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Tanzania pkf tax guide 2010

The document provides an introduction and overview to the PKF Worldwide Tax Guide 2010. It discusses that the guide aims to provide businesses with answers to key tax questions in over 100 countries. It thanks the member firms that contributed information on their country's taxes. It also notes that this is the largest edition of the guide yet, reflecting the growth of the PKF network and the tax expertise offered globally. The chairman hopes readers will find the combination of the guide and assistance from local PKF members provides the tax advice needed for international business decisions.

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Tanzania Tax Guide 2010
FOREWORD Foreword For any business looking to set up in a new market, one of the critical deciding factors will be the target country’s tax regime. What is the corporate tax rate? What capital allowances can we benefit from? Are there double tax treaties? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, which is administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide businesses with the answers to these key tax questions. This handy reference manual provides clients and professional practitioners with comprehensive international tax and business information for over 100 countries throughout the world. As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all the member firms of the PKF network who gave up their time to contribute the vital information on their country’s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Rachel Yeo and Scott McKay, PKF Melbourne for co-ordinating and checking the entries from within their regions. This year’s WWTG is the largest ever reflecting both how the PKF network is growing and the strength of the tax capability offered by member firms throughout the world. I hope that you find that the combination of reference to the WWTG plus assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business. Mark Pollock PKF Perth Chairman, International Tax Committee of the PKF network PKF Worldwide Tax Guide 2010 I
IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. Disclaimer This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. II PKF Worldwide Tax Guide 2010
PREFACE The PKF Worldwide Tax Guide 2010 (WWTG) has been prepared to provide an overview of the taxation and business regulation regimes of over 100 of the world’s most significant trading countries. In compiling this publication, member firms of the PKF network have sought to base their summaries on information current as of 30 September 2009, while also noting imminent changes where necessary. On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country’s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. Preface While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at www.pkf.com Finally, PKF International Limited gladly welcomes any comments or thoughts readers may wish to make in order to improve this publication for their needs. Please contact Kevin F Reilly, PKF Witt Mares, 10304 Eaton Place, Suite 440, Fairfax, Virginia 22030, USA by email to kreilly@pkfwittmares.com PKF INTERNATIONAL LIMITED APRIL 2010 ©PKF INTERNATIONAL LIMITED ALL RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION VI PKF Worldwide Tax Guide 2010
ABOUT PKF INTERNATIONAL LIMITED PKF International Limited (PKFI) administers a network of legally independent firms. The PKF network is the 11th largest global accountancy network with over 240 legally independent member and correspondent firms which have a combined annual turnover of $1.9 billion. Located in 125 countries, the member firms of the PKF network share a commitment to providing clients with high quality, partner-led services tailored to meet each client’s own specific requirements. The membership base of the PKF network has grown steadily since it was formed in 1969. Added to the sustained growth in the number of PKF member firms, this solidity has provided the foundations for the global sharing of expertise, experience and skills and the development of services that meet the evolving needs of all types of client, from the individual to the multi-national corporation. Services provided by member firms include: Introduction Assurance & Advisory Insolvency – Corporate & Personal Financial Planning Taxation Corporate Finance Forensic Accounting Management Consultancy Hotel Consultancy IT Consultancy PKF member firms are organised into five geographical regions covering Africa; Latin America and the Caribbean; Asia Pacific; Europe, the Middle East & India (EMEI); and North America. Each region elects representatives to the board of PKF International Limited, which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy and business development committees also work together to improve quality standards, develop initiatives and share knowledge across the network. Please visit www.pkf.com for more information. PKF Worldwide Tax Guide 2010 VII
STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES B. DETERMINATION OF TAXABLE INCOME CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS Structure LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES VIII PKF Worldwide Tax Guide 2010
INTERNATIONAL TIME ZONES AT 12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME ELSEWHERE IS: A I Angola . . . . . . . . . . . . . . . . . . . .1 pm India . . . . . . . . . . . . . . . . . . . 5.30 pm Argentina . . . . . . . . . . . . . . . . . . 9 am Indonesia. . . . . . . . . . . . . . . . . . .7 pm Australia - Ireland. . . . . . . . . . . . . . . . . . 12 noon Melbourne . . . . . . . . . . . . .10 pm Israel. . . . . . . . . . . . . . . . . . . . . .2 pm Sydney . . . . . . . . . . . . . . .10 pm Italy . . . . . . . . . . . . . . . . . . . . . .1 pm Adelaide . . . . . . . . . . . . 9.30 pm Perth. . . . . . . . . . . . . . . . . .8 pm J Austria . . . . . . . . . . . . . . . . . . . .1 pm Jamaica . . . . . . . . . . . . . . . . . . . 7 am Japan . . . . . . . . . . . . . . . . . . . . .9 pm B Jersey. . . . . . . . . . . . . . . . . . 12 noon Bahamas. . . . . . . . . . . . . . . . . . . 7 am Jordan . . . . . . . . . . . . . . . . . . . .2 pm Bahrain . . . . . . . . . . . . . . . . . . . .3 pm Barbados. . . . . . . . . . . . . . . . . . . 8 am K Belgium. . . . . . . . . . . . . . . . . . . .1 pm Kazakhstan . . . . . . . . . . . . . . . . .5 pm Belize . . . . . . . . . . . . . . . . . . . . . 6 am Kenya . . . . . . . . . . . . . . . . . . . . .3 pm Bermuda . . . . . . . . . . . . . . . . . . . 8 am Korea . . . . . . . . . . . . . . . . . . . . .9 pm Bolivia . . . . . . . . . . . . . . . . . . . . . 8 am Kuwait. . . . . . . . . . . . . . . . . . . . .3 pm Botswana . . . . . . . . . . . . . . . . . .2 pm Time Zones Brazil. . . . . . . . . . . . . . . . . . . . . . 