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Tanzania 1 Guide to Fiscal Information Tanzania Dar es Salaam +255 22 216 9000

Tanzania 1 Guide to Fiscal Information Tanzania Dar es Salaam +255 22 216 9000 Bill Page bpage@deloitte.co.ug +255 22 216 6006 Amani Michael ammichael@deloitte.co.tz Jacqueline Matiko jmatiko@deloitte.co.tz Next Previous Tanzania 2 Guide to Fiscal Information Tanzania Introduction The Minister for Finance and Economic Affairs, Honourable Dr. William Augustao Mgimwa (MP), presented the Budget Speech and Economic Status comprising the estimates of the Government revenue and expenditure for financial year 2013/14, to the National Assembly on 13 June 2013, in Dodoma. Agriculture remains a top priority for the Government and employs over 85% of the population. The Budget was supported by a Finance Bill for 2013. This Bill has since been enacted into the Finance Act, 2013. The 2013/14 revenue measures were effective from 1 July 2013. Income Tax Residents Residents are taxed on worldwide income. Income Tax Rates for Resident Individuals: From 1 July 2013 Monthly Taxable Income as exceeds But does not exceed Tax Payable Tshs Tshs Tshs 0 170 000 0% 170 000 360 000 0 + 13% 360 000 540 000 24 700 + 20% 540 000 720 000 60 700 + 25% 720 000 105 700 + 30% Notes: 1. An individual is considered resident in Tanzania for tax purposes if the individual: • Has a permanent home in Tanzania and was present in Tanzania at any time in the tax year; or • Is present in Tanzania for 183 days or more in the tax year; or • Was present in Tanzania in that tax year and in each of the two preceding tax years, for periods averaging more than 122 days per year; or • Is an employee or an official of the Government of Tanzania posted abroad during the tax year. 2. Individuals are also taxed on the value of any benefit or advantage arising from employment. 3. The tax-free amount for purposes of Pay-As-You-Earn (PAYE) continues to be to Tshs170 000 following the increase in the minimum threshold in 2012. 4. The 2013 Finance Act provided for a 1% reduction on the lower band PAYE rate payable by resident individuals. The minimum tax rate chargeable for the year of income has been reduced from 14% to 13%. 5. In addition, the Finance Act provided for a reduction of the rate of Skills and Development Levy (SDL) payable by the employer from 6% to 5%. 6. It also provided exemption from SDL to government departments or public institutions wholly funded by the Government. Non-Residents Non-resident individuals are subject to a fixed tax rate of 20% on total income from a source in Tanzania. However, non-residents are taxed on their income from employment income with a source in Tanzania at 15%, which is a final tax. In addition, certain payments made to non-residents are subject to withholding taxes (WHTs). (See Withholding Taxes below). Next Previous Tanzania 3 Guide to Fiscal Information Companies Income Tax Rates for Companies: Years of Assessment Commencing On or After 1 January 2005 Rate Companies 30% Alternative Minimum Tax (AMT) 0.3% Notes: 1. The corporate tax rates have remained unchanged since 1 January 2005. 2. Where the underlying ownership of a company changes by more than 50%, as compared with the ownership at any time during the previous three years, the company is treated as having realised its assets and liabilities held immediately before such change in control at their market value. 3. Shareholders disposing shares in Tanzanian companies are required to pay a single instalment tax (10% for residents and 20% for non-residents) before the title in the shares can be transferred. 4. A 4% royalty is charged on gold and other metallic mineral, 5% on diamonds, uranium and gemstones, 1% on gemstones (cut and polished), 3% for other minerals (e.g. coal) and 12.5% for petroleum and gas produced onshore and in shallow water. The royalty rate for deep sea hydrocarbon production is 7.5%. A 15% levy is charged on exports of raw hides and skins. 