TAXATION OVERVIEW By B.Kahenaki (MBA,CPA(T),BAF) Regional Taxpayers’ Services Officer TRA - Morogoro

COVERAGE About TRA Business Registration Taxation of Businesses and Individuals Innovations in Tax Administration Conclusion

1.0 ABOUT TRA 1.1 Introduction TRA is a Government Agency under Ministry of Finance It was established by the parliament Act No 11 of 1995 and officially resumed its function on July 1st 1996. It administers a number of Tax laws (and their amendments) such laws includes:- The Income Tax Act The Value Added Tax Act

1.0 Introduction cont’d…… The East African Customs Management Act The Customs Tariff Act The Stamp Duty Act The Motor vehicle( Tax Registration and Transfer) Act The Port Service Charges Act The Vocational Education and Training Act e.t.c

1.2 Functions of TRA Assess, collect and account for all Central Government taxes Administer efficiently and effectively all the revenue laws of the Central Government Advise the Government on all matters relating to fiscal policy (Tax policy) Promote voluntary tax compliance Improve the quality of services provided to taxpayers.

Functions of TRA Cont’d…… Counteract fraud and other forms of tax and fiscal evasion. Produce trade statistics and publications

1.3 Taxation and its Role Taxation is a compulsory levy or charge imposed by the state on her citizens and non-citizens usually payable in monetary terms Used by the Government to meet its recurrent and development expenditure i.e. pay for social and economic infrastructure

2.0 Registration of Business Before starting a business, taxpayers are required to visit TRA office and register their businesses by being provided by a unique number know as Taxpayer Identification Number ( TIN). The Income Tax Act ,2004 (Section 133) states that every person who has total income which can be chargeable to tax should register with TRA within fifteen (15) days from the date of commencing the business.

2.1 Benefits of TIN Through TIN the taxpayer is identified as a legitimate businessman/woman MV registration or transfer of ownership Obtaining driving license VAT registration Importation and exportation of goods Obtaining Customs Clearing and Forwarding Agents license

Benefits of TIN….. Registration of title upon transfer of ownership of land Obtaining trade license Obtaining working permit Obtaining resident permit For tenders to supply goods or services Financial Institutions for loan applications

3.0 Taxation of businesses and Individuals 3.1 Taxation of small traders with/ without complete records Most of the small traders do not keep complete records. However, some traders do maintain proper and complete records. All these small traders are taxed based on their annual turnover

Where turnover does not exceed Tshs 4,000,000/= Annual Turnover NOT Complied with section 80 of Income Tax Act, 2004- Record keeping Complied with section 80 of Income Tax Act, 2004- Record keeping I Where turnover does not exceed Tshs 4,000,000/= NIL II Where turnover is between Tshs. 4,000,000/= and Tshs 7,500,000/= Tshs 150,000/= 3% of the turnover in excess of Tshs 4,000,000/= III Where turnover is between Tshs 7,500,000/= and Tshs 11,500,0000/= Tshs 318,000/= Tshs 135,000/= plus 3.8% of the turnover in excess of Tshs 7,500,000/= IV Where turnover is between Tshs 11,500,000/= and Tshs 16,000,000/= Tshs 546,000/= Tshs 285,000/= plus 4.5% of the turnover in excess of Tshs 11,500,000/= V Where turnover is between Tshs 16,000,000/= and Tshs 20,000,000/= Tshs 862,500/= Tshs 487,000/= plus 5.3% of the turnover in excess of Tshs 16,000,000/=

Note: Where turnover exceeds Tshs 20,000,000/= p.a the taxpayer is obliged to prepare audited financial statements in respect of his/her business. Any taxpayer whose turnover exceed Tshs 14,000,000 p.a is obliged to acquire and use the Electronic Fiscal Device (EFD)

3.2 Taxation of Individuals’ income S/N Monthly Income Tax Rate 1. Where total income does not exceed Tshs. 170,000/= NILL 2. Where total income exceeds Tshs. 170,000/= but does not exceed Tshs. 360,000/= 11% of the amount in excess of Tshs. 170,000/= 3. Where total income exceeds Tshs. 360,000/= but does not exceed Tshs. 540,000/= Tshs. 20,900/= plus 20% of the amount in excess of Tshs. 360,000/= 4. Where total income exceeds Tshs. 540,000/= but does not exceed Tshs. 720,000/= Tshs 56,900/= plus 25% of the amount in excess of Tshs. 540,000/= 5. Where total income exceeds Tshs. 720,00/= Tshs. 101,900/= plus 30% of the amount in excess of Tshs. 720,000/=

3.3 Taxation of Corporations Companies or entities have to account their income on an accruals basis and prepare final accounts, which must be approved ny authorized Auditors, and Accountants recognized by both NBAA and TRA. These accounts are submitted to TRA on the prescribed accounting date

Cont…. All companies whether residents or non- residents are required by the Income tax Act to file an estimate of income within 3months after the start of its accounting year. The taxpayer is supposed to pay the estimated tax in a minimum of 4installments each falling due after every 3months. A taxpayer must file a final tax return to TRA within 6months after the end of each accounting year

Cont…. The current corporation tax rate is 30%. Corporations with perpetual unrelieved losses for 3 consecutive years are taxed at 0.3% of annual turnover.

3.4 Skills and Development Levy (SDL) This is imposed on the total gross emoluments which are paid by employer to the employees at a rate of 5% of the total gross emoluments paid during the month for Tanzania mainland. The gross emoluments include salary, wage, leave pay, payment in lieu of leave, subsistence allowance etc. 2/3 of the levy is remitted to the HESLB as from 1st July 2011 and the remaining 1/3 is remitted to VETA. SDL is paid by employers with 4 employees and above.

3.5 Stamp Duty Stamp Duty is another source of Government revenue which is imposed on certain legal instruments or transactions, affidavit, conveyance and lease agreements. Conveyance : 1% of consideration Conveyance for agricultural land : Tshs 500/= Legal and commercial instruments are charged at specific rates as specified in the law. (E.g. Mortgage deed under article 39 is 1% of the instrument with a maximum of 10,000/= of stamp duty payable) Note: Due dates is within 30 days from the date an instrument was signed

2. Services:- Services except listed under the schedule. 3.6 Value Added Tax (VAT) VAT registration threshold: Taxable turnover exceeding shs 100 million per annum or Taxable turnover exceeding 50 million attained during six consecutive months and Professionals Tax is imposed on the following taxable supplies:- 1. Goods:-All goods except goods listed under the exemptionschedule 2. Services:- Services except listed under the schedule. Note: Under this law insurance services are taxable except life insurance

Cont…. 3. Immovable properties:- All properties will be taxed including, newly residential building e.g.; houses sold by estate developers. New residential building must be occupied for a period of less than two years from the date of construction. VAT is charged on imports

4. Innovations in Tax administration to assist small and local new businesses Electronic registration systems to ensure effective management of taxpayers’ information. These include Online TIN and VAT application, Biometric TIN registration. Electronic payment of taxes has simplified tax payment processes and proven to be time effective to taxpayers

Introduction of Electronic Fiscal Devices (EFDs) has facilitated proper record keeping, improving the quality of tax assessments by TRA and useful to other various institutions such as Banks which needs proper business information in advancing business loans.

5.0 Conclusion Voluntary tax compliance save costs to both taxpayers and the Government, so let’s be compliant taxpayers and pay taxes for our Nation Prosperity

Thank You