Taxation in Tanzania: A Comprehensive Guide

In Tanzania, the tax system is governed by the Tanzania Revenue Authority (TRA), which is responsible for collecting taxes on behalf of the government. The TRA is headquartered in Dar es Salaam.

Tanzania has a relatively straightforward tax system, with three main types of taxes: income tax, value-added tax (VAT), and withholding tax. Income tax is levied on individuals and businesses, while VAT is a consumption tax charged on goods and services. Withholding tax is a tax deducted at source by employers or payers.

The tax year in Tanzania runs from July 1 to June 30, and taxpayers are required to submit their tax returns by the end of September each year. Failure to submit tax returns on time can result in penalties and fines.

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Tanzania's tax system has a long history that dates back to the early 20th century when the British introduced the poll tax. The country has periodically reformed its tax systems, with significant changes made post-colonial era.

One of the earliest reforms was the introduction of sales tax in 1969. This was followed by the enactment of new income tax legislation in 1973. The tax legislation was later amended to revise the tax bases and rates.

The tax system underwent further changes in the late 1970s and early 1980s, with the abolition of some excise duty in 1979 and export duty in 1985/86. However, excise duty was re-introduced in 1989.

In recognition of the poor functioning of the tax system, the Government appointed a Tax Commission in October 1989. The Commission's primary task was to study and review the central and local government tax system and its administration.

Tanzania's tax regime is relatively straightforward, with two main types of taxes: direct and indirect taxes. Direct taxes are levied on individuals and businesses, while indirect taxes are passed on to consumers through the prices of goods and services.

Tanzania's tax system is divided into these two categories, making it easy to understand and navigate.

Direct taxes include income tax, which is levied on individuals and businesses, and property tax, which is levied on property owners.

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In Tanzania, the current tax regime is relatively straightforward. There are two main types of taxes: direct and indirect taxes.

Direct taxes are levied on individuals and businesses, and are typically paid directly to the government. Indirect taxes, on the other hand, are imposed on goods and services, and are usually passed on to the consumer.

Direct taxes are classified as such because the legal incidence of the tax falls directly on the taxpayer, whereas indirect taxes are classified as such because the effective incidence of the tax falls on the final consumer.

Transfer Pricing is a complex area of taxation that can have significant implications for businesses.

In the context of international trade, Transfer Pricing refers to the process of pricing transactions between related entities, such as parent and subsidiary companies.

The main goal of Transfer Pricing is to ensure that transactions between related entities are priced at arm's length, meaning that they are based on what a third-party would pay for the same goods or services.

Arm's length pricing is crucial to prevent tax avoidance and ensure that taxes are paid in the country where the economic activity takes place.

In the article, it was mentioned that the OECD has developed guidelines for Transfer Pricing to ensure consistency and fairness across countries.

The OECD guidelines recommend that companies use a transactional net margin method to determine arm's length pricing.

This method involves analyzing the net profit margin of similar transactions between unrelated parties and applying it to the transaction between related entities.

By following these guidelines, companies can ensure that their Transfer Pricing practices are compliant with international tax laws and regulations.

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Direct taxes are levied directly on people's income from employment, business or ownership of property and an investment.

The impact and incidence of direct taxes falls on the same person, meaning it cannot be shifted to another person.

Direct taxes in Tanzania include Corporate tax, Pay-as-you-earn tax (PAYE) and withholding taxes. These taxes are examples of direct taxes that are levied on individuals and businesses.

Direct taxes refer to taxes on what you earn and what you own. This is in contrast to indirect taxes, which refer to what you spend.

Direct taxes are a key source of revenue for the Tanzanian government.

In Tanzania, corporations are required to pay tax on their profits. This tax is known as Corporation Tax, and it's paid from corporate profits.

Companies have to prepare final accounts, which must be approved by authorized Auditors and Accountants. These accounts are submitted to the Tanzania Revenue Authority (TRA) on the prescribed accounting date.

All companies, whether resident or non-resident, are required to file an estimate of income within three months after the start of their accounting year. This is a crucial step in the tax filing process.

