INTRODUCTION
The Finance Act, 2022 (Act No. 5 of 2022) has amended 36 revenue and other related laws in Tanzania with a view to imposing and altering certain taxes, duties, levies, and fees in order to enhance the collection and management of public revenues. The amended laws are, the Animal Diseases Act Cap. 156, the Bank of Tanzania Act Cap. 197, the Business Names (Registration) Act, Cap. 213, the Cashewnut Industry Act Cap. 203, The Companies Act Cap. 212, the Copyright and Neighbouring Rights Act Cap. 218, the Dairy Industry Act Cap. 262, The Excise (Management And Tariff) Act Cap. 147, the Electronic And Postal Communications Act Cap. 306, the Energy And Water Utilities Regulatory Authority Act Cap. 414, the Export Tax Act Cap. 196, the Fertilizers Act Cap. 378, the Foreign Vehicles Transit Charges Act Cap. 84, the Gaming Act Cap. 41, the Government Loans, Guarantees and Grants Act Cap. 134, the Hides, Skins and Leather Trade Act Cap. 120, the Income Tax Act Cap. 332, the Insurance Act Cap. 394, the Land Act, Cap. 113, the Land Transport Regulatory Authority Act Cap. 413, the Local Government Finance Act Cap. 290, the Local Government (District Authorities) Act Cap. 287 The Local Government (Urban Authorities) Act Cap. 288, the Mining Act Cap. 123, the National Payment Systems Act Cap. 437.
The Occupational Safety and Health Act Cap. 297, The Ports Act Cap. 166, the Tanzania Investment Act Cap. 38, the Tanzania Revenue Authority Act, Cap. 399, the Tanzania Shipping Agencies Act Cap.415, the Tax Administration Act Cap. 438, the Tax Revenue Appeals Act Cap. 408, the Trustees Incorporation Act Cap. 318, the Value Added Tax Act Cap. 148, the Vocational Education and Training Act Cap. 8.
The amendments set out in The Finance Act, 2022 are effective from 01st July 2022 unless specifically stated otherwise. This update reviews some of the emended laws to highlight the changes brought about these amendments with the view of enlightening important regulatory and compliance requirements as well as provide necessary general legal information to our esteemed clients and the general public.
FUNDAMENTAL AMENDMENTS AND THEIR IMPLICATIONS
AMENDMENT OF BUSINESS NAMES (REGISTRATION) ACT, CAP. 213
Amendment on the definition of beneficial ownership
Section 2 of the Business Names (Registration) Act is amended by redefining the term “beneficial ownership” to align it with the new definition that was introduced through the amendment of the Anti-Money Laundering Act, Cap. 423 by the Act No. 2 of 2022. The term beneficial ownership is thus defined thus:
any natural person who ultimately owns or controls the customer, the natural person on whose behalf a transaction or activity is being conducted, a person who exercises ultimate effective control over a legal person or legal arrangement or beneficiary of an insurance policy or other investment linked insurance policy and includes:
- the natural person who ultimately owns or controls the legal person through direct or indirect ownership of a majority shares or voting rights;
- a shareholding of 5% or more in the legal person or an ownership interest of five percent or more in the legal person held by a natural person; or
- the natural person who holds the position of senior managing official.
Partners to submit Beneficial Ownership Information
The Finance Act, 2022 has amended Section 2, 4, 6 and 13 by requiring business names/partnership registered under the act to submit beneficial ownership information to the Registrar. The amendment also imposes a fine of up to TZS 5Million for failure to provide the beneficial ownership information to the Registrar.
AMENDMENT OF THE COMPANIES ACT, CAP. 212 Penalty for failure to keep register/index of Members/ Shareholder
Section 115(2) and Section 116(2) of the Companies Act has been amended to impose a penalty of TZS 100,000 up to TZS 1,000,000 for failure to keep the Company’s register of members/shareholders as required by the law. The penalty is liable to be paid by the company itself or every officer of the Company who is in default.
Duration to keep Company documents
Section 393 has been amended to require the Liquidators of the Company to keep the documents relating to the dissolution of the company for a period of at least 5 years from the date of dissolution.
Amendment on the definition of beneficial ownership
Section 2 of the Companies Act is amended by redefining the term “beneficial ownership” to align it with the new definition that was introduced through the amendment of the Anti-Money Laundering Act, Cap. 423 by the Act No. 2 of 2022. The term beneficial ownership is thus defined thus:
Any natural person who ultimately owns or controls the customer, the natural person on whose behalf a transaction or activity is being conducted, a person who exercises ultimate effective control over a legal person or legal arrangement or beneficiary of an insurance policy or other investment linked insurance policy and includes:
- the natural person who ultimately owns or controls the legal person through direct or indirect ownership of a majority shares or voting rights;
- a shareholding of five percent or more in the legal person or an ownership interest of five percent or more in the legal person held by a natural person; or
- the natural person who holds the position of senior managing official.
