- Income and gains derived by holders of the bonds issued by the African Development Bank in the Tanzania domestic capital market will be exempt from tax.
- Director‘s fees will now be subject to a 15% final withholding tax.
- Income from gaming activities will be subject to normal corporate income tax. Currently, gaming licenses are taxed at various rates/amounts depending on the type of game.
- Rental payments to non-residents for the leasing of aircraft will now be subject to withholding tax. There is no mention of the withholding tax rate in the Minister’s speech.
- The power to grant exemptions on projects conducted by investors in expansion and rehabilitation projects has been withdrawn from the Minister for Finance. This is relevant to those investors who hold TIC certificates.
- The PAYE rate at the lowest tax band has been reduced from 13% to 12%.
- The presumptive tax bands have been retained. However, the tax rate for amounts between TZS 4,000,000 and TZS 7,500,000 has been adjusted. For businesses that do not keep records and which fall in this band, the applicable flat rate has been increased from TZS 100,000 to TZS 200,000. For businesses that keep records, the rate has been increased from 2% to 4%. It is likely that the rates for the other bands will also be adjusted when the Finance Bill is issued.
VALUE ADDED TAX (VAT)
The VAT Bill has been tabled for discussion and approval by Parliament.
Key changes include:
- Exemptions will be limited to what is in the VAT legislation and the Minister will no longer be allowed to grant any additional exemptions.
- The introduction of a VAT deferral scheme on imported capital goods where eligible persons will be required to execute bank guarantees.
- Importers of taxable services are required to account for VAT on the services as both input and output tax, but are required to first pay the output VAT before claiming it as input tax.
- VAT on bad debts now can be recovered in the case of bad debts which have been overdue for more than 12 months and have been written off in a company’s books.
- The direct attribution method has been removed for providers of mixed supplies.
- Most special reliefs and certain exemptions have been abolished.
- The introduction of a number of new definitions and terminologies.
- Blank forms and other documents used under the current VAT Act may remain in force after it has been repealed.
- International air transportation will now be zero-rated.
- Non-resident persons making taxable supplies without having a fixed place in Tanzania will be liable to pay VAT on the supply and will be obliged to appoint local representatives for VAT purposes.
- VAT refunds in respect of excess credits (negative net amounts) for persons other than those who make a majority of zero rated supplies will only be available where the Commissioner is satisfied that the nature of the person’s business regularly results in excess credits.
- The VAT exemption on the transfer of a going concern will now be automatic. The requirement to apply to the Commissioner for approval is no longer required.
- Goods imported for use in oil or gas prospecting exploration will continue to enjoy VAT exemption to the extent that they are eligible for relief from duties under East African Customs Management Act, 2004. The previous special relief which applied to both goods and services has been removed.
Increase in excise duty rates:
Excise duty on alcoholic beverages has been increased as follows:
- Carbonated soft drinks from TZS 91 per litre to TZS 100 per litre;
- Locally produced fruit juices from TZS 9 per litre to TZS 10 per litre;
- Imported fruit juices from TZS 110 per litre to TZS 121 per litre;
- Beer made from 100% local unmalted cereals from TZS 341 per litre to TZS 375 per litre;
- Other beers from TZS 578 per litre to TZS 635 per litre;
- Wine produced with domestic grape content exceeding 75% from TZS 160 per litre to TZS 176 per litre;
- Wine produced with more than 25% imported grapes from TZS 1,775 per litre to TZS 1,953 per litre; and
- Spirits from TZS 2,631 per litre to TZS 2,894 per litre.
Excise duty on cigarettes has been increased as follows:
- Cigarettes without filter tips and containing more than 75% domestic tobacco from TZS 9,031 to TZS 11,289 per thousand cigarettes;
- Cigarettes with filter tips and containing more than 75% domestic tobacco from TZS 21,351 to TZS 26,689 per thousand cigarettes;
- Other cigarettes from TZS 38,628 to TZS 48,285 per thousand cigarettes;
- Cut rag or cut filler from TZS 19,510 per kg to TZS 24,388 per kg; and
- Excise duty on cigars remains at 30%.
Other excise duty changes:
•• Removal of the 0.15% excise duty on money through banks and
telecommunication companies and replacing it with a 10% excise
duty on fees and levies collected by banks, telecommunication
companies and various agencies from money transfer services.
•• The authority of the Minister of Finance to grant excise duty
exemptions on petroleum products has been removed. However
this will not impact exemptions relating to infrastructure projects
being financed by development partners through agreements
signed between the government and the development partners.
•• Non-utility motor vehicles will continue to attract an excise duty
at the rate of 25% but an age limit will be imposed from 10
years to 8 years.
•• Non-passenger utility motor vehicles will continue to attract
5% excise duty but limit its age from 10 years to 8 years.
•• Passenger vehicles will continue to attract an excise duty at
the rate of 5% but an age limit will be imposed from 10 to 5
•• Imported furniture under HS code 94.01 will attract excise duty
at the rate of 15%.
•• The EAC Member States, through a Pre-Budget Consultation of
the respective Finance Ministers, met in Nairobi, Kenya on 3rd
May, 2014 to agree to effect changes to the Common External
Tariff (CET) and amend the EAC Customs Management Act,2004.