Tanzania Tax Update: Highlights of the Finance Act 2024

The Finance Act is a key piece of legislation that is passed to give effect to fiscal measures proposed by the government in the annual national budget. In this article we highlight the key changes introduced by the Finance Act of 2024. Changes introduced by the Act are effective from 1 July 2024, unless indicated otherwise.

1. Income Tax

Charitable Organisations: Resident public entities that are focused on health services and environmental conservation can apply to the Commissioner General for Tanzania Revenue Authority (CG) to be recognized as charitable organisations for tax purposes.  

Exemption from Alternative Minimum Tax: Tea processing companies with perpetual unrelieved tax losses for the current and preceding two tax years are exempt from paying Alternative Minimum Tax for a three-year period ending on 30th June 2027.

Tax invoices to support deduction of expenses: Fiscal receipts are required to support a claim of deduction of expenses. Fiscal receipts are not required for purchases from foreign suppliers and those not legally obliged to issue fiscal receipts. 

Limitation of utilisation of unrelieved tax losses: Utilisation of tax losses carried forward is restricted after a period of four years of consecutive losses such that only 60% (previously, 70%) of the taxable income of an entity in the fifth year of income can be set-off against losses brought forward and the balance of unutilised tax losses can be carried forward to the succeeding year.

Limitation of exemption from change in control rules: Exclusion from tax implications of change in underlying ownership is limited to a change that results from allotment of shares in a resident entity. 

Withholding tax (WHT) on Digital Content Creation: Payments made by residents or non-residents to resident digital content creators are subject to WHT at the rate of 5%.

WHT on Industrial and Metallic Minerals: Payments made by a resident buyer of industrial minerals (excluding salt) or metallic minerals (excluding other precious metals) are subject to WHT at the rate of 2%.

WHT on Digital Assets: Payments made by residents or non-residents to residents for the exchange or transfer of digital assets are subject to WHT at the rate of 3%. 

WHT on lease of construction equipment or machinery: Rent paid by a resident lessee to a resident lessor for lease of construction equipment or machinery is subject to WHT at the rate of 10%. 

Final withholding payments: Income tax withheld on payments made by a resident person to an individual who is a primary mining licensee or an artisanal miner, and on payments made to a local government authority, local community, or any resident individual in respect of verified carbon emission reductions, is final.  

WHT exemption on interest payments on Concessionary Loans: WHT does not apply on interest paid by resident financial institutions to non-resident financial institutions or funds which have an agreement with the Government of Tanzania to provide concessionary loans to resident financial institutions that on-lend the funds to resident borrowers.

Taxation of non-resident transport operators or charterers: Income of a non-resident who receives a payment in conducting a business of land, sea or air transport operator or charterer excludes fees, charges, or tax paid by a passenger and received by the non-resident on behalf of the Government. 

Exclusion of non-resident employees from filing returns: Non-resident employees are not obliged to file an individual tax return if they have only Tanzania-sourced employment income from which their employer has already withheld income tax.  

2. Value Added Tax (VAT)

Ministerial powers to grant exemption from VAT: The Minister for Finance can exempt from VAT:

• Specified water sanitation and treatment chemicals, and water meters imported or supplied by a water supply and sanitation authority upon approval by the Minister for Water.
• Specified equipment and machinery for processing and storing bee products imported or supplied by beekeepers upon approval by the Minister for Natural Resources. 

Notification by intending traders: Businesses which are registered for VAT as intending traders but fail to commence production of taxable supplies must notify the CG within 90 days after expiration of the period in which they had indicated they will commence production of taxable supplies. Failure to notify results in a deemed deregistration from VAT. 

Expansion of electronic services: Online data services that are delivered or provided through an internet or telecommunications network are included in the definition of electronic services under place of supply rules. 

Extension of zero-rating of supplies: 

• A supply of locally manufactured fertilizer shall continue to be zero-rated up to 30th June 2025. 
• A supply of locally manufactured garments made from locally grown cotton shall continue to be zero-rated up to 30th June 2025.

Extension of VAT exemption:

• A supply of double refined edible oil from locally grown seeds by a local manufacturer shall continue to be exempt up to 30th June 2025.

Zero-rated supplies of gold:

• Gold supplied to the Bank of Tanzania.
• Gold supplied to a licenced refinery in Mainland Tanzania.

Imports exempt from VAT:

• Single axle tractors.
• Blended tea or fermented tea from locally grown tea leaves.
• All goods, including material, supplies, equipment, machinery, and motor vehicle for official use of armed forces as certified by the Minister for Defence.

Supplies exempt from VAT:

• Aircraft and aircraft maintenance supplied to a local operator of air transportation.
• Aircraft engines and aircraft parts supplied to a local manufacturer or assembler of aircraft or to a local operator of air transportation.
• A supply of video assistant referee (VAR) technology equipment and accessories upon approval by the Minister for Sports.
• Sewerage services supplied by a water supply and sanitation authority.

Abolished exemptions: 

• Imports of spades, shovels, mattocks, and picks.
• Supply of precious metals, gemstones, and other precious stones at refineries. 

3. Excise Duty

Commercial advertisement of betting, gaming, or lotteries: Fees for commercial advertisement of betting, gaming, or lotteries through print media, television, or radio broadcasting are subject to excise duty at the rate of 10%. An exclusion applies to fees for non-commercial advertisement of promotions, the national lottery, and licensed games.  