7 am L Brunei . . . . . . . . . . . . . . . . . . . . .8 pm Latvia . . . . . . . . . . . . . . . . . . . . .2 pm Bulgaria. . . . . . . . . . . . . . . . . . . .2 pm Lebanon . . . . . . . . . . . . . . . . . . .2 pm Leeward Islands C (Nevis, Antigua, St Kitts) . . . . 8 am Cameroon . . . . . . . . . . . . . . . . . .1 pm Libya. . . . . . . . . . . . . . . . . . . . . .2 pm Canada - Liberia. . . . . . . . . . . . . . . . . . 12 noon Toronto . . . . . . . . . . . . . . . . 7 am Lithuania . . . . . . . . . . . . . . . . . . .2 pm Winnipeg. . . . . . . . . . . . . . . 6 am Luxembourg . . . . . . . . . . . . . . . .1 pm Calgary . . . . . . . . . . . . . . . . 5 am Vancouver . . . . . . . . . . . . . . 4 am M Cayman Islands . . . . . . . . . . . . . . 7 am Malaysia . . . . . . . . . . . . . . . . . . .8 pm Chile . . . . . . . . . . . . . . . . . . . . . . 8 am Malta . . . . . . . . . . . . . . . . . . . . .1 pm China - Beijing. . . . . . . . . . . . . .10 pm Mauritius. . . . . . . . . . . . . . . . . . .4 pm Colombia. . . . . . . . . . . . . . . . . . . 7 am Mexico . . . . . . . . . . . . . . . . . . . . 6 am Costa Rica. . . . . . . . . . . . . . . . . . 6 am Morocco . . . . . . . . . . . . . . . . 12 noon Croatia . . . . . . . . . . . . . . . . . . . .1 pm Cyprus . . . . . . . . . . . . . . . . . . . .2 pm N Czech Republic . . . . . . . . . . . . . .1 pm Namibia. . . . . . . . . . . . . . . . . . . .2 pm Netherlands (The). . . . . . . . . . . . .1 pm D Netherlands Antilles . . . . . . . . . . . 8 am Denmark . . . . . . . . . . . . . . . . . . .1 pm New Zealand . . . . . . . . . . .12 midnight Dominican Republic . . . . . . . . . . . 7 am Nigeria . . . . . . . . . . . . . . . . . . . .1 pm Norway . . . . . . . . . . . . . . . . . . . .1 pm E Ecuador. . . . . . . . . . . . . . . . . . . . 7 am O Egypt . . . . . . . . . . . . . . . . . . . . .2 pm Oman . . . . . . . . . . . . . . . . . . . . .4 pm El Salvador . . . . . . . . . . . . . . . . . 6 am Estonia . . . . . . . . . . . . . . . . . . . .2 pm P Panama. . . . . . . . . . . . . . . . . . . . 7 am F Papua New Guinea. . . . . . . . . . .10 pm Fiji . . . . . . . . . . . . . . . . .12 midnight Peru . . . . . . . . . . . . . . . . . . . . . . 7 am Finland . . . . . . . . . . . . . . . . . . . .2 pm Philippines. . . . . . . . . . . . . . . . . .8 pm France. . . . . . . . . . . . . . . . . . . . .1 pm Poland. . . . . . . . . . . . . . . . . . . . .1 pm Portugal . . . . . . . . . . . . . . . . . . .1 pm G Puerto Rico . . . . . . . . . . . . . . . . . 8 am Gambia (The). . . . . . . . . . . . . 12 noon Germany . . . . . . . . . . . . . . . . . . .1 pm Q Ghana . . . . . . . . . . . . . . . . . . 12 noon Qatar. . . . . . . . . . . . . . . . . . . . . . 8 am Greece . . . . . . . . . . . . . . . . . . . .2 pm Romania . . . . . . . . . . . . . . . . . . .2 pm Grenada . . . . . . . . . . . . . . . . . . . 8 am Russia - Guatemala. . . . . . . . . . . . . . . . . . 6 am Moscow/St Petersburg . . . . .3 pm Guernsey. . . . . . . . . . . . . . . . 12 noon Guyana . . . . . . . . . . . . . . . . . . . . 8 am S Sierra Leone . . . . . . . . . . . . . 12 noon H Singapore . . . . . . . . . . . . . . . . . .7 pm Hong Kong . . . . . . . . . . . . . . . . .8 pm Slovak Republic . . . . . . . . . . . . . .1 pm Hungary . . . . . . . . . . . . . . . . . . .1 pm South Africa. . . . . . . . . . . . . . . . .2 pm PKF Worldwide Tax Guide 2010 IX
Spain . . . . . . . . . . . . . . . . . . . . .1 pm Swaziland . . . . . . . . . . . . . . . . . .2 pm Sweden. . . . . . . . . . . . . . . . . . . .1 pm Switzerland . . . . . . . . . . . . . . . . .1 pm T Taiwan . . . . . . . . . . . . . . . . . . . .8 pm Tanzania . . . . . . . . . . . . . . . . . . .3 pm Thailand . . . . . . . . . . . . . . . . . . .7 pm Trinidad and Tobago . . . . . . . . . . . 8 am Turkey . . . . . . . . . . . . . . . . . . . . .2 pm Turks and Caicos Islands . . . . . . . 7 am U Uganda . . . . . . . . . . . . . . . . . . . .2 pm Ukraine . . . . . . . . . . . . . . . . . . . .2 pm United Arab Emirates . . . . . . . . . .4 pm United Kingdom . . . . . . .(GMT) 12 noon United States of America - New York City. . . . . . . . . . . . 7 am Washington, D.C. . . . . . . . . . 7 am Chicago. . . . . . . . . . . . . . . . 6 am Houston. . . . . . . . . . . . . . . . 6 am Denver . . . . . . . . . . . . . . . . 5 am Time Zones Los Angeles. . . . . . . . . . . . . 4 am San Francisco . . . . . . . . . . . 4 am Uruguay . . . . . . . . . . . . . . . . . . . 9 am V Vanuatu. . . . . . . . . . . . . . . . . . .11 pm Venezuela . . . . . . . . . . . . . . . . . . 8 am Vietnam Z Zambia . . . . . . . . . . . . . . . . . . . .2 pm X PKF Worldwide Tax Guide 2010
Tanzania TANZANIA Currency: Shillings Dial Code To: 255 Dial Code Out: 00 (TZS) Member Firm: City: Name: Contact Information: Dar es Salaam Sujata Jaffer 22 212 0806 sjaffer@tz.pkfea.com A. TAXES PAYABLE CENTRAL GOVERNMENT TAXES AND LEVIES CORPORATION TAX Tanzania resident companies are liable to corporation tax on all sources of income and deemed income (such as gains on sale of plant and machinery, commonly referred to as trading receipt), after deductions of all expenses that are wholly and exclusively for the purpose of the trade, accrued in or derived worldwide. A company is resident in Tanzania if it is incorporated in Tanzania, or its management and control was exercised in Tanzania during the year of income, or it has a permanent domestic establishment in Tanzania. A non-resident company is taxed in Tanzania to the extent that the income has been sourced in the United Republic of Tanzania. The corporation tax is computed on the corporation’s taxable profits by using the corporate tax rate in force at the end of the year of income. The current corporation tax rate is 30% for both resident and non-resident companies. Corporations, both resident and non-resident, are required to file a statement of estimated tax payable within three months after commencement of the accounting period. The estimated tax is payable by quarterly instalment. The return of income and accounts of a person for any year of income is required to be submitted within six months after the expiry of the accounting period. Unless approved by the Commissioner for Income Tax, the accounting period of any person shall coincide with the calendar year (year of income). The due date of filing the return of income is also the due date of paying the final tax. Companies with perpetual tax loss for three consecutive years as a result of tax incentives on investments are liable to 0.3% of annual turnover for both residents and non- residents. A newly listed company to the Dar es Salaam stock exchange which has at least 35% of its shares issued to the public will be liable to a 25% rate for both resident and non-resident companies for three consecutive years from