Registration for VAT is mandatory to every person upon attaining the registration threshold of 200 million in the period of twelve months and above or the person’s turnover is equal to or greater than one half of the registration threshold 100 million in the period of six months ending at the end of the previous month. This condition applies to all types of registration except for professional service providers, Government entity or institution which carries on economic activity and an intending traders after fulfilment of sufficient evidence such as contracts, tenders, building plans, business plans and bank financing.

A person who is required to be registered shall make an application to Commissioner General within thirty days (30) but an intending trader may make such application at any time.

If the Commissioner General is satisfied that a person is required to be registered with VAT and there is a good reason including protection of Government revenue but has not applied for it, shall register and notify such person not later than 14 days after the day on which registration is done regardless of the turnover.

Registration process.

Application for VAT registration is done through Taxpayer Portal (TRA Online Services) on TRA Website after the applicant has logged in to the Portal.

VAT Registration Certificate.

Upon registration, a taxpayer shall be issued with a Certificate of Registration stating the name and principal place of business of the taxable person, the date on which the registration takes effect, his Taxpayer Identification Number and his VAT registration number.

A person shall show his Taxpayer Identification Number and his VAT registration number in any return, notice of appeal or other documents used for official VAT purposes and display his certificate of registration in a noticeable position at his principal place of business.

What is a VAT return?

A VAT return is a form used to submit tax payments to TRA. Currently VAT registered traders are supposed to submit returns to TRA online through taxpayer portal.

VAT is payable on 20^th day of the following month of the business that is a due date of submitting the return. 

What are the applicable rates under VAT?

VAT is chargeable on the taxable supplies of goods and services. The rates are as follows: -

Each registered person in the chain between the first supplier and the final purchaser or user is charged tax on taxable supplies made to him (input tax) and charges tax on taxable supplies made by him (output tax).  He pays to the TRA the excess of output tax over input tax, or recovers the excess of input tax over output tax from the Authority. The broad effect of the scheme is that businesses are not affected by VAT except in so far as they are required to administer it, and the burden of the tax falls to the final consumer.

In the case of an import, the person paid, the value added tax imposed on the import under this Act or input tax paid under the value added tax law applicable in Tanzania Zanzibar, where the respective goods are transferred to Mainland Tanzania shall be allowed to claim input tax credit.

What is a VAT refund?

Money paid back to the trader. A taxable person will be entitled to a refund of VAT when in a particular prescribed accounting period when his tax liabilities are not exhausted by allowable deductions or where its returns for prescribed accounting periods regularly result in excess credits. The refund once is processed is paid to the taxpayer through Interbank Settlement System (TISS) or through his or her bank account.

A taxable person may apply for a refund where a person has over paid a net amount payable for a tax period, the application is done physically where the taxpayer should be accompanied with,

1. Certificate of genuineness

The certificate of genuineness referred to under VAT regulation shall be issued by an auditor who has been registered by National Board of Accountants and Auditors and who is registered as a tax consultant with Tanzania Revenue Authority

        2. Computation of the refund amount;

• Checklist for the applicant’s value added tax repayment.
• And any other information as Commissioner General may require.

Upon receipt of the refund claim the Commissioner General make decision on the application on the basis of the information provided without under taken an audit or investigation, and shall within 90 days of it receipt makes decision on the application and informs the applicant on the amount to be refunded, and the period upon which such a refund shall be made.

VAT REFUND DIPLOMATS AND INTERNATIONAL BODIES

Application for refund to diplomats and international bodies shall be made physically.For the purpose of justifying diplomatic status or status of an international body; the application should be endorsed by the Ministry responsible for foreign affairs and international cooperation.

Be accompanied by tax invoices related to the taxable supplies on which refunds claim is made.

Can the VAT refund be offset against the unpaid tax?

Yes.  Any refund may be offset against other taxes, penalties and interest owing to Tanzania Revenue Authority by the taxable person, but the Commissioner General shall inform the taxable person in writing.

Is interest payable on the delayed refunds?

Yes.  Refunds must be made within 30 days after the due date for lodgement of the return for the last prescribed accounting period in the half year or receipt of the last outstanding tax return due for any prescribed accounting period falling within that half year, whichever is later unless the Commissioner believes there is a revenue risk. For regularly repayment traders, refunds will be made within 90 days after the due date for lodging the return for the prescribed accounting period, or the date of receipt of the return, whichever is later.

Where the refund is not made within this period, interest is paid to the taxable person at the commercial bank lending rate determined by the Central Bank

What are the requirement for a VAT refund be effected?

