Essential Things to Know About Corporate Tax in Tanzania
A citizen of Tanzania pays tax on all income worldwide, irrespective of source. Non-residents pay tax on income with a source in Tanzania.
A 30% income corporate tax in Tanzania is levied on the income of companies based in the country and the permanent establishment (PE) of a non-resident corporation or 5% of the revenue of technical and management miners, as well as oil and gas workers (issued via WTH). Certain income of non-residents are taxed at the relevant non-resident WHT rates (see Withholding Tax section for relevant rates).
Profits made from investments in Tanzania are subjected to an income tax of 30% where such investments are within the principles of source.
Reduced Rate for Freshly Listed Companies
Companies recently listed on the Dar es Salaam Stock Exchange (DSE) are eligible for a reduced CIT rate of 25% for three consecutive years. At least 30% of a company’s shares must be public to meet the requirement completely.
Reduced Rates for Specific People
Reduced rates of income corporate tax in Tanzania apply as follows:
- 10% corporate income tax is applicable to new assemblers of motor vehicles, tractors, and fishing boats in the first five years of operations.
- 20% corporate income tax is applicable to new manufacturers of pharmaceuticals or leather goods that have a performance agreement with the Tanzanian government in the first five years of operations.
- 25% of corporate income tax is applicable to new investors involved in the manufacture of sanitary pad products that have a performance agreement with the Tanzanian government for the first two years, from 2019/20 to 2020 / 21.
Alternative Minimum Tax (AMT)
An alternative minimum tax rate of 0.5% applies to the turnover of companies with unrelieved tax losses for the current and previous two years of revenue. Only agricultural companies and companies involved in education or health delivery are exempted.
Things to know About Entity Taxation What is an Entity?
Any taxpayer other than an individual is regarded as an entity. Companies, partnerships, and trusts are examples of entities. Many companies are categorized as corporations. Any company or corporate body created, incorporated, or registered under applicable laws in Tanzania or elsewhere is regarded as a corporation. Also, an independent party or other groups of people, government, political subdivision of government, international organization, or joint investment with a trust agreement are all regarded as a corporation.
Common entity structures are;
a) Limited Company
b) Trade Associations
d) Non-Governmental Organizations
e) Cooperative Societies
f) Charitable organizations
g) Branches of non-resident companies
h) Political Parties
i) Government Agency
Is a Partnership Liable for Corporate Tax in Tanzania?
A partnership does not pay income tax on its income and is not entitled to any tax credit on such income. However, an income tax is imposed on each partner’s profit from the partnership.
What is the Revenue Year?
For income corporate tax in Tanzania, a revenue year refers to a calendar year of twelve months (meaning a period that starts on January 1 and ends on December 31). However, an entity may apply for approval to change the revenue year from a calendar year or a period of twelve months previously approved by writing to the Commissioner. The revenue year is important for tax accounting purposes.
What is a Tax Return Submission?
A tax return is a document submitted to the Tanzania Revenue Authority declaring income or losses, tax payable, and other tax-related information. Under the tax laws governing income tax, such income includes tax information that was withheld or treated as withheld, estimated tax payable, and income returns.
Tax Statement Estimated to be Paid
An entity that is an installment payer for the revenue year is required to set an estimate of the tax payable to estimate the income and income tax to be paid for that particular year. The submitted estimates will remain effective for the entire revenue year unless one sets the revised estimates. The revised estimates can be submitted at any time during the income year.
Dates to Fill Out Taxable Estimates
Estimates of taxes payable for the income year are submitted by the payment date of the first installment of taxes. However, where the payer of the installment is an entity engaged in agribusiness that includes seasonal crops in Tanzania during the income year and does not do any other business, he will submit by the end of September of the income year.
Date of Payment of Estimated Tax Payable
The estimated tax payable will be paid in quarterly installments. Suitable tax payment dates are as follows.
(a)for a person whose income year is a period of twelve months from the beginning of the calendar year, on or before the last day of the third, sixth, ninth, and twelfth months of the income year.
Phase One – On or before March 31st Phase
Two – On or before June 30th
Phase Three – On or before 30 September Phase Four – On or before December 31st
(b) in the case of a person whose income year is outside the calendar year, due dates are at the end of each three-month period from the beginning of the income year Note / Quote: A taxpayer may choose to enforce payment of more than one installment at a time.
Income Return (Final Submission)
Returns (Final submission) will be submitted within six months after the end of the income year. On the part of the corporation, the returns will be prepared or certified by an accredited public accountant in public practice (approved by the National Board of Accountants and Auditors – NBAA), accompanied by certified financial statements and other required information.
Submission of income returns will be made electronically through the electronic / online submission system (E-Filing System)
Note: Some people and or entities are exempted from submitting income returns. This includes non-residents except those with a permanent local establishment who have no income tax payable or whose income tax is paid for the income year, which includes benefits only under one installment tax at the time of recognition or single instalment tax as provided for in the Income Tax Act. However, this group of individuals may be asked to send a file to the Commissioner for a written statement served on the person.
If a person has reasons that could prevent him or her from submitting a payment on or before the due date, he or she may apply for an extension to submit the income return. The request will be made electronically through the electronic submission system (E-filing System).
Payment Failure Penalty for Corporate Tax in Tanzania
A person who fails to submit payment or payment of tax via the corporate tax system in Tanzania by the due date as required by the law of corporate tax in Tanzania shall be liable to a penalty on a monthly or part of a month period if the dispute persists. The existing penalty is the higher of;
5% of the tax amount assessed in accordance with the payment of tax less the tax paid by the beginning of the period towards that amount; and for one person, 5 currency points or for a company, 15 currency points.
Note / Quote: The penalty applies separately for not submitting a tax return which is a Statement of Estimates, and for not submitting a tax return that includes the final amount (Income return).
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