date of listing. The total income of a domestic permanent establishment of a non-resident person is liable to a 30% corporation tax rate plus 10% on repatriated profits. CAPITAL GAINS TAX The sale of interest in land or buildings and financial assets (shares) attracts capital gains tax. Shares of companies quoted on the Dar es Salaam Stock Exchange are exempt from capital gains tax. The capital gains tax rate is 10% and 20% of the T adjusted cost for resident and non-residents persons respectively. BRANCH PROFITS TAX A Tanzanian branch of a non-resident company is usually referred to as the domestic permanent establishment under the Income Tax Act 2004. The domestic permanent establishment is liable to 30% corporate income tax as well as 10% withholding tax on the repatriated profits. Repatriated profits include any profits remaining unappropriated in the accounts of the company. SALES TAXES/VALUE ADDED TAX (VAT) VAT standard rate is 18% of the taxable value of taxable imports and supplies of goods and services made by taxable persons within mainland Tanzania. Zanzibar, which is part of the United Republic of Tanzania, has its own VAT law which, in many respects, is similar to that of the mainland. PKF Worldwide Tax Guide 2010 1
Tanzania Certain supplies such as insurance, education, financial services and tourist services are exempt from VAT while exports and supplies of human and livestock medicine are zero rated. VAT is charged and collected by registered persons carrying on business (output tax) and must be remitted to the Commissioner for VAT on or before the end of the lasting working day of the month following the month to which such return relates. The registration threshold is TZS 40m/- per annum or taxable turnover exceeding TZS 10m/- attained during three consecutive months. Penalties and interests are charged on late payments. Registered business entities may claim the VAT that they pay on business purchases (input VAT). This, however, does not apply in case of non-creditable purchases such as importation or purchase of motorcars, business entertainment and input VAT incurred in order to acquire exempt supplies. VAT repayment is made where a taxable person has filed excess credit returns for six consecutive months or such person’s monthly VAT returns regularly result in excess credits. VAT on capital goods (plant and machinery, excluding motor vehicles) is relieved and the import duty is 0%. A separate application can be made to the Commissioner for Customs to deem motor vehicles as capital goods. Goods and services provided under a technical aid or donor funded project, voluntary and charitable organisation under existing laws, and special agreements are relieved from VAT. The Government and its Institutions are not relieved from VAT. SKILLS AND DEVELOPMENT LEVY The levy is imposed by the Vocational Education and Training (VETA) levy and is payable by an employer who employs four or more employees during the month or part thereof. The rate of tax is 6% of the total gross emoluments paid to such employees during the month. The expense is income tax deductible. It is an offence, punishable by fine and imprisonment, to recover this tax from employees. LOCAL TAXES The following tax/levy is charged and collected by the local authorities: carrying on business in the respective local authority. The rate of tax is 0.3% of the business turnover. It is now a tax-deductible expense. OTHER TAXES Stamp duty is payable on a wide range of transactions. There is no stamp duty on receipt of cash with effect from 1 July 2004. Such transactions as lease agreements, conveyance and transfer of shares are still liable to stamp duty. Most of the instruments are required to be stamped before they become legal documents. Stamp duty on the aforementioned instruments is 1%. STAMP DUTY Description Rates Conveyance 1% of consideration T Conveyance for agricultural TZS 500/- land Receipts on sales of goods or Exempted services for business The duty is chargeable at specific rates e.g. Legal and commercial Mortgage deed under article 39 rate is 1% of the instruments amount of instrument with a maximum of 10,000/- of stamp duty payable. Due dates are within 30 days from the date instrument was signed. NATIONAL SOCIAL SECURITY FUND (NSSF) The contribution to the NSSF is 20% of the employee’s gross pay, with both the employer and the employee sharing the burden equally, i.e. 10% each. NSSF contribution is tax deductible in arriving at the employee’s as well as the employer’s taxable income. 2 PKF Worldwide Tax Guide 2010
Tanzania B. DETERMINATION OF TAXABLE INCOME Taxable profits are calculated by ascertaining income and subtracting allowable deductions. To be deductible, expenditure must generally be wholly and exclusively incurred for the purpose of the business. DEPRECIATION Capital allowances are granted for depreciable assets classified as follows: Class I: for computers and data handling equipment; automobiles, buses and mini-buses with a seating capacity of less than 30 passengers; lorries with a load capacity of less than seven tons; and earth moving equipment, the allowance is 37.5%. (diminishing value method) Class II: for trucks, buses (with a seating capacity of 30 ≥ passengers), railroad cars, trailers, locomotives, vessels, barges, tags and other water transportation equipment, aircraft and other self propelling vehicles, plant and machinery including windmills electric generators, specialised public utility plant and equipment, and other irrigation installations and equipment, the rate is 25% (diminishing value method) Class III: for office furniture, fixtures and equipment, and any asset not included in another class, the capital allowance rate is 12.5% (diminishing value method) Class IV: for natural resources exploration and production rights and assets in respect of natural resources prospecting, exploration and development expenditure, the capital allowance rate is 20% (straight-line method) Class V: for buildings, structures, dams, water reservoirs, fences and similar works of a permanent nature used in agriculture, livestock farming or fishing farming, the capital allowance is 20% (straight-line method) Class VI: for buildings, structures and similar works of a permanent nature other than those mentioned in Class 5, the capital allowance rate is 5% (straight-line method) Class VII: for intangible assets other than those in Class IV, the rate is 1 divided by the useful life of the asset in the pool and rounded down to the nearest half year on straight-line basis. Class VIII: plant and machinery (including windmills, electric generators and distribution equipments) used in agriculture are 100% depreciable. There is an initial capital allowance of 50% of the cost of a depreciable asset in the year in which it has been purchased for each plant and machinery used in agriculture, livestock or fish farming, manufacturing process and for hotel fixtures used for providing services to tourists. 