A VAT refund, cannot be affected unless the applicant has submitted among others the following documents and or attachments:

• Certificate of genuineness issued by an auditor who has been registered by NBAA and who is registered as a tax consultant with TRA.
• A checklist of details of issues regarding the refund application must be properly filled and completed by the applicant.
• For a case of Regularly Repayment traders the following documents are vital to be submitted
• Single Bill of Entry
• Bill of Lading
• Airway bill
• Road consignment note
• Landing certificate
• EFDs receipts/invoices
• Brief working from the auditor as to how the claimed amount has been arrived at including the summary of purchases and sales

NOTE: Input Tax shall not be deducted /credited after six months from the date of the tax invoice/EFDs receipts.

VAT relief to Investor under EPZ, SEZ and Mining, Oil & Gas Companies 
An investor licensed under export processing or special economic zone Acts is entitled to VAT special relief. Mining, oil & gas companies are entitled to VAT relief provided that the Company has a binding agreement with the Government which provides for VAT relief. In order to enjoy such both Investors and entitled mining companies are obliged to fill form: ITX263.02. E. The form can be obtained from any TRA nearest office or you may download through TRA website.

Deferment of Capital goods

Deferment means a postponement of payment of the value added tax in respect of capital goods.

Deferment on imported capital goods is not automatic as is upon application by the applicant; the application is subject to scrutiny and approval by the Commissioner. The VAT embodied on each unit of the imported item/good must have VAT element exceeding 10,000,000.

The deferment is due within ten years. Goods imported whose VAT is less than 10,000,000/- shall be treated as normal and shall follow normal rules of calculation of taxes by Customs laws and procedures.

When the trader imports capital goods, the differed tax shall be treated as output tax and input tax of the importer at the time of importation and shall be accounted on the same tax return. Where the period of deferment elapses the differed tax shall not be paid. The deferment granted must be for producing taxable goods and not exempt supplies

TRA has taken a number of initiatives to modernize its operations through automation and improve the quality of services provided to the Taxpayers.

In order to have secure and efficient payment systems, the two institutions; BOT and TRA agreed to develop the interface that will improve the process of revenue collections and achieve straight through process (STP) between TISS-CBS at BOT and EPICOR, ITAX and TANCIS at TRA.

Tax Payer Portal is a portal used for revenue collections by achieving STP between BOT and TRA, and Commercial Banks. The mode of payments used are TISS Payments revenue going direct to Bank of Tanzania (SWIFT Messages)Tax bank payments reflected directly into specific TRA Systems, revenue transferred to BOT made later

HOW IT WORKS?

Tax Payer Portal will enable taxpayers to register intention to pay tax online.

Taxpayer will select mode of payment TISS);Upon submission, where the system shall generate pay slip and assign a unique control number ;The Control number, which is eight (12) digits, will be used for reconciliation between TRA and Commercial Banks; The taxpayer shall then submit a printed pay-in slip to the Commercial Bank and order the Bank to transfer tax to Commissioner’s account at BOT; Commercial bank shall receive a pay slip and command the transfer by initiating the transaction into SWIFT terminal by indicating the Control number of the slip; The portal shall receive transaction details in form of SWIFT messages from TISS and it will validate and transform it; lastly it will update respective revenue system through their web services.

The Tax Payer portal save time to taxpayers in payment process; improved accounting and analysis of Government revenue collection; Minimized human intervention; improved data integrity and speed up documentation process.

Also Payments procedures are made easier for taxpayers and they get to receive acknowledgement every time when TRA receives payment from them.

What is online submission of return?

This is a system of submitting return to TRA through Taxpayer Portal on TRA Website.

What are procedures to be followed?

On line submission of VAT returns require the following steps:

Submit VAT Return
 

• Login to Taxpayer Portal as Declarant or e-Filer
• Click the company you aim to file for
• Select unfilled return
• Select the month you want to file 

Advantages of submitting VAT return online

The web-based return system offers the following benefits:

• Taxpayers will interact with TRA while at their houses or offices.
• Elimination or reduction of queues at TRA offices during due dates
• E-filing will result in fewer errors and creates simple and quicker processing of documents

The Commissioner General may, upon application by an applicant in the prescribed form, exempt value added tax on

(a) importation of raw materials to be used solely in the manufacture of long-lasting mosquito nets by local manufacturer having a performance agreement with the Government of the United Republic

(b) importation by a government entity or supply to a government entity of goods or services to be used solely for implementation of a project funded by-

(i) the Government;

(ii)  concessional loan, non-concessional loan or grant through an agreement between the Government of the United Republic of Tanzania and another government, donor or lender of concessional loan or non-concessional loan; or

(iii) a grant agreement duly approved by the Minister in accordance with the provisions of the Government Loans, Grants and Guarantees Act entered between local government authority and a donor: Provided that, such agreement provides for value added tax exemption on such goods or service;

(c) importation or supply of goods or services for the relief of natural calamity or disaster.

