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