100% capital allowances are available to persons carrying on mining operations in respect of development and prospecting capital expenditures. DIVIDENDS Dividends to a company controlling 25% of shares or more are subject to a withholding tax rate of 0% for a resident company, and 10% for a non-resident company. Dividends received from a DSE listed company are liable to withholding tax at a rate of 5% of the gross dividend payable when received by both resident and non-resident persons. Dividend received from other companies is subject to tax at a withholding tax rate of 10%. C. FOREIGN TAX RELIEF Foreign income tax paid by a Tanzanian resident person may be credited against the income tax payable in Tanzania calculated on worldwide income if there is no existing T double-taxation agreement between Tanzania and that foreign country. The foreign tax relief does not exceed the average rate of Tanzanian income tax. Meanwhile, Tanzania has double taxation agreements with Kenya, Uganda, Italy, Sweden, Norway, Denmark, Finland, India and Zambia. D. CORPORATE GROUPS There is no group relief for company losses. It is possible, however, to discuss a way of mitigating a loss situation within a group, e.g. with management expenses with the Comptroller of Income Tax. F. WITHHOLDING TAX The following amounts, when paid to a non-resident person, shall be subjected to non-resident withholding tax rates as shown below: PKF Worldwide Tax Guide 2010 3
Tanzania Any management or 15% of the gross amount payable professional fees Any royalty 15% of the gross amount payable Any rental income (residential 10% payable for a resident company. 15% of the house if exceeds TZS gross amount payable for a non-resident company 500,000/- p.a) Dividend 10% of the gross amount payable Interest 10% of the gross amount payable Technical services fees 5% of the gross amount payable by a resident company and 15% payable by a non-resident (Mining) company Natural Resource Payment 15% of gross amount payable by all company(s) 0% payable by resident company, 5% by non- Insurance Premium resident company Services to Government by persons other than holders of 2% of gross paymentnon-resident company, 15% by resident of gross payment by company TIN registration H. PERSONAL TAX An individual who is resident and has a permanent home in Tanzania is subject to income tax on his worldwide income. Non-residents are normally subject to income tax on income accrued in or derived in the Tanzania at a rate of 15% of the gross amount payable. A person is normally regarded as ordinarily resident if he as a permanent home in Tanzania or was present in Tanzania during the year of income for 183 days or more. A person will also be regarded as ordinarily resident if he was present in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each such year of income. The individual rates of tax for residents are as follows: Income per month Tax rate (TZS) 0 15% of the amount in excess of 100,000 39,000 + 20% of the amount in excess of 360,000 540,000 to 720,000 75,000 + 25% of the amount in excess of 540,000 Above 720,000 120,000 + 30% of the amount in excess of 720,000 Income tax rates for small and medium enterprises are as follows: Turnover (TZS) Tax payable per annum (TZS) 35,000 or 1.1% of the turnover 95,000 or 33,000 plus 1.3% of turnover in excess of 3,000,000 T 291,000 or 85,000 plus 2.5% of turnover in excess of 7,000,000 520,000 or 260,000 plus 3.3% of turnover in excess of 14,000,000 All benefits, whether in cash or kind paid by an employer to employee are subject to PAYE. Some of the benefits in kind are: Payments consisting of the availability for use or use of a motor vehicle, the PAYE on this based on the engine size of the motor vehicles. Provision of interest free loans to employees, where the PAYE is based on the preferential interest rate (difference between the preferential interest rate and the rate charged by the employer to the employee, if any). Provision of housing facilities by the employer to the employee. 4 PKF Worldwide Tax Guide 2010
Tanzania The establishment of tax residency is a complicated area because the tax law has not been merged with the immigration law. The tax residency is 183 days. However, one cannot be a resident in Tanzania unless one has a residence permit issued by the Immigration Department ie work permit. The following guide may be useful: Payments made to the assignee for services rendered in Tanzania prior to obtaining a work permit as fees payable to non-resident: withholding tax is payable on such fees at the rate of 15%. Payments attributable to employment exercised, service rendered or forbearance from exercising employment or rendering service in the United Republic of Tanzania, regardless of the place of payment: the appropriate rate of withholding tax on such payments is also 15%. If the work permit is not obtained after the expiry of 183 days, the payments made to such an individual can still be subject to withholding tax. PAYE (pay as you earn) is payable within seven days after the end of each calendar month to which it relates. Failure to pay PAYE on or before the due date attracts interest for each month or part of month for which any of the tax is outstanding calculated as the statutory rate, compounded monthly, applied to the amount outstanding at the start of the period. Statutory rate in relation to a calendar year means the Bank of Tanzania discount rate at the start of the year (currently 17.53%). Normally work permits are issued for two years. Include the assignee in the payroll in the month in which a work permit is issued. There is no special tax treatment for expatriates. There is no gross up applied in Tanzania. The tax authorities are satisfied as long as the correct amount of tax is paid; they are not concerned as to who actually pays the tax. SPECIAL RULES FOR EXPATRIATES The system of tax clearance for expatriates departing from Tanzania was abolished in 1996. The employer simply removes the assignee from the payroll. Payments consisting of retirement contributions and payment for redundancy or loss of termination of employment are subject to PAYE. The passage between Tanzania and any place outside Tanzania which is paid for by the employer for non-Tanzanian employees recruited outside Tanzania is tax-free in Tanzania. I. TREATY WITHHOLDING TAX RATES None of the treaties entered into by Tanzania with other territories reduce the rate of withholding tax on payments of dividends, interest or royalties to non-residents below the domestic rates. T PKF Worldwide Tax Guide 2010 5
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Tanzania pkf tax guide 2010

  • 1.