5. The Finance Act has introduced a change to the AMT provision. Companies making five consecutive years of losses will be taxed at 0.3% on their turnover on the fifth year. Income Tax Rates for Non-Corporate Businesses Yearly Turnover as exceeds But does not exceed Tax Payable (where complete records are kept) Tax Payable (where records are incomplete) Tshs Tshs Tshs Tshs 0 4 000 000 Nil Nil 4 000 000 7 500 000 0 + 2% 100 000 7 500 000 11 500 000 70 000 + 2.5% 212 000 11 500 000 16 000 000 170 000 + 3.0% 364 000 16 000 000 20 000 000 325 000 + 3.5% 575 000 Notes: 1. This table is applicable to self-employed individuals whose businesses have an annual turnover of less than Tshs20 million and applies to individual’s income that consists of exclusively of income from business with a source in Tanzania. A standard assessment is made (i.e. the graduated tax rates for individuals are not applied) and no tax returns need to be submitted. Next Previous Tanzania 4 Guide to Fiscal Information Mining The Income Tax Act (ITA) has been amended to allow the mining companies to claim full deduction on equipment used for prospecting and exploration for minerals during their first year of use. Oil & gas The ITA was amended to introduce a ringfencing provision in petroleum operations effective 1 July 2013. Previously, ringfencing was only applicable to mining companies. This has a potentially significant impact on companies in the oil & gas sector. The implication of ringfencing provision is that deductions in oil & gas operations will be limited to a specific contract area or block. Companies involved in petroleum operations will no longer be able to use the losses arising from one Production Sharing Agreement (PSA) to shelter profits of another area from income tax. The Finance Act also introduced changes to the third schedule of the ITA under which equipment used for prospecting and exploration of petroleum would now qualify for 100% deduction. Gaming Tax Operators of casinos, private lotteries and slot machines are subject to “gaming tax”, which is a flat amount per table or slot machine in the case of casinos and 10% of gross sales in the case of private lotteries. Following the 2013/14 Budget, the “gaming tax” for casino operations is now paid at the rate of 15% of the weekly gross gaming revenue. Formerly the tax was charged on the monthly gross gaming revenue. Withholding Taxes (WHTs) Certain payments are subject to WHT. These rates are set out below: WHT Rates Note Residents Non-Residents Dividends - Paid by listed company 5% 5% - Paid by unlisted company 10% 10% - To company controlling 25% of shares or more 5% 10% Insurance premiums 0% 5% Interest 10% 10% Pensions - Lump sums commuted 10% 15% - Annuities 15% 15% Royalties 15% 15% Mining - Management and technical services 5% 15% Rents - If in excess of Tshs500 000 per annum 11 10% 10% - Aircraft 5 10% 0% Service fees 3, 4 5% 15% Government payments - Suppliers of goods to the government 10 2% 0% - Money transfer commission 12 10% Next Previous Tanzania 5 Guide to Fiscal Information Notes: 1. All supplies of goods to a resident corporation, whose budget is wholly or substantially financed by the Government, by a resident corporation irrespective of whether or not they hold TIN are subject to WHT of 2% with effect from 1 July 2013. 2. The non-resident WHTs specified above and WHT on technical services to mining companies are final taxes. The resident WHT rates for dividends, interest on deposits from a financial institution to an individual, and rent to an individual, are final taxes. 3. The 2013 Finance Act imposed WHT of 5% on service fee paid by a resident person or a Permanent Establishment (PE) of a non-resident person to resident person or a PE or a non-resident person. The tax is a non-final tax that can be offset against corporate tax liability for the year. 4. A 15% WHT is applicable where service fee is paid to a non-resident person with a source in Tanzania. Income is sourced in Tanzania where services are rendered in Tanzania, though the TRA is attempting to tax payments where the service is consumed in Tanzania, regardless of the location of performance. 5. A 10% WHT applies on aircraft lease payments made to resident persons engaged in air transport business. 6. The repatriated income of a local PE of a non-resident person is subject to a WHT of 10%. 7. Tax withheld must be paid to the Commissioner within seven days after the end of the month in which the amount is withheld. 8. The requirement to withhold tax does not apply to individuals unless the payment is made in conducting a business. 9. The WHT rates may, in respect of payments to non-residents, be reduced by an applicable Double Tax Agreement (DTA). Tanzania’s DTAs, and the WHT rates in terms of these agreements, uploads/Finance/ deloitte-tanzania-guide.pdf