Introduction:

Withholding tax is the amount of tax retained by one person when making payments to another person in respect of goods supplied or services rendered by the payee. A person receiving or entitled to receive a payment from which income tax is required to be withheld is a withholdee while a person required to withhold income tax from a payment made to a withholdee is referred to as the Withholding Agent.

 

Payment subject to Withholding Tax.

Withholding tax applies to specific payments including payment that is to be included in calculating the chargeable income of an employee from the employment, payment of investment return including dividend, interest, natural resource payment, rent or royalty, payment in respect to service fee and contract payments and payment in respect to supply of goods to the government and its institutions.

 

Statement and Time for payment of tax withheld.

  • Every withholding agent shall pay to the Commissioner within seven days after the end of each calendar month any income tax that has been withheld.

 

Withholding Tax Certificate

Certificates are obtained in the Revenue Gateway System and can be printed by Withholder or withholder as the case may be after making payment.

 

Categories of withholding taxes:

The law has divided withholding taxes in to two major categories namely: -

  • Final withholding taxes
  • Non final withholding taxes

Final withholding taxes are taxes in which the withholdee cannot claim any tax credit when calculating the income tax payable for a year of income.

Non final withholding taxes: are taxes which the withholdee is entitled for a tax credit an amount equal to the tax treated as paid for the year of income in which the amount is derived.

Withholding Tax rates

Description of Payment

Rate for Resident

Rate for Non Resident

(i)Dividends from the  Dar es salaam Stock Exchange  listed corporations

(ii)  Dividend from  resident corporation to another resident corporation where the corporation receiving the dividend holds 25% or more of the shares in the corporation

5%

 

 

5%

5%

 

 

NA

Dividends from other corporations

10%

10%

Interest

10%

10%

Royalties

15%

15%

Other Withholding payments from Investment Returns.

15%

15%

Rental Income

10%

15%

Technical services fees (mining)

5%

15%

Transport (Non-resident operator/ charterer without permanent establishment).

N/A

5%

Insurance Premium

N\A

5%

Natural Resources Payment

15%

15%

Service Fees

5%

15%

Directors Fee (Non full time Directors) 

15%

15%

Commission to agents by service providers on money transfer through mobile phones.

10%

N/A

Payments for goods supplied to   Government and its institutions by any person.

2% of gross payment

N/A