibles such as rights, options, and vouchers, as well as the provision of professional services.
In cases where goods are imported for usage in Tanzania Mainland, VAT will be imposed on the imports of those products.

8. IS VAT CHARGED ON ALL KIND OF GOODS AND SERVICES?

No. All goods and services are not subject to VAT.

Agriculture tools, horticultural or forest machinery, dairy equipment, educational materials, medical products and healthcare services, and equipment for natural gas are all exempt from the law’s definition of taxable services.
When a shipment is cleared by customs, it is exempt from VAT.

In order to obtain a VAT refund for locally purchased goods, people who qualify for the exemption must first pay the tax.
bags or personal belongings, products imported by religious organizations for health or education services, and goods imported by non-profit organizations for disaster relief are examples of exempted imports in the case of imported goods

9. WHAT IS THE TIME OF SUPPLY FOR THE PURPOSE OF VAT COLLECTION?

When goods exempt from customs duties arrive in the country, it is presumed that they have been sold. Tanzanian imports must pay VAT whether they are doing it for their own consumption or for the benefit of their business (VAT).

Suppliers must collect VAT when they produce an invoice or receive payment for a supply, whether in full or in part.

For VAT purposes, a piece of equipment is exempt if it is delivered with a monetary note or token still in place.

There are vending machines and meters included in this project’s scope (except pay phones).
The term “period of provision” is used by industry experts to describe a product or service’s life cycle.
Only when a piece of real estate is made available to the buyer can it be termed delivered or made available to a consumer.

10. HOW IS VAT APPLICABLE IN TANZANIA MAINLAND?

When making a sale, the seller is required to keep a record of every transaction and account for VAT at that time.

Additionally, the taxable person must determine the monthly VAT position by reporting the monthly output VAT from all supplies and claiming for the monthly input VAT.

11. WHAT ARE THE REQUIREMENTS FOR VAT REGISTRATION?

A person must register for VAT if their annual threshold exceeds $100 million or their six-month annual threshold exceeds $50 million as of the last day of the previous month.

Professional service providers, government entities or institutions that do business, and an intending trader who wishes to register upon proof of his intention to begin an economic activity, such as contracts, tenders, building plans, business plans, bank financing, or if a person will make taxable supplies after being registered are exempt from the requirement of the threshold being required.

The Commissioner General must receive an application for registration from a person who has met the legal threshold within 30 days of the date of qualification, but an intended trader may submit an application at any time.

12. IS IT POSSIBLE TO REGISTER BRANCHES OR DIVISIONS?

Each branch or division of a single person can only be registered once.

13. WHAT ARE REGISTRATION PROCEDURES?

The Tanzania Revenue Authority conducts a site inspection before approving any registration, either electronically or manually, to ensure that the information supplied on the application form is accurate.

14. WHAT SHOULD BE DONE IN CASE OF CHANGES?

A taxpayer’s personal information is unfettered under the law, including changes to their personal information such as their name, residence, and the sort of business they do If a trader makes any adjustments, they must notify the Commissioner General no later than 14 days from the date of the change.

15. IS IT POSSIBLE FOR A TAXABLE PERSON TO DE-REGISTER?

Yes. This can happen if a registered person stops making taxable supplies permanently. A person who no longer makes taxable supply must file for cancellation of their registration within fourteen days of the date on which they stopped doing so permanently.

Any registered person who does not keep up with their registration requirements will be deregistered.

16. WHAT IS THE EFFECT OF DE-REGISTRATION?

People who have lost their status as a registered person should no longer be honored with documents like tax invoices and adjustment notes. A Value Added Tax Report must be filed, and any taxes that are owed must be paid by this individual following the end of registration.

17. WHAT ARE THE VAT PAYMENT PROCEDURES?

On the last working day of the month after the end of the tax period to which it applies, a taxable person is required to submit a value added return. When a non-taxable individual files their return, they can do so at any time prescribed by the Commissioner General.

The VAT is due on the 20th of the month after the business’s due date for submitting the return and is payable on that day.

Whenever a Saturday, Sunday, or a public holiday falls on a due date for a tax return, the return must be filed or completed on the first working day after that day. You can submit your VAT return for the month after the month in which your firm was active with either a payment, a refund, or nada.

18. IS IT IMPORTANT TO KEEP RECORDS?

Records of all tax invoices and adjustments notes issued and received by the trader in relation to imports and export of goods and services should be kept on file by any taxable person. This includes all accounts, papers, returns, and other records.

Taxable and non-taxable supplies need to be included in the record-keeping requirements.

Input tax credits and output tax payments must be recorded in the trader’s VAT account. An audit, recovery actions, disputes, prosecution, or any other proceeding must be retained and maintained for at least five years from the end of the tax period to which they apply or until a final judgment is made.

19. CAN A PERSON CLAIM BACK VAT?

Yes. If VAT costs are not covered by approved deductions or if the returns for the necessary accounting periods consistently result in credit, VAT refunds will be provided.

20. IS THERE VAT RELIEF?

Yes. Importation or supply of goods and services taxable in nature are exempt from VAT in some cases The EAC Customs Management Act 2004 restricts VAT relief on imported commodities to those that qualify for import duty relief for licensed exploration and prospecting mineral, oil, and gas organizations and mining enterprises. In addition, investors licensed under the Export Processing Zone Act or the Special Economic Zone Act are eligible for VAT exemption.