VAT became effective in mainland Tanzania on 1 July 1998 when the Value added tax (VAT) Act 24 of 1997 came into force. In Zanzibar VAT became effective on 1 January 1999. While this chapter sets out the law prevailing on the Mainland, the law in Zanzibar is essentially the same.
VAT is administered by the Tanzania Revenue Authority (TRA).
Rates and scope
The standard rate of VAT was 20% as at 31 May 2009. However, from 1 July 2009, the rate was reduced to 18%. There is no higher or reduced rate (except for the zero rate).
VAT is charged on any supply of goods or services made in mainland Tanzania where it is a ‘taxable supply’ made by a ‘taxable person’ in the course or furtherance of any business carried on by him. VAT is also chargeable on the importation of taxable goods and services.
A ‘taxable person’ is a person who is, or is required to be, registered for VAT. The requirement to register for VAT arises where taxable turnover exceeds, or is likely to exceed:
TZS40 million in a period of 12 consecutive months; or
TZS10 million in a period of three consecutive months.
Once either of these criteria is satisfied the person is obliged to register within 30 days.
The value of taxable imported services is taken into account for the purposes of determining whether registration is required. Businesses that make no taxable supplies but who import services with a value exceeding the threshold are obliged to register.
The Commissioner is also empowered to register persons on the grounds of national economic interest or for the protection of revenue. This provision is also used to register investors whose projects have not yet commenced production.
Application for registration may be made in advance of any requirement to do so, but is allowed only at the Commissioner’s discretion.
Group or branch registration
Group registration for companies is not allowed in Tanzania.
Where a taxable person carries on a business in several divisions or branches, it may be registered in the names of those divisions or branches if the company’s request is approved by the Commissioner.
If taxable supplies are made in Zanzibar, a separate ‘branch’ registration in Zanzibar is required.
To obtain a VAT registration, a nonresident business must obtain a local business licence and a Taxpayer Identification Number (TIN). To obtain these, the nonresident business must first open an income tax file with the Tanzania Revenue Authority.
The appointment of a fiscal representative is optional. A bank account is not required for VAT registration.
Application for registration
Registration is applied for on form VAT101, which is obtained from and returned to the TRA office, local to the principal place of business. Application must be lodged within 30 days of the business becoming liable to make the application, but may be made in advance of any requirement to do so.
The penalties for late registration or failure to register are as follows:
automatic penalty of TZS50,000;
1% of the VAT due for the first month, then TZS100,000 or 2% for each further month late, for each missing return;
interest charged at Central Bank rate plus 5%.
If criminal prosecution is pursued, a fine of TZS200,000 shillings and/or two to 12 months imprisonment may be imposed on conviction.
The registration number format for resident and nonresident businesses is the same, namely ‘2 digits-6 digits A’: 99-999999 A.
If a person ceases to be liable to be registered, either through cessation of trading or because the turnover falls below the registration threshold, he must notify the Commissioner within 30 days and make application to be deregistered. Deregistration may also be initiated by the TRA where it sees fit. VAT must be accounted for on all stock and assets on hand at deregistration, unless the business is the subject of a transfer of a going concern, or the VAT involved is less than TZS5,000.
Advertised prices must be stated inclusive of VAT.