INVESTING AND DOING BUSINESS IN TANZANIA 2:
Paying Tax.
Courtesy of:
Tanzania Revenue Authority (TRA) is responsible for collecting most taxes in Tanzania. Local government authorities also have mandate to collect some taxes and charges. Taxes are made up of:
- Direct and
- Indirect taxes
Direct taxes mainly refer to taxes on income while indirect taxes are on consumption and international trade.
Tax payment methods are withholding, instalment and assessment.
Generally, every person is required to pay tax on instalment and on assessment.
The withholding method is only relevant to those who are required to withhold tax. These are:
- Employers who make a payment that is to be included in calculating the chargeable income of an employee from the employment;
- Persons paying investment returns (e.g. those paying dividends, interest, natural resource payment, rent or royalty);
- Persons paying service fees and contract payments.
PROCEDURE AND TYPES OF TAXES
Tax registration is done at the TRA tax centre located close to the particular business premises. Taxes are paid at banks.
Taxpayer Identification Number (TIN)
Every taxpayer must register for a Tax Payer Identification Number (TIN) before starting doing business in Tanzania.
Types:
TIN for Individuals
TIN for companies
Value Added Tax (VAT)
All businesses with annual turnover of 40 million Shillings and above must register for Value Added Tax (VAT) and obtain a VAT Registration Number (VRN). [Turnover threshold may change from time to time]. It is mandatory for taxpayers to purchase Electronic Fiscal Devices before they obtain the VAT certificate. Companies collect VAT on behalf of TRA when they sell goods and/or services. Companies are required to submit monthly returns showing the total sales and purchases of the business.
Pay As You Earn (PAYE) Tax
Pay as you earn is an individual tax deducted by the employer from monthly salaries of employees. Employers are required to submit monthly deductions to TRA. In addition employers are required to submit bi-annual tax returns (declarations) showing details of deduction during a six months period.
Income Tax
Income tax is a tax that varies with the income or profits of the taxpayer. TRA categorizes individuals into two groups i.e. Small individual traders who are under the presumptive tax system and medium individual traders whose taxes are based on their annual profit determined by their audited accounts. Presumptive tax system is a tax system where individuals are taxed based on their annual turnover and are not obliged to maintain audited accounts. However, individuals may opt not to apply the system and prepare audited accounts and pay tax based on profits.
Individuals who prepare audited accounts is a group of taxpayers whose annual turnover is above TSHS 20,000,000. Taxpayers under this group are taxed based on their annual profits.
Withholding Tax
The following categories are required to withhold tax:
- Persons paying investment returns (e.g. those paying dividends, interest, natural resource payment, rent or royalty)
- Persons paying service fees and contract payments.
Corporation Tax
A Corporation may have income from business and income from investment. The total income of the corporation is taxed at 30%.
Stamp Duty
Authenticating certain legal instruments requires the payment of stamp duty. Rates applicable and types of instruments chargeable are available on Stamp Duty Act 2006.
Property Tax
Property tax is levied at a flat rate on the property value by municipal or city councils. Applicable rate varies according to size, use and location of the property.