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21 June 2022 Tanzania’s Parliament passes Finance Bill 2022 On 14 June 2022, Tanzania’s Minister for Finance and Planning presented the 2022/23 fiscal budget. The Tanzanian Parliament passed the Finance Bill, 2022 (the Bill) on 15 June. The Bill is now subject to the President’s assent to become a law. This Alert summarizes the key changes included in the Bill. All proposed changes would be effective from 1 July 2022, unless indicated otherwise. Business: a transaction or activity carried out through the internet or electronic means including an electronic service or transaction conducted in the digital marketplace regardless of the manner in which such transaction is carried out. Digital market place: a platform which enables direct interaction between buyers and sellers of goods and services through electronic means. Electronic service: defined to have the meaning ascribed to it under Section 51 of the Value Added Tax Act, CAP 148. Section 51 defines an “electronic service” to mean any of the following services provided or delivered through a telecommunications network: Political, cultural, artistic, sporting, scientific, and other broadcasts and events including broadcast television The Bill proposes to empower the Minister for Finance to exempt from tax, income accruing from special strategic investments that are approved by the National Investment Steering Committee under the Tanzania Investment Act. Margin payable on a cost-plus margin alternative financing arrangement approved by the Bank of Tanzania will be treated as interest. A corporation will be considered tax resident for a year of income if management and control of its affairs are exercised in Tanzania whether physically or through any electronic means. “Natural resource payments” to include payments made for harnessing, generating or utilizing land, air or water natural resources for generation of power or anything of value whether the respective natural resource is located alongside the border or within the country. Payments made by an individual other than payments made in conducting business in respect of a service rendered by a nonresident through a digital marketplace shall be sourced in Tanzania. The Bill proposes to require resident individuals to withhold tax on interest, natural resource payments, rent and or royalties. However, the budget speech proposed this requirement on rent payments only. Interest paid to a holder of corporate or municipal bonds issued and listed on the Dar es Salaam Stock Exchange shall be excluded from withholding tax with effect from 1 July 2022. A nonresident who receives a payment that has a source in Tanzania from an individual, other than in conducting business, for services rendered through a digital marketplace, will be required to pay income tax by way of single installment equal to 2% of gross payments received in a calendar month. The nonresident is liable to pay income tax and file a return to the Commissioner General (CG) for the Tanzania Revenue Authority (TRA) on or before the seventh day of the following month. The Minister for Finance is to be granted discretionary powers to issue regulations prescribing procedures for assessing and collecting income tax on digital services. A wholesaler of bulk petroleum products who sells petroleum products to a retailer will be required to charge the retailer income tax equal to TZS20 per liter of the product sold. Submit a return or certificate of payment of the tax collected to the CG no later than the seventh day of the following month.
The Bill also proposes to exclude from presumptive income tax, resident individuals who are professionals or who derive income from technical management, construction and training services. A resident individual with small scale mining operations whose turnover does not exceed TZS100m annually and who does not have a regular income, to pay income tax at the rate of 2% of the sale value of minerals. The tax is payable at the time of selling minerals at Mineral and Gem Houses or buying stations designated by the Mining Commission under the Mining Act. The Mining Commission shall collect and remit the tax to the CG. A resident individual who is engaged in long distance transportation of passengers with a bus of a carrying capacity of 40 passengers and above, or long distance transportation of goods with a lorry having above three axles and whose turnover does not exceed TZS100m annually to pay income tax at a rate of TZS3.5m annually. “Long distance transportation” is defined to mean carriage of passengers or goods from one region to another inside or outside Tanzania. Withholding tax on royalty payments for the use of, or right to use, a cinematography film, videotape, sound recording, or any other like medium shall be charged at the rates of 10% and 15% for payments made to nonresidents and residents respectively. Gains on the realization or transfer of mineral rights and mineral information to an entity formed between the Government and an