Tax Rules Of Tanzania
Basically Taxation in Tanzania is in form two types of taxes. Each type is classified according to the legal and effective incidence to the final payer. These two types are direct and indirect taxes.
These are taxes levied directly on people’s income from employment, business or ownership of property and an investment. The impact and incidence of the tax falls on the same person i.e. incidence cannot be shifted to another person e.g. Corporate tax, Pay As You Earn (PAYE) and withholding taxes.
This is a tax, which is paid from corporate profits. Companies or entities have to prepare final accounts, which must be approved by authorized Auditors, and Accountants recognized by both NBAA and TRA. These accounts are submitted to TRA on the prescribed accounting date. All companies whether resident or non-resident are required by the Income Tax laws to file an estimate of income within three months after the start of its accounting year. The firm is supposed to pay tax based on four installments. Six months after the accounting period, the firm must file a final tax return to TRA. The current corporation tax rate is 30%.
INDIVIDUAL INCOME TAX
Individuals include sole traders and salaried people who are taxed at progressive individual income tax rate, which varies from the lowest marginal rate of 11% to the top marginal rate of 30%. However, for a non-resident individual the applicable rate is 20%, which is charged on the total income. The table below shows the current resident individuals tax rates.
These are taxes, which are based on consumption. Examples of such taxes are like Import Duty, Excise Duty, and Value Added Tax (VAT), etc. By definition the legal incidence of the tax falls on the trader who acts as a collection agent of the government while the effective incidence falls on the final consumer of goods or services who eventually pays the tax.
VALUE ADDED TAX (VAT)
Value Added Tax is a consumption tax charged by VAT registered traders on all taxable goods and services at a standard rate of 18%. The VAT is a multistage tax levied at each stage of production and distribution up to the retail stage. The tax is also levied on taxable imports made by persons whether or not registered for VAT. All exports are renovated (0%). All traders or businesses whose taxable turnover exceeds Shs. 40 millions per annum or Shs. 10,000,000 in a period of three (3) consecutive months are obliged to apply for registration to the Commissioner for Domestic Revenue within thirty (30) days of becoming liable to make such application.Application for VAT registration is done by filling the application form online or manually and TRA inspect the business site before approving any registration. One registered, the taxpayer is required to submit monthly VAT returns either with payment, repayment or a nil return to the month following the month of business.
Some persons and institutions are relieved from the payment of VAT on supplies or on importation of taxable goods and services, while some goods services are specifically exempted from VAT.