VAT LECTURE TWO -IMPOSITION AND REGISTRATION.pdf

BAIT 3
TMU 08212: ADVANCED BUSINESS
TAXATION
TOPIC ONE: VALUE ADDED TAX (VAT)
LECTURE II: IMPOSITION OF VAT IN TANZANIA AND ITS
REGISTRATION
Year 2023/2024
1
VALUE ADDED TAX (VAT) BY: NYANTAMBA

IMPOSITION OF VALUE ADDED TAX IN TANZANIA
VAT shall be imposed and payable on taxable supplies and
taxable imports
Transfer of Taxable goods
❖ T/Zanzibar T/ Mainland
If Rate(T/znz) = Rate(T/mainland) = No VAT to paid in T/mainland
If Rate(T/znz) < Rate(T/mainland) = The difference shall be collected by TRA
❖ T/Zanzibar T/ Mainland
Supply is made directly by a taxable person in M/Tanzania
to taxable person in T/Zanzibar, TRA shall collect the VAT
and remit it to the ZRA.
2

PERSONS LIABLE TO PAY VAT
 Taxable import ⇨ the importer
 Taxable supply (M/land TZ) ⇨ the supplier
 Taxable supply (imported services) ⇨ the
purchaser
3

THE AMOUNT OF VAT
VAT = Value o f the supply or import × rate
For standard rate is 18%
For Zero rated is 0%
Note:
✓ If supply is both exempt and zero-rated,
the supply shall be zero rated
✓ If supply is both exempt and standard rate,
the supply shall be standard rate
4

VAT TAXABLE PERSON
Who is Taxable person?
A registered person or a person who is required to be
registered for VAT under VAT Act, 2014
Person means:-
❖An individual
❖A company
❖An association of persons
❖A Government entity
❖A foreign Govt or a political sub of a foreign Govt
❖NGOs
❖A public international organization
5

VAT -REGISTRATION
Types of VAT Registration
1)Normal 2) compulsory 3) Intending trader registration
1. NORMAL/VOLUNTARY REGISTRATION
Occurs after taxpayer meeting the requirements apply for
registration: Either two of the tests may be used
A. Future prospect test: A person shall be registered for VAT when
➢ Expecting turnover in 12months commencing at the beginning of the
previous month ≥ reg. threshold
➢ Expecting turnover in 6 months commencing at the beginning of the previous
month ≥ ½ reg. threshold
B. Historical turnover test: A person is required to be registered for VAT if:-
➢ person’s turnover is ≥ reg. threshold for12 months ending at the end of the
previous month
➢ Person’s turnover is ≥ ½ reg. threshold for 6months ending at the end of the
previous month
6

2. COMPULSORY REGISTRATION
The commissioner General may register the
person under the following conditions
a) Person is required to be registered for VAT, has
not applied for registration(normal registration),
not later than 14 days the CG shall register the
person and notify the person immediately after
registration
b) For good reason including protection of Govt
revenue, may register the person regardless of
the person’s turnover
7

3. REGISTRATION FOR INTENDING TRADER
Intending trader means any person who is in the process of
setting up an economic activity with the intention of making
taxable supplies with a turnover in excess of the value added
tax registration threshold but has not yet commenced to make
taxable supplies.
➢ Person may be registered by CG as intending trader
under following conditions-
➢ Provision of evidence to satisfy the CG intention to
commence an economic activity e.g. contracts,
tenders, business plans, bank financing
➢ Will make taxable supplies once registered
➢ Specify the period commencement of production of
taxable supplies.
8

Registrations Of Branches And Divisions
➢ Businesses with more than one set of premises
(branches) or autonomous units within same
legal entity shall be a single registration,
➢ Shall cover all economic activities undertaken
by that person’s branches divisions.
➢ All returns are amalgamated for completion of
a single VAT return

9

Person’s Turnover
A person’s turnover is sum of :
➢ Total value of supplies made, or to be made, by the
person and
➢ Total value of supplies of imported services made, or to
be made, to the person during the period that would be
taxable supplies if the person was a taxable person
during that period.
Note
A person’s turnover in respect of supplies of imported
services shall be considered for registration where that
person has a turnover resulting from taxable supplies
other than supplies of imported services (Regu. 10(2))
10

Example
Nchimunya started running a retail business making standard
rated taxable supplies on 1 June 2022. She made sales of Tshs
6,000,000 in the month of June. Her sales increased by Tshs
21,000,000 each month from July 2022 to November 2022. From
December 2022, she expects sales to be Tshs 17,000,000 per
month. Her standard rated expenses were Tshs 35,000,000 per
month and are expected to remain at this level in future.
Nchimunya is not sure whether she is required to register her
business for Value Added Tax.
a) Explain the Value Added Tax registration requirements to
Nchimunya
b) State, giving reasons, when Nchimunya will be required to
register for VAT
c) Explain three (3) obligations Nchimunya will have once she
registers her business for VAT
11

Exclusion on Person’s Turnover
➢The value that would not be a taxable
if the person were a taxable person
➢The value of a sale of a capital asset
➢The value as a consequence of selling
an economic activity or part of it.
➢The value as a consequence of
permanently ceasing to carry on an
economic activity
12

Exception on Registration Threshold
A person shall be required to be registered for VAT
if
➢The person supplying of professional services in
Mainland TZ and supplies of professional
services in M/TZ made by a person who is
permitted, approved, licensed, or belongs to a
professional association
➢A Govt entity or institution which carries on
economic activity
13