investor. Gains on the realization or transfer of free carried interest shares from an entity to the Government. The Bill proposes to empower the Minister for Finance to grant an exemption from VAT, upon approval by the Cabinet and by order published in the Gazette, on goods or services for implementation of special strategic investment approved by the National Investment Steering Committee. Further, the Bill proposes to empower the CG to grant an exemption from VAT on importation by or a supply of goods or services to a non-governmental organization (NGO) having a financial agreement (which provides VAT exemption on goods and services) with the Government solely for projects implemented by the respective NGO or an NGO duly appointed to implement the project. Currently, the exemption from VAT is restricted only to the NGO that has concluded the agreement with the Government. Heading 87.16 (trailers and semi-trailers; other vehicles, not mechanically propelled; parts thereof) The Bill proposes to zero rate a supply of double refined edible oil or fertilizer by a local manufacturer for a period of one year from 1 July 2022 to 30 June 2023. A nonresident supplier who has no presence in Tanzania but makes taxable supplies for which VAT is payable must apply to the CG for registration where it is impracticable for the nonresident supplier to appoint a VAT representative because of business circumstances. The Bill proposes to empower the Minister for Finance to issue regulations prescribing the manner and procedure of dealing in loans, including alternative financing products approved by the Bank of Tanzania. Unpasteurized or pasteurized cow milk or goat milk with additives and long-life milk (HS code 04.01) Arms and ammunition, parts and accessories thereof, equipment and machineries for the official use of the armed forces as certified by the Ministry for Security and Defense. Cold rooms (HS codes 9406.10.10 and 9406.90.10) and refrigerated truck (HS codes 8704.21.90; 8704.22.90; 8704.23.90; 8704.31.90; 8704.32.90; and 8704.90.90) by a person engaged in livestock, fishery or agriculture duly certified by the Ministry for Livestock, Fishery or Agriculture. Raw materials of natural borates and concentrates thereof (whether or not calcined), but not including borates separated from natural brine; natural boric acid containing not more than 85% of H3BO3 calculated on the dry weight (HS code 2528.00.00), (other petroleum oils and oils obtained from bituminous minerals, crude (HS code 2710.99.00), glues (HS code 3505.20.00). Equipment and machinery of nuclear reactors, boilers, machinery and mechanical appliances; parts thereof (Chapters 84) and Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles (Chapter 85) to be solely and directly used in manufacturing of fertilizers duly certified by the Ministry for Industries. Soil testing equipment (HS codes 9026.10.00, 9031.80.00, 9027.80.00 and 9027.90.00) as certified by the Ministry for Agriculture. Moisture meter (HS code 9031.80.00), rain gauge for weather stations (HS code 9023.00.90), PH meters (HS code 3822.00.90), tissue culture equipment (HS code 8419.89.60), and tension meters (HS code 9031.80.00) as certified by the Ministry for Agriculture. Raw materials (HS codes 7229.90.00; 3810.90.00; 3401.19.00; 7904.00.00; 4016.93.00; 8481.10.00; and 8309.90.90) by a manufacturer of gas cylinders upon signing a performance agreement with the Government of Tanzania. Machinery for preparing, tanning or working hides, skins or leather (HS codes 8453.10.00 and 8438.50.00) by a local manufacturer of hide and skins for exclusive use in manufacturing leather in Mainland Tanzania. The CG is to be empowered to issue a TIN to every Tanzanian citizen aged 18 years or above who has been registered and issued with a National Identification Number (NIN). Each TIN issued shall be used in every transaction involving sales or purchases, whether made electronically or manually. An individual, other than an employee or manager of a person, who is not licensed is restricted from acting as a tax consultant or communicating with the CG on pretext of representing another person. Taxpayers are to file returns electronically on or before the due date as prescribed by the specific tax law. The change gives effect to the already rolled out e-filing system. The CG is to have discretionary powers to grant, by a written notice and under special circumstances, filing of a tax return manually or by any other means. Any person who establishes a storage facility for business or investment purposes to store goods whose value exceed TZS10m will be required to register the facility with the CG. The owner of the registered storage facility is obliged to keep records of all stored goods and report to the CG on a monthly basis in a prescribed manner. Failure to register a storage facility or report the stored goods to the CG attracts a penalty of 300 currency points and payment of any detected loss of revenue occasioned by reason of such undisclosed goods, whether the goods are