What is VAT Exemption in Tanzania

Tally Solutions | Updated on: September 27, 2022

What is VAT exemption in Tanzania?
Is VAT exemption different from zero-rated VAT?
List of businesses exempted from VAT
List of VAT exempted products and services in Tanzania

What is VAT exemption in Tanzania?

VAT exemption in Tanzania refers to those goods and services that are excluded from having VAT levied on them. Businesses that are solely selling goods and services that are VAT exempt as per the Tanzania Revenue Authority (TRA) do not need to register for VAT. However, if such businesses are selling some goods and services that are subject to VAT and others that are not subject to VAT, then such businesses are partially VAT exempted. In such cases, businesses must register for VAT through the TRA portal since they are selling goods and services that are subject to VAT.

How To File VAT Return In Tanzania?

Value Added Tax in Tanzania | VAT In Tanzania

Is VAT exemption different from zero-rated VAT?

Yes, VAT exemption is different from zero-rated VAT. VAT-exempted goods and services are those which do not require to have the VAT imposed on them. VAT-exempt businesses cannot register for VAT because they are not dealing with goods and services subject to VAT. Zero-rated VAT requires you to register for VAT because you have the power to reclaim the input VAT when you file for VAT return. This can occur in the case where your business had to spend money to acquire a particular item or perform business activities where your funds were spent. An example of zero-rated VAT is the exports of particular goods and services from the United Republic of Tanzania.

List of businesses exempted from VAT

VAT exemption in Tanzania depends on whether the Commissioner General approves your application or not. Here are some of the examples of VAT-exempted:

Businesses that import raw materials for manufacturing durable and reliable mosquito nets. The business has to be a local manufacturer and it must have an agreement in place with the Government of Tanzania.

Any business that imports from or supplies to a government organization the goods and services required for the completion of a project that is funded by the government. VAT exemption is also provided if the project is funded by a concessional loan, grant, or non-concessional loan as long as there is a formal agreement between the other government or lender with the Government of Tanzania.

Businesses that supply the goods and services required or import them from a government organization for completion of a project that has received a grant. This grant must be approved by the Minister and it should be specific about the exempted goods and services.
Any business that imports or supplies goods and services that are used to provide relief and help during the occurrence of a natural disaster are exempt from VAT.

Businesses that are involved in importing from or supplying to NGOs whereby an agreement is in place between the NGO and the Government of Tanzania. Note that the agreement should include details of the exemption of goods and services and the NGO is the one solely responsible for implementing the particular project.
Any business that supplies goods and services or imports them to another business or entity which has an agreement in place for project implementation with the Government.

It is important to remember that the exemption granted to businesses will not last a lifetime and the exemption will no longer hold if certain events occur. When this happens, the business is liable to pay the VAT. For example, if an NGO sells VAT-exempted goods and services to another party, who is not VAT exempted, rather than use them to implement the project itself, the right to the NGO’s VAT exemption will be revoked.