(d) importation by or supply of goods or services to an entity having an agreement with the Government of the United Republic for purpose of operating or executing a strategic project: Provided that, such agreement provides for value added tax exemption on goods or services;

(e) an importation by or supply of goods or services to a non-governmental organization having an agreement with the Government of the United Republic solely for project implemented by the respective non-governmental organization: Provided that, such agreement provides for value added tax exemption on goods or services.

Note: The exemption granted under this part shall cease to have effect and the value added tax shall become due and payable as if the exemption has not been granted if the said goods or services are transferred, sold or otherwise disposed of in any way to another person not entitled to enjoy similar privileges as conferred under this Act.

Exemption to Investments Approved by NISC

The Minister shall, upon approval by the Cabinet and by order published in the Gazette, grant value added tax exemption on goods or services for implementation of special strategic investments approved by the National Investment Steering Committee under the Tanzania Investment Act

The Commissioner General may, upon application by an applicant in the prescribed form, exempt value added tax on-

 (a) importation of raw materials to be used solely in the manufacture of long-lasting mosquito nets.

 (b) importation by or supply to a Government entity of goods or services to be used solely for implementation of a project funded by-

 (i) the Government.

 (ii) a concessional loan, non-concessional loan or grant through an agreement between the Government of the United Republic and another government, donor or lender of concessional loan or non-concessional loan.

 (iii) a grant agreement duly approved by the Minister in accordance with the provisions of the Government Loans, Grants and Guarantees Act entered between local government authority and a donor: Provided that, such agreement provides for value added tax exemption on goods or services.

 (c) importation or supply of goods or services for the relief of natural calamity or disaster.

 (d) importation by or supply of goods or services to an entity having an agreement with the Government of the United Republic for purpose of operating or executing a strategic project: Provided that, such agreement provides for value added tax exemption on goods or services;

(e) an importation by or supply of goods or services to a non-governmental organization having an agreement with the Government of the United Republic solely for project implemented by the respective non-governmental organization: Provided that, such agreement provides for value added tax exemption on goods or services. Sale of a house of a value not exceeding 50 million shillings by a real estate developer.

f) Supply of precious metals, gemstones and other precious stones at refineries, buying stations or Mineral and Gem Houses designed by the Mining Commission under the Mining Act. 

g) Supply of aircraft, aircraft engine, aircraft parts and aircraft maintenance to a local operator of air transportation or Aircraft engine and aircraft parts excluding parts of goods to a local manufacturer or assembler of aircraft or to a local operator of air transportation.

h) Supply of automobile accessories used in the conversion of motor vehicle fuel system to natural gas or electricity system to persons engaged in the conversion of such motor vehicles.

i) Import of “moulds” used by a local manufacturer of pharmaceutical for exclusive use in manufacturing pharmaceutical products in Mainland Tanzania

The Minister may, for better carrying out of the provisions of this section, make regulations prescribing the manner of application, granting and monitoring utilization of exemption granted.

Where in respect of any taxable supply of goods, the value added tax has been paid in Tanzania Zanzibar at the rate lower than the rate applicable in Mainland Tanzania under this Act, the difference in the value added tax shall be deemed to have not been paid and shall be collected by Tanzania Revenue Authority from the taxable person upon transfer of goods to Mainland Tanzania in accordance with the provisions of this Act.

Note:

The difference does not apply on telecommunication ever since the applicable VAT rate is the same to Mainland Tanzania as to Tanzania Zanzibar which is 18%.

Where in respect of any taxable supply of goods, the supply is made directly by a taxable person in Mainland Tanzania to a recipient who is taxable person in Tanzania Zanzibar, the Tanzania Revenue Authority shall collect the value added tax and remit it to Zanzibar Revenue Authority.

Where in respect of any taxable supply of goods, the tax has been paid in Tanzania Zanzibar pursuant to the law for the time being in force in Tanzania Zanzibar, at the same rate as the rate applicable in Mainland Tanzania, the tax shall be deemed to have been paid on the taxable supply in accordance with the provisions of this Act and no tax shall be payable on its transfer to Mainland Tanzania.

Who is a Withholding Agent under Value Added Tax context? 

Withholding Agent is defined under the Value Added Act to mean, the Ministry responsible for finance, a Government entity which retains whole or part of its collected revenue that includes Executive Agencies, Regulatory Authorities, Public Institutions & Boards Funded by Own Revenue, Local Government Authorities (LGAs) and Public Universities and Training Institutions or a registered person as may be appointed by the Commissioner General by notice. And so this agent is required to withhold a portion of VAT from payments they make to their VAT-registered suppliers and remit the amount of VAT withheld directly to TRA.