The corporation tax rate in Tanzania is 30%, unless the company qualifies for a lower rate. For example, new assemblers of vehicles, tractors, and fishing boats pay 10% for the first five years from commencement of operation.

Income of companies newly listed on the Dar es Salaam Stock Exchange (DSE) is taxed at 25% for three consecutive years. This is a great incentive for companies to list on the stock exchange.

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Here are the corporate tax rates in Tanzania:

Companies with perpetual unrelieved tax losses for three consecutive years, including the year of income, pay 0.5% of their turnover.

Indirect taxes in Tanzania are taxes based on consumption. Examples of such taxes include Import Duty, Excise Duty, and Value Added Tax (VAT).

These taxes are not directly paid by the consumer, but rather by the trader who acts as a collection agent of the government. The final consumer of goods or services eventually pays the tax.

Value Added Tax (VAT) is one type of indirect tax in Tanzania, which is also applicable in other countries. Excise Duty is another type of indirect tax, which is charged on the sale, use, manufacture, or importation of specific products and services.

Excise Duty can be charged in both specific and ad valorem rates, and the liability to pay it falls on either the purchaser or the seller depending on the nature of the item supplied. In Tanzania, excise duty also applies to fees charged by financial institutions and telecommunication service providers.

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In Tanzania, the filing of the excise duty return and payment of the duty are both due on the 30th of the month following that to which it relates. A nil excise duty return is filed where there are no dutiable transactions during the period.

Customs Duty is another type of indirect tax in Tanzania, which is not explicitly mentioned in these examples. However, it is mentioned in Example 2 as an indirect tax in Tanzania, which includes Value Added Tax (VAT), Excise Duty, and Customs Duty.

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Taxpayers in Tanzania are required to file their return of income each year by 30 June.

Filing the return on time and accurately is crucial to avoid penalties and comply with Tanzania's tax regulations.

A taxpayer is expected to self-assess and submit their potential income for the year ahead on or before 31 March.

They are expected to pay the tax they have self-assessed by four equal instalments on or before 31 March, 30 June, 30 September, and 31 December.

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Every month an employer is expected to withhold tax from the taxable salaries paid to the employees.

A return related to this tax should be filed on or before the 7th day of the following month.

Filing of the return is obligatory irrespective of the fact that the taxpayer has any tax liability or not.

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In Tanzania, tax registration is a must for businesses with a taxable turnover exceeding TSh 200 million per annum or 100 million in six months. This includes traders, businesses, and professional service providers such as accountants, lawyers, and engineers.

To register, you'll need to submit an application to the Commissioner for Domestic Revenue within 30 days of becoming liable. This can be done online or manually, and the TRA will inspect your business site before approving your registration.

Once registered, you'll need to submit monthly VAT returns, either with payment, repayment, or a nil return, before the 20th of the following month. Some businesses are exempt from paying VAT on certain supplies or imports, and some goods and services are exempt altogether.

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Tanzania has double tax treaties with nine countries that may provide for a lower rate of withholding tax (WHT).

These countries include Canada, Denmark, Finland, India, Italy, Norway, South Africa, Sweden, and Zambia.

Tanzania has also signed Double Taxation Agreements with Oman in 2024, and the Czech Republic in 2025, although they are yet to be ratified.

You can access full text of tax treaties between Tanzania and other territories through the IBFD database, which provides current and historic tax rates, detailed tax guides, and tax treaties for hundreds of jurisdictions around the world.

The database also includes tables summarising direct taxation of companies and individuals, VAT or GST, and other taxes.

Here are some key tax rates under the treaties in force:

Note: These tax rates are subject to change and may not be up-to-date. It's always best to consult the IBFD database or a tax professional for the most current information.

Tanzania has a relatively straightforward tax system, but there are some special considerations to keep in mind.

Tanzanian residents are taxed on their worldwide income, while non-residents are taxed only on income sourced in Tanzania.

The tax year in Tanzania runs from January 1st to December 31st, and taxpayers are required to file their tax returns by June 30th of the following year.