  • 2.
    FOREWORD Foreword For any business looking to set up in a new market, one of the critical deciding factors will be the target country’s tax regime. What is the corporate tax rate? What capital allowances can we benefit from? Are there double tax treaties? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, which is administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide businesses with the answers to these key tax questions. This handy reference manual provides clients and professional practitioners with comprehensive international tax and business information for over 100 countries throughout the world. As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all the member firms of the PKF network who gave up their time to contribute the vital information on their country’s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Rachel Yeo and Scott McKay, PKF Melbourne for co-ordinating and checking the entries from within their regions. This year’s WWTG is the largest ever reflecting both how the PKF network is growing and the strength of the tax capability offered by member firms throughout the world. I hope that you find that the combination of reference to the WWTG plus assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business. Mark Pollock PKF Perth Chairman, International Tax Committee of the PKF network PKF Worldwide Tax Guide 2010 I
  • 3.
    IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. Disclaimer This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. II PKF Worldwide Tax Guide 2010
  • 4.
    PREFACE The PKF Worldwide Tax Guide 2010 (WWTG) has been prepared to provide an overview of the taxation and business regulation regimes of over 100 of the world’s most significant trading countries. In compiling this publication, member firms of the PKF network have sought to base their summaries on information current as of 30 September 2009, while also noting imminent changes where necessary. On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country’s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. Preface While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at www.pkf.com Finally, PKF International Limited gladly welcomes any comments or thoughts readers may wish to make in order to improve this publication for their needs. Please contact Kevin F Reilly, PKF Witt Mares, 10304 Eaton Place, Suite 440, Fairfax, Virginia 22030, USA by email to kreilly@pkfwittmares.com PKF INTERNATIONAL LIMITED APRIL 2010 ©PKF INTERNATIONAL LIMITED ALL RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION VI PKF Worldwide Tax Guide 2010
  • 5.
    ABOUT PKF INTERNATIONALLIMITED PKF International Limited (PKFI) administers a network of legally independent firms. The PKF network is the 11th largest global accountancy network with over 240 legally independent member and correspondent firms which have a combined annual turnover of $1.9 billion. Located in 125 countries, the member firms of the PKF network share a commitment to providing clients with high quality, partner-led services tailored to meet each client’s own specific requirements. The membership base of the PKF network has grown steadily since it was formed in 1969. Added to the sustained growth in the number of PKF member firms, this solidity has provided the foundations for the global sharing of expertise, experience and skills and the development of services that meet the evolving needs of all types of client, from the individual to the multi-national corporation. Services provided by member firms include: Introduction Assurance & Advisory Insolvency – Corporate & Personal Financial Planning Taxation Corporate Finance Forensic Accounting Management Consultancy Hotel Consultancy IT Consultancy PKF member firms are organised into five geographical regions covering Africa; Latin America and the Caribbean; Asia Pacific; Europe, the Middle East & India (EMEI); and North America. Each region elects representatives to the board of PKF International Limited, which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy and business development committees also work together to improve quality standards, develop initiatives and share knowledge across the network. Please visit www.pkf.com for more information. PKF Worldwide Tax Guide 2010 VII
  • 6.
    STRUCTURE OF COUNTRYDESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES B. DETERMINATION OF TAXABLE INCOME CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS Structure LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES VIII PKF Worldwide Tax Guide 2010
  • 7.
    INTERNATIONAL TIME ZONES AT12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME ELSEWHERE IS: A I Angola . . . . . . . . . . . . . . . . . . . .1 pm India . . . . . . . . . . . . . . . . . . . 5.30 pm Argentina . . . . . . . . . . . . . . . . . . 9 am Indonesia. . . . . . . . . . . . . . . . . . .7 pm Australia - Ireland. . . . . . . . . . . . . . . . . . 12 noon Melbourne . . . . . . . . . . . . .10 pm Israel. . . . . . . . . . . . . . . . . . . . . .2 pm Sydney . . . . . . . . . . . . . . .10 pm Italy . . . . . . . . . . . . . . . . . . . . . .1 pm Adelaide . . . . . . . . . . . . 9.30 pm Perth. . . . . . . . . . . . . . . . . .8 pm J Austria . . . . . . . . . . . . . . . . . . . .1 pm Jamaica . . . . . . . . . . . . . . . . . . . 7 am Japan . . . . . . . . . . . . . . . . . . . . .9 pm B Jersey. . . . . . . . . . . . . . . . . . 