Tanzania VAT Guide

• What is VAT?
• How should I register for VAT?
• VAT returns and tax payment
• How does VAT work in Tanzania?
• VAT rate structure
• VAT refund
• VAT relief
• Payment and accounting for VAT
• Online submission of VAT returns
• VAT exemption
• Vatable goods between Mainland and Zanzibar

What is VAT?

VAT is Value Added Tax that is charged on goods, services, and economic activities that add value to the item being sold at every stage. VAT in Tanzania is charged on local and imported goods and services. Exports are zero-rated.

How should I register for VAT?

Taxpayers, whether an individual or an entity, will have to register on the system and will receive an Electronic Filer Identification Number (e-fin) and then a temporary password that can be used to create their own password and file returns.

VAT returns and tax payment

A VAT payment is submitted to the TRA through a VAT return form through an e-filing or in paper form. It is to be paid on the 20th day of the following month for which the VAT is being paid. If the 20th day is a Sunday or a holiday, it will be payable on the following working day.

How does VAT work in Tanzania?

A Value-added tax (VAT) is charged to all goods and services that are notified as taxable in or imported by an entity into the United Republic of Tanzania at a rate of 18% in Mainland Tanzania and 15% in Tanzania Zanzibar. However, the export of goods and some services are zero-rated.

VAT rate structure

The VAT rates are as follows:

VAT refund

When the taxpayer's payments are in excess of the amount due or when his tax liabilities are exhausted, the difference amount is payable to the taxpayer. This is a VAT refund paid through the Interbank Settlement System (TISS) or through his/her bank account. The form for this application is VAT ITX260.02E. The form is to be submitted along with a certificate of genuineness issued by an authorized auditor registered by the National Board of Accountants and Auditors and registered as a tax consultant with the Tanzania Revenue Authority. The taxpayer must also submit a calculation of the refundable amount. The refund is subject to the decision of the Upon receipt of the refund claim. The Commissioner-General makes the decision on the application within 90 days of receipt after an audit and investigation.

VAT relief

There is a VAT relief granted to investors under the Export Processing Zone (EPZ), Special Economic Zone (SEZ), and mining, oil, and gas companies when the companies are eligible or have an agreement with the government stating that they will be granted relief. The form that is used for such relief is ITX263.02. E available at any TRA office or through the TRA website.

Payment and accounting for VAT

Currently, taxpayers pay taxes through banks and submit the evidence of their payments to the TRA. The TRA has modernized its payment options to give taxpayers secure and efficient payment systems. The BOT and TRA are developing an interface for a straight-through process (STP) between TISS-CBS at BOT and EPICOR, ITAX and TANCIS at TRA. The Revenue Gateway is an intelligent software interface that improves revenue collections through an STP between BOT and TRA, and Commercial Banks.

The Revenue Gateway is used for:

• TISS Payments directly to Bank of Tanzania (SWIFT Messages)
• Tax bank payments directly into specific TRA Systems, and revenue transferred to BOT made later

It will allow the registration of taxpayers to pay taxes online through the TRA portal. The taxpayer selects a mode of payment and generates a pay slip bearing a unique 8-digit control number. The printed pay-in-slip is submitted to the Commercial Bank to transfer the tax amount to the Commissioner’s account at BOT by initiating the transaction into the SWIFT terminal. The Gateway updates the respective revenue system through its web services after the payment is made.

Using the Gateway reduces the transaction time and makes the payment of taxes quick, efficient, accurate, and speeds up documentation. The entire process is secure, cost-effective, and easy to manage and maintain. 

Online submission of VAT returns

The TRA Web is the online platform for the submission of VAT returns. E-filing offers the following benefits:

• Convenience
• No waiting in queues. Less crowd at the TRA offices
• Quicker and more accurate filing and processing
• Taxpayers can maintain their own records

The signature of the e-filer is retrieved from the Automatic Finger Identification System (AFIS) which captures the filer’s signature as a routine procedure when applying for a driver's license, registering a motor vehicle, or applying for TIN for any other business.

When filing a return for a corporate entity, the e-filing system prompts for a Taxpayer Identification Number (TIN) of one of the company directors. The system verifies if the director has been biometrically scanned before it retrieves the taxpayer’s general information. If there is no signature found, the e-filer has to get their signature captured at the TRA office where the filer or the entity files its VAT returns.

 VAT exemption

VAT may be exempted by the Commissioner-General on certain items such as:

• Import of raw materials for manufacturing long-lasting mosquito nets
• Import or a supply of goods or services to the Government for projects funded by:
  • The Government
  • A grant, loan, or concessional loan through an agreement between the Government of the United Republic and the donor, lender, or another government
  • Grant approved by the Minister in accordance with the Government Loans, Grants and Guarantees Act between a local government authority and a donor if the agreement provides for VAT exemption on goods or services
• Goods imported for relief of natural calamity or disaster
• Goods or services that are imported to any entity with an agreement with the Government of the United Republic to operate or execute a strategic project if the agreement provides for VAT exemption on goods or services
• Import or supply of goods and services to a non-governmental organization with an agreement with the Government of the United Republic only for use in a project by the respective non-governmental organization if the agreement provides for VAT exemption on goods or services

The Minister may also regulate the application, grant, and monitor the usage of the granted exemption.

Vatable goods between Mainland and Zanzibar

In some cases, the VAT paid at Tanzania Zanzibar is lower than the rate applicable in Mainland Tanzania. The difference in the VAT will be considered unpaid, and the Tanzania Revenue Authority will collect it from the taxable entity when the goods are transferred to Mainland Tanzania in accordance with the regulations. If the supply of taxable goods is made directly by a taxable person in Mainland Tanzania to a taxable recipient in Tanzania Zanzibar, the VAT will be collected by the Tanzania Revenue Authority and remitted to the Zanzibar Revenue Board. If the tax paid in Tanzania Zanzibar is the same as that applicable in Mainland Tanzania, the tax is considered to be paid, and the entity will not have to pay any further tax to Mainland Tanzania.

Read More: 

• Accounting Packages For Your Growing Business In Tanzania
• Have You Ever Thought Managing VAT Compliance Is as Easy as 1,2,3?