Tanzania has a range of tax incentives to encourage investment in key sectors, including manufacturing, agriculture, and tourism.

The Tax Administration in Tanzania is governed by the Tax Administration Act, 2015 (TAA, 2015) and tax administration regulations.

The Tanzania Revenue Authority (TRA) is the government agency responsible for administering and collecting taxes in the country.

A taxpayer is responsible for ensuring compliance with tax laws and regulations by properly presenting their tax returns and paying correct taxes.

Approved tax consultants can assist or represent taxpayers in tax-related matters, but they must have a certificate of registration and approval from the Commissioner General.

The revenue authority has the power to audit tax affairs up to five years after the lapse of the tax period, except in cases of suspected fraud.

A trust is considered a resident trust if a trustee is a resident person at any time during the year of income.

Taxpayers can file an objection or appeal against a tax decision, but they have the burden of proof to counter the decision.

Punishments for non-compliance with tax laws and regulations include fines, imprisonment, penalties, or interests, which vary depending on the nature of the offense.

The penalty for late filing of tax returns or late payment of taxes is the higher of 2.5% of the tax liability and TZS 300,000 (TZS 100,000 for individuals), per month or part of the month.

Interest on late payment of tax continues to accrue at a statutory rate per month or part of the month.

Taxpayers who have made an overpayment of tax can apply to the Commissioner General for a refund, which will be offset against other taxes or repaid to the person.

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The Tanzania Revenue Authority's online gateway portal allows taxpayers to manage their tax affairs, including filing tax returns and generating transfer forms to initiate tax payments.

Taxpayers can obtain access to e-filing through online self-registration using their tax identification number (TIN).

Every person who becomes potentially liable to tax must apply for a TIN within 15 days of commencing business, investment, or employment.

A person can only have one TIN, which is connected to their National Identification Number (NIDA).

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Tax on employment and income is a crucial aspect of taxation in Tanzania. Every month, an employer is expected to withhold tax from the taxable salaries paid to employees, and a return related to this tax should be filed on or before the 7th day of the following month.

The tax rates in Tanzania are progressive, with different bands applying to different income levels. For resident individuals, the tax rates range from 0% to 30%, depending on the amount of income earned.

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Here's a breakdown of the tax rates in Tanzania:

Employees do not file tax returns, but employers are required to submit a monthly statement indicating the names of employees, total employment income per employee, and income tax withheld per employee.

Expatriates working in Tanzania are subject to the same personal income tax rates as residents, but they are taxed only on their Tanzanian-sourced income.

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In Tanzania, companies and entities must pay corporation tax from their corporate profits. This tax is paid in four installments, with the final tax return due six months after the accounting period.

The corporation tax rate is 30%, except for certain types of companies that qualify for lower rates. For example, new assemblers of vehicles, tractors, and fishing boats pay 10% for the first five years from commencement of operation.

Companies newly listed on the Dar es Salaam Stock Exchange (DSE) pay 25% for three consecutive years. New manufacturers of pharmaceutical or leather products with performance agreements with Tanzania's government pay 20% for the first five years from operations commencement.

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Here's a breakdown of the different corporate tax rates in Tanzania:

Companies in Tanzania are required to prepare final accounts, which must be approved by authorized Auditors and Accountants, and submitted to TRA on the prescribed accounting date.

The corporation tax rate is 30% for most companies, but there are some exceptions. For instance, companies newly listed on the Dar es Salaam Stock Exchange (DSE) are taxed at 25% for three consecutive years.

Companies that are newly listed on the DSE with at least 30% of its equity ownership issued to the public are eligible for a lower corporate tax rate.

Income of companies newly listed on the DSE is taxed at 25% for three consecutive years, making it a great opportunity for businesses to save on taxes.

New assemblers of vehicles, tractors, and fishing boats can enjoy a reduced corporate tax rate of 10% for the first five years from the commencement of operations.

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New manufacturers of pharmaceutical or leather products having performance agreements with Tanzania’s government are taxed at 20% for the first five years from operations commencement.

