Tanzanian Parliament passed the finance bill on 28 June 2022 to impose income tax on the non-residents who receive payments by a source located in Tanzania in exchange for digital services other than conducting business.
On 30 June, the Bill was acknowledged by the President to become the Finance Act of 2022. This Act also made amendments to the Value-Added Tax Act, CAP 148, by requiring a non-resident for registration who is not present in Tanzania but makes taxable supplies for which value-added tax is payable to the Commissioner General of Tanzania Revenue Authority (TRA).
The Act granted the power to the Minister of finance to issue regulations regarding the procedure of assessment. On 1 July 2022, the Minister of finance issued the following rules with the amendments to the Finance Act 2022.
- The Income Tax (Non-Resident Electronic Service Provider) Regulations, 2022
- The Value Added Tax (Registration of Non-Resident Electronic Service Suppliers) Regulations, 2022
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Electronic services are defined under section 51 of the Value Added Tax Act, CAP 148. It is defined as any of the following services that are delivered through telecommunication means.
- Software and updating
- Music, games, and entertainment activities
- Websites, web-hosting, or remote maintenance of programs
- Access to database
- Cultural, artistic, political, scientific, and other broadcasts.
- Self-education packages
- Images, texts, and information
Source Of Payment For Income Tax
The source of payment for income tax is alleged to be sourced in Tanzania if the recipient is deemed to be in Tanzania:
- The payment method includes credit or debit card information and bank account details of the recipient of the electronic services who is in Tanzania.
- The resident’s information includes billing, home, country code of the SIM card, and the internet address of the recipient in Tanzania.
Following people are required to register themselves with the Commissioner General of Tanzania Revenue Authority.
- A non-resident who provides electronic services to a resident in Tanzania.
- Regardless of the threshold, a non-resident who supplies electronic services to a non-VAT registered individual in Tanzania who does not have a VAT representative.
Registration is to be done within six months from 1 July 2022. The application for registration can be filled online using a prescribed form that includes the following information:
- Business name, including the trading name
- Certificate of incorporation
- Email and address (must be registered) of the business
- Details including telephone number, address, and email of the person who is incharge of tax matters
- Website information through which the company is conducted
- Any additional information required by the Commissioner General
After the registration, the Commissioner General shall;
Issue the non-resident with a Taxpayer Identification Number (TIN) for the payment of tax and tax returns for income tax purposes.
Issue non-resident with a Value-Added Tax Registration Number (VRN) for the payment of tax and filing of tax returns for VAT purposes.
A non-resident must file a return online in a simplified form stating that the tax payable is in respect of electronic service provided during the tax period. He also must pay income tax to the bank designated by the CG or its equivalent convertible currency at a prevailing exchange rate as published by the Bank of Tanzania. They should also pay income tax and file the return on income tax before the seventh day of the following month.
In case a non-resident wants to deregister himself permanently, he must inform the Commissioner General about the reason for deregistration, the date of cessation of business, and any outstanding taxes he needs to pay. After analyzing the matter, the CG has the power to deregister the non-resident.
If you want to know about tax in Tanzania and Tanzania tax revenue or anything else related to business, investments, and corporate laws, contact Shikana Group to get the best possible advice on the matter.