Income tax payable by way of single instalment in the case of realisation of interest in land or buildings is the amount of tax paid once before the Titles are transferred from one person to another. The Registrar of Titles shall not register such a transfer without the production of a certificate from TRA certifying that the single instalment has been paid or is not payable. The seller is required to declare the transfer of interest in land or building by completing form  ITX 204.01.E

(a)      10% of the gain for a resident person

(b)      20% of the gain for a non-resident person

However, the Income Tax Act, provides that an instalment payer shall be entitled to tax credit for a year of income of an   amount equal to the income tax paid by way of single instalment for the year of income

Exemptions

1. a)If the residence has been owned continuously by the individual for three years or more and lived in by the individual continuously or intermittently for a total of three years or more; and the interest was realised for a gain of not more than shillings 15,000,000
2. b)  An interest in land held by an individual that has market value of less than shillings 10,000,000 at the time it is realised and has been used for agricultural purposes for at least two of the three years prior to realisation

(a)      10% of the gain for a resident person

(b)      20% of the gain for a non resident person  

However, the Income Tax Act, provides that an instalment payer shall be entitled to tax credit for a year of income of an   amount equal to the income tax paid by way of single instalment for the year of income

Exemptions 

a)    If the residence has been owned continuously by the individual for three years or more and lived in by the individual continuously or intermittently for a total of three years or more; and the interest was realised for a gain of not more than shillings 15,000,000

b)  An interest in land held by an individual that has  market value of less than shillings 10,000,000 at the time it is realised and has been used for agricultural purposes for at least two of the three years prior to realisation

c) Shares - DSE shares held by a person with shareholding less than 25%

d) Amounts derived from gain on realisation or transfer of mineral rights and mineral information to a partnership entity formed between the Government and an investor, or transfer of free carried interest shares, or transfer of shares to the Government through the Treasury Registrar

Capital gains income is calculated as follows: -

Value of consideration received or accruing as a result of the realization of the interest in land or buildings 

less 

cost of acquisition 

less 

expenditure incurred on any improvement to the asset

 less 

expenditure incurred wholly and exclusively in connection with the realization

These are expenditure incurred wholly and exclusively in connection with the realization of interest in land and building, such as stamp duty, registration charges, legal fees and brokerage
Tax on capital gains in case of companies
Gains derived by companies as single instalment payers is to be finally taxed at corporation tax rate, which is currently 30%

NOTE

Section 90(1) of the Income Tax Act, (Cap. 332), has introduced a new paragraph (b) in order to tax capital gain at a rate of 3% of the incomings or approved value of Land or Buildings, for sellers who do not possess document evidence substantiating the cost of the assets.

What is a security?

A security is a tradable financial asset (investment assets) of any kind. Securities are broadly categorized into: -

• Equity securities (e.g. Ordinary and preference shares)
• Debt securities, (e.g. bonds and debentures)
• Derivative securities, (e.g., forwards, futures, options and swaps).

Taxation of net gains on sale of securities

The net gains on sale of securities is treated as investment income to be included in determining the total income of the person during the year of income   as provided by the Income Tax Act, 2004. The total income of an entity is charged at the rate of 30% while the resident individual tax rates will be applied on the total income of resident individuals.

The total income is the sum of investment income, business income and employment income

What are the net gains from sale of investment assets?

Gain from the sale of investment asset is the excess of market value over the cost of asset

The net gain from the sale of investments assets is the sum of all gains from sale of investment assets reduced by: -

• Total of all losses from sale of investment assets
• Any unrelieved losses during the year and
• Any unrelieved losses for the previous year

What is the cost of asset (Security)?

The cost of asset is the sum of expenditure incurred in acquiring the asset including 

 Exempted Securities

The Shares listed on the Dar es Salaam Stock Exchange provided that the shares are owned by a resident or a non-resident person who controls less than 25% of the controlling shares of the company

 Limits on investment losses

If a person makes a loss from any investment, it can offset

Income from other investments and it cannot offset income from any business.

Limits on capital gains

If a person makes a loss when selling an investment asset, it can offset only gains from selling other investment assets.

Foreign investment losses can offset only foreign investment income, losses on the sale of investment assets can offset only against the sale of foreign investment assets.