Here are the different corporate tax rates for various types of companies in Tanzania:

Businesses that are profit-making and in circumstances where maintaining documents is a challenge can benefit from the presumptive tax regime, which is a more favorable option.

A business's tax liability can be affected by its branch and subsidiary structures. In the United States, a branch is considered a permanent establishment of the parent company and is taxed on its worldwide income.

A subsidiary, on the other hand, is a separate entity from the parent company and is taxed on its own income. This means that a subsidiary can be taxed on income that is not attributed to the parent company.

A parent company can have multiple subsidiaries, but a subsidiary can only have one parent company. This is an important distinction when it comes to tax liability and reporting requirements.

In general, a subsidiary is considered a separate taxpayer from its parent company and is required to file its own tax return. However, the parent company may be able to claim a credit for taxes paid by the subsidiary.

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In Tanzania, Value Added Tax (VAT) is a significant tax that businesses need to understand and comply with. VAT registration is mandatory for businesses with an annual turnover exceeding TZS 200 million.

Taxable supplies in Tanzania include those made at a standard rate of 18% and those made at a zero rate of 0%. This means that most businesses will need to charge VAT on their sales, unless they are exempt.

Money is not considered a form of supply, which is good news for businesses that deal with large cash transactions.

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In Tanzania, Value Added Tax (VAT) has two classes: taxable and exempt supply.

Taxable supplies include supplies made at a standard rate of 18% and supplies made at a zero rate of 0%. Most supplies are considered taxable.

Businesses with an annual turnover exceeding TZS 200 million must register for VAT, as well as government entities and professional service providers.

Registration is also mandatory for certain other entities engaged in taxable economic activities, regardless of turnover.

To register for VAT, businesses must fill out an application form online or manually and undergo a site inspection by the Commissioner for Domestic Revenue.

Once registered, taxpayers must submit monthly VAT returns, which can be with payment, repayment, or a nil return.

The deadline for submitting VAT returns is the 20th of the month following the month of business.

Taxpayers who have made no transactions during the reporting period must file a nil VAT return.

VAT becomes payable when the net effect between VAT on sales is higher than VAT on purchases, and a receivable if the vice-versa occurs.

Customs duties are a type of tax levied on imported goods.

In Tanzania, customs duties are applicable upon the importation of goods, but favourable rates and rules apply when importing from East African Community (EAC) member countries, as long as the rules of Origin criteria are met.

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Customs duty rates vary depending on the nature of the goods being imported. For instance, raw materials, agricultural inputs, pharmaceuticals, and medicines are exempt from customs duty, which is a big relief for businesses and individuals importing these essential goods.

Here's a breakdown of customs duty rates in Tanzania:

In Tanzania, you'll also encounter other levies that are subject to tax. The Value Added Tax (VAT) is a type of consumption tax that's levied on goods and services.

The VAT rate in Tanzania is 18% for most goods and services, but it's reduced to 8% for certain essential items like food and medicine.

The VAT is a significant source of revenue for the Tanzanian government, and it's collected by the Tanzania Revenue Authority.

The income tax is another type of tax that's levied on individuals and businesses in Tanzania. The tax is progressive, meaning that higher-income individuals pay a higher tax rate.

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The tax rates for individuals in Tanzania range from 5% to 30%, depending on their income level. For example, individuals with an annual income of up to TZS 3 million pay a flat rate of 5%, while those with an annual income above TZS 10 million pay a rate of 30%.

Tanzania also has a corporate tax rate of 30% for businesses, which is a flat rate that applies to all companies.

In Tanzania, stamp duty is a tax levied on various instruments, with lease agreements being one of the most common.

The lessee is responsible for paying stamp duty on lease agreements, which is 1% of the annual value of the lease agreement for the duration of the lease.

For agreements or memoranda of agreement, the stamp duty is a fixed amount of TZS 500/=, with exemptions considered on a case-by-case basis.

This means that if you're entering into a lease agreement, you'll need to factor in the 1% stamp duty on the annual value of the agreement, and if you're signing an agreement or memorandum of agreement, you'll pay a flat fee of TZS 500/=, unless you qualify for an exemption.

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