Rates to be withheld by a Withholding agent depends on the following;

Where a supply of goods or services that is subject to the standard rate of value added tax is made in Mainland Tanzania to a withholding agent, the applicable VAT rate shall remain 18%. However, in the case of a supply of goods, the withholding agent shall withhold 3% of the consideration and remit it to the Commissioner General and in the case of a supply of services, the Withholding agent shall withhold 6% of the consideration and remit it to the Commissioner General. Hence, the taxable person supplying the goods or services shall accordingly be entitled to receive 15% or 12% respectively of the consideration from the Withholding agent.

Where a supply that is subject to the standard rate of value added tax is made in Mainland Tanzania to a person who is not registered for VAT purposes, and such person pays the consideration through a bank or an electronic payment system approved by the Commissioner General, the applicable VAT rate on that supply shall be 16%.

Provided that the Commissioner General shall, by public notice, designate the categories of persons to whom these provisions apply, and prescribe the procedures for the implementation of the withholding and reduced rate arrangements.

VAT Withholding Tax Certificate

Upon payment from a taxable supplier to the withholding agent after the withholding agent has withhold the appropriate rate the withholding agent will issue a VAT Withholding Certificate which acts as a proof that part of the output VAT on a taxable supply has been withheld and remitted directly to the Tanzania Revenue Authority (TRA).

A withholding agent who is liable to pay Value Added Tax under section 5(5) shall, not later than the date on which the tax becomes payable under section 15, issue to the supplier a Value Added Tax Withholding Certificate generated through a system approved by the Commissioner General. The certificate shall be issued in such form and manner as may be prescribed by the Minister, which will contain the following particulars; the date of issuance, the name, Taxpayer Identification Number (TIN), and Value Added Tax Registration Number of the withholding agent, a description of the supply made, including quantity and other relevant specifications, the total consideration payable for the supply and the amount of value added tax included therein, the rate and amount of value added tax withheld and the name, address, Taxpayer Identification Number (TIN) and Value Added Tax Registration Number of the supplier.

 A VAT withholding certificate that does not comply with the requirements of subsection (1) shall not be valid for purposes of claiming withheld output tax.

Who is An Assisted Government entity?

An Assisted Government entity is a Government entity for which the Commissioner General is authorized to collect consideration payable for a taxable supply made by that entity. Under the Tanzania’s VAT regime, the Assisted Government entities typically include Ministries, Departments, Agencies(MDAs), and Public Institutions that provides taxable goods or services to the public or businesses but they have entered an administrative arrangement under which TRA collects and accounts for VAT on their behalf.

Where an Assisted Government entity makes a supply and the consideration payable to such entity in respect of that supply is required to be collected by the Commissioner General, the Value Added Tax included in that consideration shall be treated as Advance Value Added Tax paid to the Commissioner General.

Upon payment an Assisted Government entity will be issued with a Certificate of Advance Value Added Tax Paid which acts as a proof that VAT has been paid in advance on a taxable supply by or on behalf of An Assisted Government entity or other designated body. Whereby the Commissioner General shall, within one day after the end of a tax period, issue it which shall be issued in such form and manner as may be prescribed by the Minister, containing the following particulars; the name, address, Taxpayer Identification Number (TIN), and value added tax registration number of the assisted Government entity, the date of issuance and the tax period to which the certificate relates, the certificate serial number, a description of the supplies made by the assisted Government entity during the tax period, including quantity and other relevant specifications, the total consideration received for the supplies and the amount of value added tax included therein and the amount of advance value added tax paid by the assisted Government entity in the respective tax period.

 A registered person who permanently ceases to make taxable supplies shall apply for the cancellation of its registration in the manner prescribed in the regulations. The application for deregistration shall be made within fourteen days after the date on which the person permanently ceased to make taxable supplies. Where the Commissioner General is satisfied that a person applying for cancelation of registration is not required to be registered for value added tax and such person has been registered for at least twelve months, the Commissioner General shall, by notice in writing, cancel the person’s registration or less than twelve months, the Commissioner General may, by notice in writing, cancel the person’s registration, where satisfied that, it is appropriate to do so. The cancellation of a person’s registration shall take effect from the date set out in the notice of cancellation.

For the case of Intended Trader, 

An Intended Trader who does not comply with conditions to be registered for VAT shall notify the Commissioner General within a period of 90 days after the end of the period by giving reasons for failure to comply with the conditions. And upon receiving the notification for failure to comply, the Commissioner General shall serve the intended trader with a written decision, stating the reasons for either granting or refusing the extension of time as requested.

And where the Commissioner General refuses to grant the extension of time, the person shall be deemed to have been deregistered for Value Added Tax purposes from the date the extension was required. And if the person who fails to notify the Commissioner General shall be deemed to be deregistered for Value Added Tax.