1. DIRECT TAXES
a. Individual Income Tax
Individual Income Tax is levied on an individual’s earnings or profits. The individuals in this category fall into two categories, namely,
(i) presumptive tax system and
(ii) individuals who prepare audited accounts.
Under the presumptive tax system, tax payable is established based on annual turnover shown by individual records. The second category includes individuals whose annual turnover is above TZS 100,000,000 and they are taxed based on their profits. Individuals under this category are required to prepare audited accounts/ financial statements in respect of their business.
b. Corporate Tax
Corporate Tax is levied on taxable income (profit) of limited companies, institutions, or organizations such as associations, clubs, societies, trusts, charitable organizations, cooperatives, and other unincorporated bodies. The corporate tax rate is 30% and 25% for the companies listed on the Dar es Salam Stock Exchange (DSE). Also, there is an additional tax rate of 10% on repatriated income of branches of foreign companies.
Alternative Minimum Tax (AMT)
Alternative Minimum Tax is imposed on companies that have perpetual unrelieved tax losses for the current and preceding two income years. The tax rate applicable is 0.5% to the sales turnover of the companies.
d. Capital Gain Tax (CGT)
Capital Gain Tax is a tax imposed on capital gain or the profits that a person makes from selling assets (e.g. shares, interest in land and buildings). The capital gain tax is charged only on the gain between the value of an asset it had at the time of its sale, and the value it had on its purchase. A person who derives a gain (profit) from the selling of an asset is required by the law to pay capital gain tax by way of a single installment. The rates for capital gain tax are 10% and 20% of the gain for residents and non-residents respectively.
e. Withholding Tax (WHT)
Withholding Taxes are taxes deducted at source from the sources of income such as dividends, royalties, interest, rent, natural resources payments, employee payments from employment (PAYE), commission, service fees payments, and pensions. Withholding tax is retained by one person (withholding agent) when making payments to another person (withholdee) in respect of goods supplied or services rendered by the payee. Different withholding tax rates apply to different sources of income.
2. INDIRECT TAXES
a. Value Added Tax (VAT)
VAT stands for Value Added Tax. VAT is charged on all taxable goods and services supplied in, or imported into the United Republic of Tanzania. The VAT rates are 18% for standard-rated supplies and 0% for exports of goods and services in mainland Tanzania. For Tanzania Zanzibar, the VAT rate applicable is 15%.
b. Excise Duties
Excise Duties are indirect taxes charged on specific goods and services manufactured locally or imported. The Excise duty is charged in both specific and ad valorem rates. Items charged under specific rates include; wine, spirits beer, soft drinks, mineral water, fruit juices, etc. Items charged under ad-valorem rates includes; money transfer services, electronic communication services, pay to view television services, imported furniture, motor vehicles and the rates are; 0%, 5%, 10%, 17%, 15%, 20%, 25%, 30% and 50%.
3. OTHER TAXES
a. Stamp Duty
Stamp Duty Tax is imposed on instruments executed in Mainland Tanzania or on the instruments executed outside Tanzania that relate to any property or any matter or thing performed or done in Tanzania. Such instruments include among others, leases, shares transfers, conveyances, affidavits, letters of credit, etc. The applicable stamp duty rate for most of these instruments is 1% of the consideration.
b. Skills Development Levy (SDL)
Skills Development Levy is charged on the gross emoluments of all payments made by the employer to the employees at a particular time (month). The gross emoluments include salaries, wages, payments in lieu, fees, commission, bonuses, gratuity, etc. The SDL is payable by the employer who employs ten or more employees. The rate applicable for SDL is 4% of the total emoluments paid to all employees during the month.
c. Custom (Import) Duty
Customs duty is a tax imposed on goods and services imported into Tanzania. Tanzania is a member of the East African Customs Union (EAC) which implements the East African Customs Union Protocol. The protocol provides amongst others the common external tariffs (CET) that are imposed on goods from non – EAC countries. The tariffs range from 0% for raw materials to 10% for semi-finished goods and 25% for finished consumer goods. The goods from EAC countries are not subject to custom (import) duty, provided they conform to the rules of origin adopted under the customs union treaty ratified by all members.
d. Railway Development Levy (RDL)
The Railway Development Levy is charged based on customs value on the importation of goods entering for home consumption in Mainland Tanzania. The RDL rate applicable is 1.5% on the customs value. RDL is not levied on exemptions provided under the East African Community Customs Management Act, 2004 (EACCMA, 2004).
c. Digital Service Tax
The Finance Act, of 2022 introduced taxation of digital market services rendered by non-residents to resident individuals at the rate of 2% which took effect on 1 July 2022. A “digital marketplace” has been defined to mean a platform that enables direct interaction between buyers and sellers of goods and services through electronic means. This means that transactions such as websites, webhosting, software and updating, self-education packages, and broadcast television will now be subject to taxation in Tanzania.
d. Gaming Tax
Gaming Tax is charged on gaming activities such as casinos, sports betting, SMS lottery, national lottery, slots (route) operations, and forty machines site. The law has provided different gaming tax rates on gaming activities, specifically, on gross gaming revenue and net winnings. Gaming activities do not include games played with cards in private homes or residences in which a person does not make money for operating such games.
e. Property Tax
Property Tax is an annual tax payable by owners of urban residential and commercial buildings. Property tax is collected through the purchase of electricity tokens (LUKU machines). The rates applicable are TZS 1,000 per month on ordinary buildings and TZS 5,000 per month for every storey building or apartment with one meter. The rate applicable for apartments regardless of the number of floors is TZS 60,000.
f. City Service Levy (Municipal Levy)
City Service Levy is charged to corporate entities or persons conducting business. The Local Government Authorities impose a city service levy at the rate of 0.3% based on business turnover.
g. Hotel Levy
The Hotel Levy is charged to every owner of a hotel or guest house. A levy of 20% is charged on each of the hotel charges on each guest. The hotel charges include payments received by the hotel or guesthouse owners such as hotel accommodation and breakfast charges served to guests. Any person or body of persons registered for VAT is exempted from the hotel levy.
h. The Port Services Charges
The Port Services charges are charged on every passenger embarking /boarding a ship or a ferry, at a port in Mainland Tanzania, for a journey to a destination within or outside the United Republic of Tanzania. The rate applicable for a resident person is TZS 1,000 and for the non-resident person is USD 10 or its equivalent in convertible currency.
i. The Airport Services Charges
The Airport Services charges are charged on every passenger embarking/ boarding an aircraft at an airport within the United Republic, who intends to travel to a destination within the United Republic. The rate applicable is TZS 10,000. Further, a passenger who intends to travel to a destination outside the United Republic is required by the law to pay the airport services charges of USD 40 applicable to both residents and non-residents.
j. The Motor Vehicles Registration Taxes
The Motor Vehicles Registration Taxes are taxes charged on the first registration of any motor vehicle or upon transfer of the motor vehicle to a person. The law has provided rates applicable for first registration and on transfer. The transfer tax is payable by the transferee to the licensing authority upon the completion of the transfer of the vehicle. The law has provided individuals and persons who are exempted from payment of motor vehicle registration taxes.