owned by the storage facility owner or not. 1 currency point is equivalent to TZS15,000. A manager of an entity or a person who was a manager of an entity at the time an entity fails to pay tax shall only be jointly and severally liable with the entity in instances of fraud as proven in a court of law. Previously, a manager was not jointly and severally liable if they exercised a degree of care, diligence, and skill to prevent the failure to pay tax. The Bill proposes to revert to the Minister for Finance the power to remit interest and penalties, in whole or part, upon recommendation by the CG. Failure to issue a fiscal receipt or fiscal invoice; from receipt of payment to the time of supply of goods, rendering service or receiving payment for goods or service Failure to demand or report a denial of issuance of a fiscal receipt or fiscal invoice; from upon of payment to upon payment or receipt of goods or services Failure to apply for registration or licensing within the prescribed period under a tax law will be an offense. Upon conviction, the person is subject to a penalty of 500 currency points or imprisonment for a term not exceeding one year, or both. The Bill proposes offenses relating to excise duty including but not limited to the manufacturing of excisable goods without a license, failure to abide to conditions of a license, failure to obey an order for suspension or revocation of a license, and failure to keep records of manufacture, storage or delivery of excisable goods at a factory or place of work. A fine of not less than 330 currency points or imprisonment for a term not exceeding three years, or both For a subsequent offender, a minimum fine of 300 currency points but not exceeding 3,500 currency points or imprisonment for a term of not less than 5 years but not exceeding 20 years, or both A court order of forfeiture of a plant, excisable goods or materials connected with commission of the offense The Bill proposes to widen the scope of excise duty at the rate of 5% on the dutiable value for pay-to-view television services to include such services provided by a licensed cable, terrestrial, satellite or other technology operator. Currently, excise duty is imposed on pay-to-view television services provided by a licensed cable television network or cable operator. The Fourth Schedule to the Act is to be amended to adjust rates for excise duty on a variety of goods including sugar confectionary, chocolates, and electric accumulators, among others. Harmonization of the definition of “beneficial owner” with the definition provided in the Anti-Money Laundering Act, CAP 423 (AML Act). The AML Act defines a “beneficial owner” to mean any natural person who ultimately owns or controls the customer, the natural person on whose behalf a transaction or activity is being conducted, a person who exercises ultimate effective control over a legal person or legal arrangement or the beneficiary of an insurance policy or other investment linked insurance policy and provides: The natural person who ultimately owns or controls the legal person through direct or indirect ownership of a majority shares or voting rights or ownership interest in that legal person and such ownership, ownership interest or control also includes possession of bearer shares, the ability to appoint or remove the majority of board members, the chief executive officer or senior management. A shareholding of 5% or more in the legal person or an ownership interest of 5% or more in the legal person held by a natural person shall be an indication of direct ownership or a sufficient percentage of the shares or voting rights or ownership interest in that legal person, or a shareholding of 5% or more or an ownership interest of 5% or more in the legal person held by a legal person, which is under the control of a natural person, or by multiple legal persons, which are under the control of the same natural person, shall be an indication of indirect ownership. If, after having exhausted all possible means and provided there are no grounds for suspicion of money laundering, terrorist financing and proliferation financing, no natural person is identified, or if there is any doubt that the natural person identified is the beneficial owner, the natural person who holds the position of senior managing official. The beneficiaries, or where the natural person benefiting from the trust has yet to be determined, the class of natural persons in whose main interest the trust is set up or operates Any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means If a customer is any other legal arrangement, the natural person holding the equivalent or similar positions to those referred to in the case of a trust. The Bill proposes introduction of a requirement to furnish information and particulars relating to the beneficial owners during registration of a partnership. Failure to provide or update information on the beneficial owners shall be an offense. Upon conviction, a person is subject to a minimum fine of TZS1m and up to a maximum