FIN &LAW Client Update:
Tanzania Tax implication on the new budget 2017/2018
On 8th June 2017, the Minister for Finance and Planning presented the proposed 2017/2018 Budget to Parliament of the United Republic of Tanzania. The Budget was later culminated to the enactment of the Finance Act, 2017 by the parliament. The Finance Act, 2017 became effective 01st July, 2017 which had the following tax measures and implications as follows:-
The New Finance Act, 2017 made changes on the Income Tax Act Cap. 332 as follows:-
- Taxation of Non-Profit Organization has been clarified and equally subjected the Non-Profit Organization to clearly justify their Non Profit making through normal taxes process instead of being removed from tax net procedure.
- Also, the Income Tax Act, Cap 332 has been amended to clarify on the period within which the applicability of the Alternative Minimum Tax would be effective. The changes has been to the effect that that corporations with unrelieved tax losses for three consecutive years will be liable for Alternative Minimum Tax at the rate of 0.3% of turnover in the third year. Initially the period was five years.
- Also the Act has introduced a 5% withholding tax on the market value of minerals for small-scale miners. However, the act has not put a detailed framework on the basis for determining market value or the practical collection of such tax.
- The Act has reduced Corporate Income tax for new assemblers of vehicles, tractors and fishing boats to 10% for the first five years of operation. In addition, the Act has reduced Corporate Income tax for newly listed Companies with the Dar es Salaam Stock Exchange with at least 30% of its equity issued to the Public shall be reduced from 30% to 25% for 3 consecutive years from the date of listing
- On Financial Transaction and Services, the Income Tax has been amended with a view of eliminating ambiguities in law and mitigate revenue loss due to hedging or financial speculations arrangements which were occasioned by treating respective transactions as separate business and ring-fencing of the resultant gains.
- Further, regarding Insurance and Re-Insurance services, the Income tax has been amended to capture anti avoidance in Taxation occasioned through re-insurance services rendered outside Tanzania with source payment from Tanzania.
- On Capital Allowance expenditure, the Act has been amended to increase the amount of Capital allowance in respect of “non commercial” vehicles from TZS 15-million to TZS 30-million.
- No changes has been made on the tax bands, rates and thresholds applicable to individuals.
Value Added Tax (VAT)
The New Finance Act, 2017 also made changes on the value Added Tax Act Cap. 148 as follows:-
- The overwhelming outcry on the application of VAT on ancillary transport services has been 0% rated. Earlier in 2015 the government introduced VAT at the rate of 18% on ancillary transport services in relation to goods in transit through Tanzania. Following the amendment, the rate of 0%, is to be reintroduced on ancillary transport services in relation to goods in transit through Tanzania. The outcry of the application of VAT on ancillary transport services in relation to goods in transit through Tanzania had significant impact on the declining use of the Dar es Salaam port due to the increased costs to non-residents not registered for VAT in Tanzania, thus significantly increasing their cost of doing business.
- Finally, the VAT Act has been amended to exempt Fertilized eggs for incubation, local produced compounded animal feeds and machinery and plant used in the edible oil, textile and pharmaceutical industries are to be exempt from VAT.
The Excise (Management and Tariff) Act, Cap. 147 has also been amended on the rates applicable to some excisable items. According to the Act, the changes are inline to protect the currency but also flow of certain goods. The most notable changes made includes:-
- Decrease of Excise duty of locally produced fruit juices and wines produced with domestic grapes content exceeding 75%.
- Abolishment of the annual Motor vehicle license fee. The changes have been made to remove the annual motor vehicle license fee whereby now it would be payable once on first registration of the motor vehicle. On the other hand though, the Motor vehicle license fee on first registration has also been increased.
- Increase of Excise Duty on Petrol, Diesel ad Kerosine by TZS 40 per litre. The measure has been adopted to increase excise duty as a way of compensating the removal of annual motor vehicle license fee.
This publication has been prepared for general information on matters of interest only. It does not constitute legal opinion or professional advise. You should not act upon the information contained in this publication without obtaining specific professional advise. No representation or warranty (express or implied) is given to the accuracy or completeness of the information contained in this publication. FIN & LAW does not accept or assume any liability, responsibility or duty of care for any consequences or inconvenience for any consequences of you or anyone else acting or refraining to act, in reliance on the information contained in this publication or any decision based on it.
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