12 noon Bahamas. . . . . . . . . . . . . . . . . . . 7 am Jordan . . . . . . . . . . . . . . . . . . . .2 pm Bahrain . . . . . . . . . . . . . . . . . . . .3 pm Barbados. . . . . . . . . . . . . . . . . . . 8 am K Belgium. . . . . . . . . . . . . . . . . . . .1 pm Kazakhstan . . . . . . . . . . . . . . . . .5 pm Belize . . . . . . . . . . . . . . . . . . . . . 6 am Kenya . . . . . . . . . . . . . . . . . . . . .3 pm Bermuda . . . . . . . . . . . . . . . . . . . 8 am Korea . . . . . . . . . . . . . . . . . . . . .9 pm Bolivia . . . . . . . . . . . . . . . . . . . . . 8 am Kuwait. . . . . . . . . . . . . . . . . . . . .3 pm Botswana . . . . . . . . . . . . . . . . . .2 pm Time Zones Brazil. . . . . . . . . . . . . . . . . . . . . . 7 am L Brunei . . . . . . . . . . . . . . . . . . . . .8 pm Latvia . . . . . . . . . . . . . . . . . . . . .2 pm Bulgaria. . . . . . . . . . . . . . . . . . . .2 pm Lebanon . . . . . . . . . . . . . . . . . . .2 pm Leeward Islands C (Nevis, Antigua, St Kitts) . . . . 8 am Cameroon . . . . . . . . . . . . . . . . . .1 pm Libya. . . . . . . . . . . . . . . . . . . . . .2 pm Canada - Liberia. . . . . . . . . . . . . . . . . . 12 noon Toronto . . . . . . . . . . . . . . . . 7 am Lithuania . . . . . . . . . . . . . . . . . . .2 pm Winnipeg. . . . . . . . . . . . . . . 6 am Luxembourg . . . . . . . . . . . . . . . .1 pm Calgary . . . . . . . . . . . . . . . . 5 am Vancouver . . . . . . . . . . . . . . 4 am M Cayman Islands . . . . . . . . . . . . . . 7 am Malaysia . . . . . . . . . . . . . . . . . . .8 pm Chile . . . . . . . . . . . . . . . . . . . . . . 8 am Malta . . . . . . . . . . . . . . . . . . . . .1 pm China - Beijing. . . . . . . . . . . . . .10 pm Mauritius. . . . . . . . . . . . . . . . . . .4 pm Colombia. . . . . . . . . . . . . . . . . . . 7 am Mexico . . . . . . . . . . . . . . . . . . . . 6 am Costa Rica. . . . . . . . . . . . . . . . . . 6 am Morocco . . . . . . . . . . . . . . . . 12 noon Croatia . . . . . . . . . . . . . . . . . . . .1 pm Cyprus . . . . . . . . . . . . . . . . . . . .2 pm N Czech Republic . . . . . . . . . . . . . .1 pm Namibia. . . . . . . . . . . . . . . . . . . .2 pm Netherlands (The). . . . . . . . . . . . .1 pm D Netherlands Antilles . . . . . . . . . . . 8 am Denmark . . . . . . . . . . . . . . . . . . .1 pm New Zealand . . . . . . . . . . .12 midnight Dominican Republic . . . . . . . . . . . 7 am Nigeria . . . . . . . . . . . . . . . . . . . .1 pm Norway . . . . . . . . . . . . . . . . . . . .1 pm E Ecuador. . . . . . . . . . . . . . . . . . . . 7 am O Egypt . . . . . . . . . . . . . . . . . . . . .2 pm Oman . . . . . . . . . . . . . . . . . . . . .4 pm El Salvador . . . . . . . . . . . . . . . . . 6 am Estonia . . . . . . . . . . . . . . . . . . . .2 pm P Panama. . . . . . . . . . . . . . . . . . . . 7 am F Papua New Guinea. . . . . . . . . . .10 pm Fiji . . . . . . . . . . . . . . . . .12 midnight Peru . . . . . . . . . . . . . . . . . . . . . . 7 am Finland . . . . . . . . . . . . . . . . . . . .2 pm Philippines. . . . . . . . . . . . . . . . . .8 pm France. . . . . . . . . . . . . . . . . . . . .1 pm Poland. . . . . . . . . . . . . . . . . . . . .1 pm Portugal . . . . . . . . . . . . . . . . . . .1 pm G Puerto Rico . . . . . . . . . . . . . . . . . 8 am Gambia (The). . . . . . . . . . . . . 12 noon Germany . . . . . . . . . . . . . . . . . . .1 pm Q Ghana . . . . . . . . . . . . . . . . . . 12 noon Qatar. . . . . . . . . . . . . . . . . . . . . . 8 am Greece . . . . . . . . . . . . . . . . . . . .2 pm Romania . . . . . . . . . . . . . . . . . . .2 pm Grenada . . . . . . . . . . . . . . . . . . . 8 am Russia - Guatemala. . . . . . . . . . . . . . . . . . 6 am Moscow/St Petersburg . . . . .3 pm Guernsey. . . . . . . . . . . . . . . . 12 noon Guyana . . . . . . . . . . . . . . . . . . . . 8 am S Sierra Leone . . . . . . . . . . . . . 12 noon H Singapore . . . . . . . . . . . . . . . . . .7 pm Hong Kong . . . . . . . . . . . . . . . . .8 pm Slovak Republic . . . . . . . . . . . . . .1 pm Hungary . . . . . . . . . . . . . . . . . . .1 pm South Africa. . . . . . . . . . . . . . . . .2 pm PKF Worldwide Tax Guide 2010 IX
  • 8.
    Spain . .. . . . . . . . . . . . . . . . . . .1 pm Swaziland . . . . . . . . . . . . . . . . . .2 pm Sweden. . . . . . . . . . . . . . . . . . . .1 pm Switzerland . . . . . . . . . . . . . . . . .1 pm T Taiwan . . . . . . . . . . . . . . . . . . . .8 pm Tanzania . . . . . . . . . . . . . . . . . . .3 pm Thailand . . . . . . . . . . . . . . . . . . .7 pm Trinidad and Tobago . . . . . . . . . . . 8 am Turkey . . . . . . . . . . . . . . . . . . . . .2 pm Turks and Caicos Islands . . . . . . . 7 am U Uganda . . . . . . . . . . . . . . . . . . . .2 pm Ukraine . . . . . . . . . . . . . . . . . . . .2 pm United Arab Emirates . . . . . . . . . .4 pm United Kingdom . . . . . . .(GMT) 12 noon United States of America - New York City. . . . . . . . . . . . 7 am Washington, D.C. . . . . . . . . . 7 am Chicago. . . . . . . . . . . . . . . . 6 am Houston. . . . . . . . . . . . . . . . 6 am Denver . . . . . . . . . . . . . . . . 5 am Time Zones Los Angeles. . . . . . . . . . . . . 4 am San Francisco . . . . . . . . . . . 4 am Uruguay . . . . . . . . . . . . . . . . . . . 9 am V Vanuatu. . . . . . . . . . . . . . . . . . .11 pm Venezuela . . . . . . . . . . . . . . . . . . 8 am Vietnam Z Zambia . . . . . . . . . . . . . . . . . . . .2 pm X PKF Worldwide Tax Guide 2010
  • 9.