fine of TZS5m. TZS100,000 and an additional penalty of TZS10,000 for every day during which a company fails to keep registers of its members or beneficial owners, or deliver such registers to the company registry within the legal deadlines. TZS100,000 and an additional penalty of TZS10,000 for every day during which a company, having more than 50 members, fails to keep an index of the names of its members. TZS100,000 and an additional penalty of TZS10,000 for every day during which a company fails to deliver to the company registry an annual return within 28 days of the due date. “Officer” of an entity is defined to include any person in accordance with whose directions or instructions the directors of the company are accustomed to act. Imposition of a fee on television decoder subscriptions at a rate ranging from TZS1,000 to TZS3,000. Imposition of export tax on copper waste or scrap metals under Headings 72.04 and 74.04 at a rate of 30% of the free-on-board value of the commodity or US$150 per ton, whichever is greater. Reduction of transit charges for foreign vehicles exceeding three axles from US$16 per 100 kilometers to US$10 per 100 kilometers to align the charges imposed in the country and those imposed in the East African Community (EAC), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). Transit charges on the use of foreign vehicles on public roads in Mainland Tanzania to be limited to round trips to a destination within Mainland Tanzania. Imposition of gaming tax at a rate of 5% of monthly gross gaming revenue on internet gaming or virtual games under an internet casino license. The provisions of the Tax Administration Act relating to maintenance of documents, tax liability, collection and recovery of tax, imposition of interest, tax enforcement, objection and appeal to apply to gaming tax. A licensee of a gaming activity will be required to withhold gaming tax on winning prizes at the time of payment of winning prizes. Submit a return or certificate of payment of the withheld tax to the CG no later than 15 days of the following month. Imposition of mandatory insurance to cover commercial buildings, operation of public markets, imported goods, marine vessels, ferries and pontoons. Accrual of interest on outstanding land rent proposed to commence after 12 months of default. Previously, interest would accrue after 6 months. Each district authority will be required to establish a one-stop center for co-coordinating, encouraging, promoting and facilitating business within its area of jurisdiction. Each urban authority will be required to establish a one-stop center for co-coordinating, encouraging, promoting and facilitating business within its area of jurisdiction. Further, requiring entities, corporate bodies or individuals paying service levy to pay produce cess at the local government authority where the agriculture or other produce is purchased. Fiscal incentives approved by the National Investment Steering Committee (NISC) to special strategic investors to be issued under the respective tax laws. A new beneficial owner is appointed, or an existing beneficial owner changes their names, residence or postal address. Failure to notify the Administrator General as required shall be an offense. Upon conviction, a person is subject to a minimum fine of TZS200,000 and up to a maximum fine of TZS1m. Payments made to intern students from universities who are under the Tanzania Employment Service Agency Program are proposed to be exempt from the Skills and Development Levy. The Ministers for Finance from the East African Community (EAC) Partner States agreed to effect changes in the Common External Tariff (CET) for the financial year 2022/23 and to continue to implement some measures that were implemented in the financial year 2021/22 as follows: To grant a stay of application of the EAC CET rate of 25% and apply a duty rate of 35% or US$1.5 per square meter, whichever is higher for one year on ceramic tiles (HS Codes 6907.21.00; 6907.22.00; and 6907.23.00). This measure is intended to protect local manufacturers of ceramic tiles against cheap, substandard and undervalued imports. To grant a stay of application of the EAC CET rate of 10% and apply a duty rate of 10% or US$125/MT whichever is higher for one year on flat-rolled products (HS Codes 7212.20.00 and 7226.99.00). The objective of this measure is to protect local manufacturers against undervalued imports. To apply the EAC CET rate of 0% instead of the duty rate 25% on Crude Palm Oil (CPO) (HS Code 1511.10.00). This measure is intended to protect consumer welfare against skyrocketing prices, enhance economic growth, employment creation and value addition. To grant a stay of application of the EAC CET of 0% and apply a duty rate of 10% for one year on crude vegetable oils of soya beans, groundnuts, coconuts, mustard and linseed (HS Codes 1507.10.00; 1508.10.00; 1513.11.00; 1514.91.00; and 1515.11.00). The objective of this measure is to align with sunflower, cotton and other crude oils which attract 10% so as to