11 November 2021by finandlaw-admin
INTRODUCTION
On 08th October 2021, the Government of Tanzania published a set of new Tax Regulations that provides and carters for efficient tax administration but also streamline the tax exemption process and procedures. The Regulations issued are:
- The Tax Administration (Remission of Interest and Penalties) (Revocation) Regulations 2021 Government Notice No. 713 of 2021
- The Value Added Tax (General) (Amendment) Regulations 2021, Government Notice No. 714 of 2021
- The Value Added Tax (Exemption Management Procedures) Regulations of 2021 Government Notice No. 715. This update, therefore, reviews these Regulations to highlight the changes
brought about and compliance issues therein as well as provide necessary general legal information to our esteemed clients.
THE TAX ADMINISTRATION (REMISSION OF INTEREST AND PENALTIES) (REVOCATION) REGULATIONS 2021 GOVERNMENT NOTICE NO. 713 OF 2021
The Tax Administration (Remission of Interest and Penalties) (Revocation) Regulations 2021 Government Notice No. 713 of 2021 came into effect on 08th October 2021 to repeal and revoke the earlier issued regulations namely, the Tax Administration (Remission of Interest and Penalties) Regulation of 2020 (GN No. 351 of 2020). The revoked Regulation provided for the powers of the Commissioner General of the Revenue Authority to grant remission of interest and penalty imposed to a taxpayer upon fulfilling the conditions provided for under the regulations. The person whose application for the remission was granted was obliged to pay only the principal taxes.
THE VALUE ADDED TAX (GENERAL) (AMENDMENT) REGULATIONS 2021, GOVERNMENT NOTICE NO. 714 OF 2021
This Regulation amends the existing VAT Regulation namely the Value Added Tax (General) Regulations of 2015 (GN No. 225 of 2015). According to Regulation 2, the new amendments add a new Regulation 36A which entails the imposition and payment of the VAT difference on goods transferred from Tanzania Zanzibar to Tanzania Mainland. The regulation, however, provides that the difference will be paid upon clearance of such goods at the ports of entry in Mainland Tanzania. Tanzania Zanzibar VAT is charged at the rate of 15% while the VAT applicable in Tanzania Mainland is 18%.
Further, Regulation 36B has also been amended to provide for the new procedure to be applied for the VAT refund to Zanzibar Revenue Board on goods supplied to a person registered under the value added tax law administered in Tanzania Zanzibar. In essence, goods from Tanzania Mainland that are supplied to Tanzania Zanzibar are charged with a standard rate VAT i.e., 18% and the
registered trader under the value added tax law in Zanzibar will in turn apply to the Zanzibar Revenue Board for Refund. For the refund to be successful, the regulations have thus provided for documentation requirements to be accompanied with the application for refund.
THE VALUE ADDED TAX (EXEMPTION MANAGEMENT PROCEDURES) REGULATIONS OF 2021 GOVERNMENT NOTICE NO. 715
(a) Application for Exemption
The Value Added Tax (Exemption Management Procedures) Regulations of 2021 Government Notice No. 715 of 2021 repeal and revoke the earlier issued regulations namely the Value Added Tax
(Exemption Monitoring Procedures) Regulations of 2018 Government Notice No. of 2018 147 of 2018. Essentially the new
Regulations provide for procedures for granting, managing, and monitoring the progress of Value Added Tax exemptions in Tanzania.
According to Regulation 4(1) application for VAT Exemption is required to be made to the Commissioner General in a prescribed form. The Application must be made within 60 days
before the commencement of the project and must be accompanied with several documents as provided for under Regulation 4(2) including:-
- an agreement with the Government which was approved by the Minister which binds the Government to grant such tax exemption.
- a contract between Government entity and contractor.
- quotations, bill of quantities and list of goods and services to be exempted for the entire project.
- tentative description of the place of procurement of goods or services. In case of locally supplied goods, the name and description of suppliers in Tanzania.
- list of contractors and level one sub-contractors who shall execute the project.
Regulation 4(3) and 4(4) requires that all the documents and information required for the application of the exemption to be submitted to the Permanent Secretary of the Ministry responsible with the project executed who shall verify the application thereafter forward it to the Commissioner General. It is imperative to note that Regulation 4(5) requires the application forwarded to the Commissioner General under must be accompanied with the declaration that the goods or services applied for exemption will solely be used for the intended project.
(b) Processing and Granting of Exemption
Regulation 5 empowers the Commissioner General to approve or reject the application for VAT exemption. In doing so, however, the Regulation requires the Commissioner General to review and verify the application for the Exemption. According to Regulation 5(6) the Commissioner General is required to issue the exemption certificate (in a prescribed form) within 30 days from the date of receipt of the application.
Upon grant of the VAT exemption Certificate, Regulation 6 requires that the applicant to process the utilization of the granted tax exemption by filing a prescribed form and submit the same to the respective Revenue Authority Department or Regional Office accompanied with several other documents provided for under Regulation 6(3). And upon approval of the application, the Commissioner General is required to approve the utilization request within 7 days or give reasons if he rejects the application.
The Minister has the power to reject or approve the recommendations. Regulation 24, 25, 26, 27 and 28 provide for, among others, negotiation with respect to an award of concession between the concessionaire and negotiation team appointed by the CC, filing of a report with recommendations to the Minister for approval and award of concession.
(c) Monitoring the Granted Tax Exemption
In a bid to effectively administer the exemption Regulation 7 imposes the requirement for the Applicant to prepare and submit the Utilization report of the granted tax exemption to the Commissioner General. Regulation 7(2) requires the exemption utilization Report to be submitted to the Commissioner General within 30 days after a lapse of:
- every 6 months for a 12-month project; and
- every 12 months for a project with a maximum period of more than 1 year.
To effectively administer the monitoring, in the event the Applicant fails to submit the Utilization report, Regulation 7(3) empowers the Commissioner General to stop approving any further tax exemption until the applicant properly account for all of its previous utilized tax exemptions.
DISPUTE RESOLUTION
In the event the Applicant is aggrieved by the decision of the Commissioner, the Regulations allow the Applicant to follow the same dispute resolutions procedures laid down in the Tax Administration Act. That is, object to the Commissioner General and subsequent through the Tax Revenue Appels board, Tribunal to the Court of Appeal as the case may provide.
