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
5. 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
6. 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
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 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
12. 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
13. 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