promote domestic production of vegetable oils. To grant a stay of application of the EAC CET rate of 35% and apply a duty rate of 25% or US$500/MT whichever is higher for one year on semi-refined and refined vegetable oils (HS Codes 1507.90.00; 1508.90.00; 15.09; 1510.10.00; 1510.90.00; 1511.90.10; 1511.90.30; 1511.90.90; 1512.19.00; 1512.29.00; 1513.19.00; 1513.29.00; 1514.19.00; 1514.99.00; 1515.19.00; 1515.29.00; 1515.50.00; and 1515.90.00). This measure is intended to protect and promote the processing of vegetable oils in the country using locally grown seeds and imported crude palm oil, as well as employment creation. To grant a stay of application of the EAC CET rate of 25% and apply a duty rate of 35% for one year on baby diapers (HS Code 9619.00.90). This measure is intended to protect local manufacturer of baby diapers as they have production capacity to meet the demand in the country, and employment creation. To grant a stay of application of the EAC CET rate of 10% and apply a duty rate of 25% for one year on cotton yarn (heading 52.05; 52.06; and 52.07) except subheading 5205.23.00. The measure is intended to protect and promote production of cotton yarns in the country by increasing value addition of locally grown cotton and enhance cotton to cloth (C2C) strategy. To increase the import duty rate from 25% to 35% on windows and doors made of aluminum, iron and steel with HS codes 7610.10.00 and 7308.30.00. This measure is for protection and promotion of growth of small and medium enterprises engaged in making windows and doors, and employment creation. To grant duty remission and apply an import duty rate of 0% instead of 10% for one year on raw materials under HS codes 1901.90.10; 3302.10.00; and 3505.10.00 used to manufacture food flavors. This measure aims at promoting growth of local manufacturers of food flavors. To grant a stay of application of the EAC CET rate of 100% or US$460/MT whichever is higher and apply a duty rate of 25% for one year on cane sugar under HS code 1701.14.90 imported under a permit issued by the Tanzania Sugar Board. This measure is intended to cover the sugar production gap in the country. Tanzania together with other EAC Partner States agreed to introduce new HS code of 8543.40.00 containing Electronic Cigarettes and assign a duty rate of 35% since it is a tobacco substitute. The objective of this measure is to create a level playing field for local manufacturers of tobacco against importers of electronic cigarettes and promote employment creation. To increase the import duty rate from 25% to 35% on wigs, false beards, eyebrows and eyelashes, switches of human or animal hair or of textile materials under Heading 6704. This measure will protect local manufacturer of these products, and employment creation. The proposed measures that took effect in the financial year 2021/22 which will continue to be implemented in 2022/23 are as follows: Duty remission and application of import duty rate of 0% instead of 25% or 10% on inputs used to manufacture essential medical products and supplies for fighting COVID-19 including masks, sanitizers, coveralls, face shields and ventilators for one year. The objective of this measure is to continue promoting domestic production of items for fighting the COVID-19 pandemic. Stay of application of the EAC CET rate of 10% and application of a duty rate of 0% for another year on cash registers and other Electronic Fiscal Device (EFD) Machines and Point of Sale (POS) (HS codes 8470.50.00 and 8470.90.00). The objective of this measure is to encourage the use of electronic devices for accounting of government revenue at reduced costs of the machines. Duty remission and application of import duty rate of 0% instead of 25% for one year on packaging materials (HS codes 7310.21.00; 6305.10.00; 3923.50.10; 3923.50.90 and 3920.30.90) used for packing processed coffee. This measure aims at reducing packaging material costs for coffee processors in the country. Stay of application of the EAC CET rate of 0% and application of a duty rate of 10% for one year on gypsum powder (HS code 2520.20.00). This is to protect the gypsum powder producers against imports in the country. Duty remission and application of import duty rate of 0% instead of 25% for one year on packaging materials for seeds (HS codes 3923.29.00; 6305.10.00; 4819.40.00; 7310.29.90; 6305.33.00; 6305.20.00; 6304.91.90 and 7607.19.90) used by local producers of agricultural seeds. Stay of application of the EAC CET rate of 10% and application of a duty rate of 10% or US$125/MT whichever is higher for one year on iron and steel products (HS codes 7209.16.00; 7209.17.00; 7209.18.00; 7209.26.00; 7209.27.00; 7209.28.00; 7209.90.00; 7211.23.00; 7211.90.00; 7226.92.00; and 7225.50.00). Stay of application of the EAC CET rate of 10% and application of a duty rate of 10% or US$250/MT whichever is higher for one year on flat-rolled products of iron or non-alloy steel, of a width of less than 600 mm, clad (HS code 7212.60.00).
Document ID: 2022-5593 | |||||||||||||||