    Tanzania TANZANIA Currency: Shillings Dial Code To: 255 Dial Code Out: 00 (TZS) Member Firm: City: Name: Contact Information: Dar es Salaam Sujata Jaffer 22 212 0806 sjaffer@tz.pkfea.com A. TAXES PAYABLE CENTRAL GOVERNMENT TAXES AND LEVIES CORPORATION TAX Tanzania resident companies are liable to corporation tax on all sources of income and deemed income (such as gains on sale of plant and machinery, commonly referred to as trading receipt), after deductions of all expenses that are wholly and exclusively for the purpose of the trade, accrued in or derived worldwide. A company is resident in Tanzania if it is incorporated in Tanzania, or its management and control was exercised in Tanzania during the year of income, or it has a permanent domestic establishment in Tanzania. A non-resident company is taxed in Tanzania to the extent that the income has been sourced in the United Republic of Tanzania. The corporation tax is computed on the corporation’s taxable profits by using the corporate tax rate in force at the end of the year of income. The current corporation tax rate is 30% for both resident and non-resident companies. Corporations, both resident and non-resident, are required to file a statement of estimated tax payable within three months after commencement of the accounting period. The estimated tax is payable by quarterly instalment. The return of income and accounts of a person for any year of income is required to be submitted within six months after the expiry of the accounting period. Unless approved by the Commissioner for Income Tax, the accounting period of any person shall coincide with the calendar year (year of income). The due date of filing the return of income is also the due date of paying the final tax. Companies with perpetual tax loss for three consecutive years as a result of tax incentives on investments are liable to 0.3% of annual turnover for both residents and non- residents. A newly listed company to the Dar es Salaam stock exchange which has at least 35% of its shares issued to the public will be liable to a 25% rate for both resident and non-resident companies for three consecutive years from date of listing. The total income of a domestic permanent establishment of a non-resident person is liable to a 30% corporation tax rate plus 10% on repatriated profits. CAPITAL GAINS TAX The sale of interest in land or buildings and financial assets (shares) attracts capital gains tax. Shares of companies quoted on the Dar es Salaam Stock Exchange are exempt from capital gains tax. The capital gains tax rate is 10% and 20% of the T adjusted cost for resident and non-residents persons respectively. BRANCH PROFITS TAX A Tanzanian branch of a non-resident company is usually referred to as the domestic permanent establishment under the Income Tax Act 2004. The domestic permanent establishment is liable to 30% corporate income tax as well as 10% withholding tax on the repatriated profits. Repatriated profits include any profits remaining unappropriated in the accounts of the company. SALES TAXES/VALUE ADDED TAX (VAT) VAT standard rate is 18% of the taxable value of taxable imports and supplies of goods and services made by taxable persons within mainland Tanzania. Zanzibar, which is part of the United Republic of Tanzania, has its own VAT law which, in many respects, is similar to that of the mainland. PKF Worldwide Tax Guide 2010 1
  • 10.
    Tanzania Certain supplies such as insurance, education, financial services and tourist services are exempt from VAT while exports and supplies of human and livestock medicine are zero rated. VAT is charged and collected by registered persons carrying on business (output tax) and must be remitted to the Commissioner for VAT on or before the end of the lasting working day of the month following the month to which such return relates. The registration threshold is TZS 40m/- per annum or taxable turnover exceeding TZS 10m/- attained during three consecutive months. Penalties and interests are charged on late payments. Registered business entities may claim the VAT that they pay on business purchases (input VAT). This, however, does not apply in case of non-creditable purchases such as importation or purchase of motorcars, business entertainment and input VAT incurred in order to acquire exempt supplies. VAT repayment is made where a taxable person has filed excess credit returns for six consecutive months or such person’s monthly VAT returns regularly result in excess credits. VAT on capital goods (plant and machinery, excluding motor vehicles) is relieved and the import duty is 0%. A separate application can be made to the Commissioner for Customs to deem motor vehicles as capital goods. Goods and services provided under a technical aid or donor funded project, voluntary and charitable organisation under existing laws, and special agreements are relieved from VAT. The Government and its Institutions are not relieved from VAT. SKILLS AND DEVELOPMENT LEVY The levy is imposed by the Vocational Education and Training (VETA) levy and is payable by an employer who employs four or more employees during the month or part thereof. The rate of tax is 6% of the total gross emoluments paid to such employees during the month. The expense is income tax deductible. It is an offence, punishable by fine and imprisonment, to recover this tax from employees. LOCAL TAXES The following tax/levy is charged and collected by the local authorities: carrying on business in the respective local authority. The rate of tax is 0.3% of the business turnover. It is now a tax-deductible expense. OTHER TAXES Stamp duty is payable on a wide range of transactions. There is no stamp duty on receipt of cash with effect from 1 July 2004. Such transactions as lease agreements, conveyance and transfer of shares are still liable to stamp duty. Most of the instruments are required to be stamped before they become legal documents. Stamp duty on the aforementioned instruments is 1%. STAMP DUTY Description Rates Conveyance 1% of consideration T Conveyance for agricultural TZS 500/- land Receipts on sales of goods or Exempted services for business The duty is chargeable at specific rates e.g. Legal and commercial Mortgage deed under article 39 rate is 1% of the instruments amount of instrument with a maximum of 10,000/- of stamp duty payable. Due dates are within 30 days from the date instrument was signed. NATIONAL SOCIAL SECURITY FUND (NSSF) The contribution to the NSSF is 20% of the employee’s gross pay, with both the employer and the employee sharing the burden equally, i.e. 10% each. NSSF contribution is tax deductible in arriving at the employee’s as well as the employer’s taxable income. 2 PKF Worldwide Tax Guide 2010
  • 11.