Offsetting of excise duty paid on undenatured ethyl alcohol: Excise duty paid on imported or locally manufactured undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher that is used as raw material to manufacture wine of fresh grapes (including fortified wines), undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol, or spirits, liqueurs and other spirituous beverages is offsetable against excise duty payable on the finished products. 

Submission of excise duty returns: Monthly returns are due not later than the 25th day (previously, last working day) of the month following the month to which the return relates.

Ministerial powers to grant duty remission: Minister for Finance can remit excise duty payable on undenatured ethyl alcohol for:

• Production of industrial energy where the person produced the undenatured ethyl alcohol; or
• Medical or laboratory usage.

New excisable products:

• Imported tomato ketchup and other tomato sauces (other than tomato paste) – Tanzania Shillings (TZS) 300 per kilogram. 
• Locally produced undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher – TZS 5,000 per litre.
• Imported undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol or higher – TZS 7,000 per litre.
• Imported opaque beer – TZS 963.90 per litre. 

Reduced excise duty:

• Locally produced, bottled mineral waters and aerated waters – from TZS 63.80 per litre to TZS 56 per litre. 

4. Tax Administration

Compliance with laws governing cargo deconsolidation: Cargo consolidators must comply with customs and other laws governing deconsolidation of cargoes to their owners at the time of importation of goods. Failure to comply with such laws is an offence that attracts, upon conviction, a fine equal to 30% of the customs value of the imported cargo. 

Servicing of documents: Documents are considered to be served to the tax authorities or a person when duly sent by fax, email or any other electronic means as per laws governing electronic transactions. 

Admission of objections: An objection to a tax assessment or notice of a tax liability is deemed to be admitted by the tax authorities when the objector has paid a tax deposit equivalent to the greater of the tax not in dispute or one third of the assessed tax. 

Capped fines for offences relating to fiscal devices and fiscal receipts: The fine for failure to acquire or use a fiscal device, or failure to issue a correct fiscal receipt is capped at 200 currency points equivalent to TZS 4 million. 

Adjustment of Currency Points: one currency point is equivalent to TZS 20,000 (previously, TZS 15,000).

5. Railway Development Levy

Railway development levy at the rate of 2% (previously, 1.5%) is payable on CIF value of imports entered for home consumption.

6. Vocational Education and Training 

Payments made by a water supply and sanitation authority to casual labourers engaged in implementation of water and sanitation project are exempt from skills and development levy. 

7. Export Levy

Crude sunflower oil and sunflower seeds are liable to export levy at the rate of 10% of the free-on-board (FOB) value.

8. Import Control

Industrial Development Levy is chargeable on specified imports entered for home consumption:

• Wire rods – 10% of CIF value
• Beer – 5% of CIF value
• Non-alcoholic beer – 5% of CIF value
• Wine – 10% of CIF value
• Energy drinks – 5% of CIF value
• Organic surface-active agents (detergents) – 10% of CIF value
• Cement clinkers – 10% of CIF value
• Portland cement – 10% of CIF value

Goods originating from the East African Community Partner States that meet the East African Community Rules of Origin are exempt from the levy. 

9. Road and Fuel Tolls

Imposition of road and fuel toll on windfall fuel: 

• Road and fuel toll is chargeable on windfall fuel.
• Toll is payable by the owner or possessor of windfall fuel, and on the date the price of fuel under his custody attracts windfall profit.
• Owner or possessor of a fuel storage facility must record quantities of fuel kept and sold.
• Records of fuel kept and sold, and fuel toll on windfall fuel must be remitted to the tax authorities on or before the 20th day of the following month. 
• Minister for Finance shall publish regulations on the applicable rates of fuel toll on windfall fuel and the manner of toll collection. 
• Windfall fuel means fuel whose market price has dropped without reduction of the market price.
• Windfall profit means the surplus profit earned or to be earned by the owner or possessor of windfall fuel.

Proposed non-tax changes

1. Sugar Industry

Sugar Board shall establish average production costs of sugar per metric tonne at the beginning of every production season.

Sugar manufacturers must declare and publish names of their sugar distributors for each region at the beginning of every production season. 

The National Food Reserve Agency (NFRA) has exclusive mandate to import, store and distribute sugar for domestic consumption to cover sugar gaps or to maintain buffer stock.

2. Mining

Mineral right holders and licensed dealers shall set aside at least 20% of gold for local processing, smelting, refining, and trading. An exclusion applies to persons who have an agreement with the Government that stipulates otherwise. 

A supply of gold to the Bank of Tanzania is exempt from the 1% inspection fee.

Royalty at the rate of 4% is payable on gold supplied to the Bank of Tanzania.

3. Motor Vehicle Registration

Motor vehicle registration tax is payable on electronic motor vehicles or electric hybrid motor vehicles:

• micro hybrid with capacity 5< Kilowatt (Kw) – TZS 95,000.
• mild or semi-hybrid with capacity between 6 – 30 Kw – TZS 250,000
• full hybrid with capacity between 31 – 40 Kw – TZS 250,000.
• plug-in hybrid with capacity between 41 – 90 Kw – TZS 250,000.

4. Bank of Tanzania Act

Transacting using any currency other than the legal tender (bank notes and coins in TZS) issued by the Bank of Tanzania is an offence. Minister of Finance shall issue regulations providing further clarification.

5. Banking and Financial Institutions Act

The timeline for determining abandoned property is 10 years (previously, 15 years).

Conclusion

This article covers key legislative changes as a result of amendments made by the Finance Act of 2024, and provides a summary highlighting some of the key changes that will affect stakeholders in the respective industries/sectors. Please contact one of the authors listed below if you have any questions.