TIME OF APPLICATIONS FOR REGISTRATION
➢Apply to CG within 30 days from the date of
such requirement
➢Once satisfied that an applicant qualifies,CG
shall register such person
➢Notify the applicant within 14 days of the
application
14

NOTE
➢CG shall issue a registration certificate
to the registered person
➢A registered person shall use Taxpayer
Identification Number(TIN) and a Value
Added Tax Registration Number(VRN)
on all documents required to be issued
under VAT Act.
15

VAT REGISTRATION THRESHOLD
➢The level at which registration for the VAT becomes
compulsory is called VAT registration threshold.
➢now TSHS 200,000,000.
Important?
Yes! determines the efficiency operation of the VAT.
⇨Low threshold level includes many firms as taxable
persons which may exceeds tax authority
administration capacity
⇨ High threshold eliminates many small firms from
being included in the VAT population but it is
manageable
16

CONSEQUENCES/EFFECTS OF VAT REGISTRATION
➢ Person becomes a taxable person
➢ Enjoying benefits but with
responsibilities
⇨Ability of deducting input taxes incurred
when buying taxable goods and services
⇨ Becomes agent of TRA on collecting
taxes on all taxable goods and services
made by him.
17

Issuing electronic fiscal receipts(Tax invoice)
➢ Taxable person are supposed to issue
electronic fiscal receipts(EFR).
➢ EFR acknowledge both VAT received or
payable and the debts or cash received
from taxable transactions WHILE normal
receipts acknowledge receipt of cash or
debts
➢ Price advertised or quoted shall be VAT
inclusive
18

TAX INVOICE
➢ A registered person who makes a
taxable supply shall, no later than the
day on which VAT becomes payable on
the supply
➢ Issue a serially numbered true and
correct tax invoice generated by EFD for
the supply.
19

CONTENTS OF TAX INVOICE
➢ Date on which it is issued
➢ The name, TIN and VRN of the supplier
➢ The description & quantity
➢ The total consideration and the amount of VAT
➢ If the value of the supply exceeds the minimum amount
prescribed in the regulations, the name, address, TIN
and VRN of the customer
➢ Any other additional information as may be prescribed
in the regulations
➢ Original tax invoice shall be issued for each taxable
supply 20

CREDIT NOTE
➢ It is a commercial document issued by a seller to
a buyer
➢ Taxable person who had issued EFR in respect of
taxable supply must issue a credit note when:-
a) The supply is cancelled
b) The goods are returned to the registered taxable
person
c) The value of the supply is reduced
Credit note must include all features of EFR, the
amount of credit and a statement of the reason for
credit
21

KEEPING RECORDS
Registered person should keep the following records:
 Value of each supply excluding VAT and the VAT
charged
 Total VAT recorded for each accounting period
 Payment made or received showing the date,
amount and the person making or receiving the
payment.
 All goods appropriate or taken into person use or into
the use of other, the date of appropriation or taking
into use, the description of the goods, the value of
goods excluding VAT calculated on the goods.
22

RECORDS…
➢ Copies of all VAT electronic fiscal receipts
issued.
➢ A record of all outputs that is sales day
book
➢ Evidence supporting claims for the
recovery of input VAT that electronic fiscal
receipts.
➢ A record of all input, eg purchase day book
➢ VAT account
23

A CANCELLATION OF REGISTRATION
A registered person may apply for cancellation if:-
a) Permanently ceased to make taxable supplies
b) Fails to maintain the registration threshold
Application shall be made within 14 days
CG may cancel registration of the person if:-
a) Registered by providing false or misleading
information
b) Not carrying on an economic activity
c) Ceases to produce taxable supplies
d) Taxable turnover falls below registration threshhod
24

EFFECTS OF CANCELLATION
A person whose registration is cancelled shall
a) Shall cease to be registered person
b) Shall cease to use and issue Tax invoice
c) Shall surrender VAT registration certificate
d) Within 30 days file the final VAT return
and pay all taxes under this Act
NOTE: CG shall maintain list of all registered
including their history and make available
when required
25

Example One
Tinashana Ltd is the owner of a new company dealing
with selling of mixed supplies in Arusha town. The
business started two years ago. She needs to know some
issues on tax compliance especially on Value Added Tax
(VAT).
Required:
Assist her on the following areas of issues:
(i) How does one become VAT taxable traders? (ii) Briefly
explain how one can stop to be taxable trader. (CPA (T))

Example Two
The trader in some circumstances or conditions is
required to be registered for VAT and again may apply
for cancellation. The Commissioner in some
circumstance has powers to deregister a trader.
Required:
Explain at least four (4) reasons where Commissioner
may be required to do so. CPA (T)
27

Review questions
Question 1
a) Explain the types of registration for the purposes of Value
Added Tax (VAT)
b) List any Six (6) contents which must appear on the tax
invoice
c) Describe three (4) circumstances which may result in a
business being de-registered for VAT
d) It has sometimes been suggested that the current TZS 100
million turnover thresholds for VAT registration and the
18% VAT single rate should be reduced to TZS 50 million
and 15% respectively. What is the basis or justification for
the above suggestion?
28

VAT LECTURE TWO -IMPOSITION AND REGISTRATION.pdf

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