    Tanzania B. DETERMINATION OFTAXABLE INCOME Taxable profits are calculated by ascertaining income and subtracting allowable deductions. To be deductible, expenditure must generally be wholly and exclusively incurred for the purpose of the business. DEPRECIATION Capital allowances are granted for depreciable assets classified as follows: Class I: for computers and data handling equipment; automobiles, buses and mini-buses with a seating capacity of less than 30 passengers; lorries with a load capacity of less than seven tons; and earth moving equipment, the allowance is 37.5%. (diminishing value method) Class II: for trucks, buses (with a seating capacity of 30 ≥ passengers), railroad cars, trailers, locomotives, vessels, barges, tags and other water transportation equipment, aircraft and other self propelling vehicles, plant and machinery including windmills electric generators, specialised public utility plant and equipment, and other irrigation installations and equipment, the rate is 25% (diminishing value method) Class III: for office furniture, fixtures and equipment, and any asset not included in another class, the capital allowance rate is 12.5% (diminishing value method) Class IV: for natural resources exploration and production rights and assets in respect of natural resources prospecting, exploration and development expenditure, the capital allowance rate is 20% (straight-line method) Class V: for buildings, structures, dams, water reservoirs, fences and similar works of a permanent nature used in agriculture, livestock farming or fishing farming, the capital allowance is 20% (straight-line method) Class VI: for buildings, structures and similar works of a permanent nature other than those mentioned in Class 5, the capital allowance rate is 5% (straight-line method) Class VII: for intangible assets other than those in Class IV, the rate is 1 divided by the useful life of the asset in the pool and rounded down to the nearest half year on straight-line basis. Class VIII: plant and machinery (including windmills, electric generators and distribution equipments) used in agriculture are 100% depreciable. There is an initial capital allowance of 50% of the cost of a depreciable asset in the year in which it has been purchased for each plant and machinery used in agriculture, livestock or fish farming, manufacturing process and for hotel fixtures used for providing services to tourists. 100% capital allowances are available to persons carrying on mining operations in respect of development and prospecting capital expenditures. DIVIDENDS Dividends to a company controlling 25% of shares or more are subject to a withholding tax rate of 0% for a resident company, and 10% for a non-resident company. Dividends received from a DSE listed company are liable to withholding tax at a rate of 5% of the gross dividend payable when received by both resident and non-resident persons. Dividend received from other companies is subject to tax at a withholding tax rate of 10%. C. FOREIGN TAX RELIEF Foreign income tax paid by a Tanzanian resident person may be credited against the income tax payable in Tanzania calculated on worldwide income if there is no existing T double-taxation agreement between Tanzania and that foreign country. The foreign tax relief does not exceed the average rate of Tanzanian income tax. Meanwhile, Tanzania has double taxation agreements with Kenya, Uganda, Italy, Sweden, Norway, Denmark, Finland, India and Zambia. D. CORPORATE GROUPS There is no group relief for company losses. It is possible, however, to discuss a way of mitigating a loss situation within a group, e.g. with management expenses with the Comptroller of Income Tax. F. WITHHOLDING TAX The following amounts, when paid to a non-resident person, shall be subjected to non-resident withholding tax rates as shown below: PKF Worldwide Tax Guide 2010 3
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    Tanzania Any management or 15% of the gross amount payable professional fees Any royalty 15% of the gross amount payable Any rental income (residential 10% payable for a resident company. 15% of the house if exceeds TZS gross amount payable for a non-resident company 500,000/- p.a) Dividend 10% of the gross amount payable Interest 10% of the gross amount payable Technical services fees 5% of the gross amount payable by a resident company and 15% payable by a non-resident (Mining) company Natural Resource Payment 15% of gross amount payable by all company(s) 0% payable by resident company, 5% by non- Insurance Premium resident company Services to Government by persons other than holders of 2% of gross paymentnon-resident company, 15% by resident of gross payment by company TIN registration H. PERSONAL TAX An individual who is resident and has a permanent home in Tanzania is subject to income tax on his worldwide income. Non-residents are normally subject to income tax on income accrued in or derived in the Tanzania at a rate of 15% of the gross amount payable. A person is normally regarded as ordinarily resident if he as a permanent home in Tanzania or was present in Tanzania during the year of income for 183 days or more. A person will also be regarded as ordinarily resident if he was present in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each such year of income. The individual rates of tax for residents are as follows: Income per month Tax rate (TZS) 0 15% of the amount in excess of 100,000 39,000 + 20% of the amount in excess of 360,000 540,000 to 720,000 75,000 + 25% of the amount in excess of 540,000 Above 720,000 120,000 + 30% of the amount in excess of 720,000 Income tax rates for small and medium enterprises are as follows: Turnover (TZS) Tax payable per annum (TZS) 35,000 or 1.1% of the turnover 95,000 or 33,000 plus 1.3% of turnover in excess of 3,000,000 T 291,000 or 85,000 plus 2.5% of turnover in excess of 7,000,000 520,000 or 260,000 plus 3.3% of turnover in excess of 14,000,000 All benefits, whether in cash or kind paid by an employer to employee are subject to PAYE. Some of the benefits in kind are: Payments consisting of the availability for use or use of a motor vehicle, the PAYE on this based on the engine size of the motor vehicles. Provision of interest free loans to employees, where the PAYE is based on the preferential interest rate (difference between the preferential interest rate and the rate charged by the employer to the employee, if any). Provision of housing facilities by the employer to the employee. 4 PKF Worldwide Tax Guide 2010
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    Tanzania The establishment oftax residency is a complicated area because the tax law has not been merged with the immigration law. The tax residency is 183 days. However, one cannot be a resident in Tanzania unless one has a residence permit issued by the Immigration Department ie work permit. The following guide may be useful: Payments made to the assignee for services rendered in Tanzania prior to obtaining a work permit as fees payable to non-resident: withholding tax is payable on such fees at the rate of 15%. Payments attributable to employment exercised, service rendered or forbearance from exercising employment or rendering service in the United Republic of Tanzania, regardless of the place of payment: the appropriate rate of withholding tax on such payments is also 15%. If the work permit is not obtained after the expiry of 183 days, the payments made to such an individual can still be subject to withholding tax. PAYE (pay as you earn) is payable within seven days after the end of each calendar month to which it relates. Failure to pay PAYE on or before the due date attracts interest for each month or part of month for which any of the tax is outstanding calculated as the statutory rate, compounded monthly, applied to the amount outstanding at the start of the period. Statutory rate in relation to a calendar year means the Bank of Tanzania discount rate at the start of the year (currently 17.53%). Normally work permits are issued for two years. Include the assignee in the payroll in the month in which a work permit is issued. There is no special tax treatment for expatriates. There is no gross up applied in Tanzania. The tax authorities are satisfied as long as the correct amount of tax is paid; they are not concerned as to who actually pays the tax. SPECIAL RULES FOR EXPATRIATES The system of tax clearance for expatriates departing from Tanzania was abolished in 1996. The employer simply removes the assignee from the payroll. Payments consisting of retirement contributions and payment for redundancy or loss of termination of employment are subject to PAYE. The passage between Tanzania and any place outside Tanzania which is paid for by the employer for non-Tanzanian employees recruited outside Tanzania is tax-free in Tanzania. I. TREATY WITHHOLDING TAX RATES None of the treaties entered into by Tanzania with other territories reduce the rate of withholding tax on payments of dividends, interest or royalties to non-residents below the domestic rates. T PKF Worldwide Tax Guide 2010 5
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