Executive summary

The Tanzania Minister of Finance and Planning has issued the Tax Administration (Remission¹ of Interest and Penalty) Order, 2018 that became effective on 1 July 2018 and will expire on 31 December 2018.

According to this order, the Commissioner General of the Tanzania Revenue Authority (TRA) may remit the whole of interest or penalties due with respect to "eligible tax payable" by the "eligible person" upon making an application with voluntary disclosure of such tax liability, and agreeing in writing within the validity period of the Order to pay the principal tax due within financial year 2018/2019 and also agreeing to finally conclude the respective tax liability without any further dispute. The order applies to eligible taxes, levies and duties emanating from tax laws administered by the TRA other than the East Africa Community Customs Management Act (EACCMA, 2004) and taxes, levies duties or fees collected on behalf of local government authorities, other institutions or agencies arising out of non-tax laws.

Detailed discussion

Background

On 30 June 2018, the Tanzanian President assented the Finance Act, 2018 (the Act) and the Act became operative with immediate effect from 1 July 2018.² Section 65 of the Act amended Section 70 of the Tax Administration Act, 2015 by adding subsection 2 immediately after subsection 1 to give power to the Minister by way of regulation or order published in the Official Gazette to prescribe eligibility, duration, and procedures of accessing the remission of interest or penalty imposed under any tax law.

Key issues

Eligible tax

All taxes, levies or duties emanating from a tax law administered by the TRA except the EACCMA, 2004 and taxes, levies duties or fees collected on behalf of local government authorities, other institutions or agencies arising out of non-tax laws such as Skills and Development Levy (SDL), are considered an eligible tax.

Eligible person

An eligible person is a person who has:

• Filed a tax return with respect to an eligible tax but has not paid the whole or part of the tax due.
• Not filed a return with respect to an eligible tax and has not paid the whole or part of eligible tax.
• Not applied for a taxpayer identification number (TIN) or any required registration.
• Filed an objection with the Commissioner General of TRA.
• A pending case in front of the Tax Revenue Appeals Board, Tax Revenue Appeals Tribunal or Court of Appeal of Tanzania.

Excluded persons

The tax amnesty order does not apply to a person:

• Who may otherwise be an eligible person but who has already paid the eligible tax.
• Whose tax affairs are being audited or investigated by the Commissioner General with respect to an eligible tax for the period under audit or investigation.
• Who has been convicted of fraud by a court with respect to an eligible tax, or who has been convicted of a transnational organized crime, including money laundering, human trafficking, poaching, economic sabotage, corruption, drug trafficking or involvement in terrorism.
• Whose assessment is a result of an Electronic Fiscal Device (EFD) or other offense which has been compounded.
• Whose assessment emanates from an offense involving willful or fraudulent omission or commission under a tax law.

How to receive a remission in interest and penalties

An eligible person should:

• File an application in prescribed form number ITX207.01.E by 30 November 2018.
• State the amount of the principal tax payable and interest or penalty to be remitted.
• Provide further information as specified in the prescribed form.

Time limit for applying for remission

• As noted, an eligible person should file an application in the prescribed form by 30 November 2018.
• The Commissioner General is obliged to approve or deny an application received within 30 days from the date of receipt.

Settlement agreement

Upon agreement by both parties, a settlement agreement will be signed for the payment of the principal amount of the eligible tax and shall include material facts of the default on which the remission application is based. It will also include the total amount payable by the eligible person prior to the grant of the remission under the order separately indicating principal tax, interest and penalty, payment arrangements and due dates and the commitment of both parties to comply with the conditions of the settlement agreement.

Revocation of the settlement agreement

• Where eligible person who has been granted with a remission fails to comply with the agreed terms, the Commissioner General shall revoke the settlement agreement and proceed to demand the eligible tax as if no remission was granted.
• If the settlement agreement has been entered under influence of false or fraudulent representation, it shall remain void and the Commissioner General may revoke the agreement.

In closing, it should be noted that the Commissioner General may require a person who has voluntary disclosed unpaid eligible tax to file a return or returns with respect to such taxes.

Endnotes

¹ Remission is the term used in the regulation issued by the Government, representing a reduction or amnesty in the payment of interest and penalties.

² See EY Global Tax Alert, Tanzania issues Finance Act, 2018, dated 11 July 2018.

———————————————
CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Tanzania), Dar es Salaam

• Tom Philibert
  tom.philibert@tz.ey.com
• Laurian Justinian
  laurian.justinian@tz.ey.com
• Beatrice Melkiory
  beatrice.melkiory@tz.ey.com
• Innocent E. Alex
  innocent.e.alex@tz.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg

• Marius Leivestad
  marius.leivestad@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Rendani Neluvhalani
  rendani.mabel.neluvhalani@uk.ey.com
• Byron Thomas
  bthomas4@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York

• Silke Mattern
  silke.mattern@ey.com
• Dele A. Olaogun
  dele.olaogun@ey.com

———————————————
ATTACHMENT

PDF version of this Tax Alert