AMENDMENT OF TRUSTEES INCORPORATION ACT CAP 318
Section 1A of the Act is amended to redefine the term beneficial ownership. The term has equally been redefined to align it with the new definition that was introduced through the amendment of the Anti-Money Laundering Act, Cap. 423 by the Act No. 2 of 2022 (see the definition above).
Further Section 16 is also amended to require Trustees to notify the Registrar within 1 month upon the occurrence of the following:
- a person ceases to be a trustee or a beneficial owner and a new trustee is appointed;
- a person who becomes a beneficial owner or a trustee changes his name, residence or postal address; or
- changes of beneficial owner his particulars.
Failure to do so attracts an offence that may be punishable by payment of a fine of not less than TZS 200,000 but not more than TZS 1Million.
AMENDMENT OF THE ELECTRONIC AND POSTAL COMMUNICATIONS ACT, CAP. 306
Introduction of Television decoder Subscription fee.
The Finance Act, 2022 has inserted a new section i.e. section 164B which imposes a new fee on Television decoder subscription to be paid at the rate ranging from TZS 1,000 to TZS 3,000 in order to increase Government Revenue. However, the manner and modality for collection of the said fee shall be subject to the regulations to be made by the Minister.
AMENDMENT OF THE GAMING ACT, CAP. 41
Definition of Gaming Activities
The definition of gaming activities has been widened to include “internet or virtual games”. Further, other terms such as “Winning” and “withholding agent” have also been defined so as to clearly stipulate the clarity of these words in the gaming concept.
Gaming Tax on Winnings
Section 31 is amended to provide time frame within which the gaming tax hall be payable with respect to virtual and internet gaming activities and provide for the application of the Tax Administration to the gaming activities.
In particular, Section 31(2) (b) requires the internet gaming or virtual games under the internet casino license to be paid at the rate of 25% of the monthly gross gaming revenue. All other gaming activities that are not provided for under the law are also subjected to 10% of the gross monthly revenue and such amount is to be paid on the seventh day of the following month from the date of payment.
Imposition of liability on licensee to collect winning tax
The Finance Act, 2022 has amended section 31A (4) (5) and (6) by imposing upon the Licensee of gaming activity a liability to collect gaming tax by withholding the amount from the wining price, remitting the withheld gaming tax to the Revenue Authority within seventh day of the following month but also submit the certificate of payment of the revenue Authority not later than 15 days of the following month. Failure to do these, the Licensee is liable for the payment of such gaming tax on winnings together with interest and penalties.
AMENDMENT OF THE INCOME TAX ACT, CAP. 332
Recognition of Digital Business
The Income tax Act Cap. 332 has been amended to formally recognize the development of technology by taxing online businesses. The amendment adds the new definition of the terms “digital market place” and “electronic services” in order to widen tax base by introducing digital taxation. Further, a new section 90A is added order to introduce tax to non-resident service provider of the digital services at the rate of 2%.
Further, Section 66(4) is amended in order to address current technological changes in the conduct of business by including the control and management of a business through electronic means. Section 69 is amended by including into the tax net payments made to foreign investors who harness natural resource and nonresident who supply digital services without having physical location within Tanzania.
Power of the Minister to Exempt Strategic Investors
Section 10 of the Income tax Act is amended to empower the Minister to grant exemption to special strategic investments approved by the National Investment Steering Committee in accordance with the Tanzania Investment Act, Cap. 38 after being approved by the Cabinet. The aim of the amendment is to promote investment in the country and harmonise the provisions of the Act and the tax laws in relation to granting of tax exemption.
Other Amendments to the Income Tax
Section 32 is amended in order to include in the provision of that section the treatment of profit derived by non-conventional banks through alternative financing. The aim of the amendment is to release banks from payment of capital gain tax on assets sold through alternative financing.
Sections 4 and 79 are amended to introduce a regime of taxing income earned by small scale miners in order to enable them to pay tax at the time of selling minerals due to the nature of their business.
Further, section 82 is amended to allow tenants to withhold tax on rental income with respect to residential and commercial buildings. The amendments also exclude withholding tax on interest from coupon on corporate and municipal bonds from being collected through withholding tax procedure aiming at increasing alternative sources of finance for development projects.
AMENDMENT OF THE VALUE ADDED TAX CAP. 148
Capital Goods (VAT deferment)
Section 11(10) of the Act which provides for deferral of VAT on Capital Goods has been qualified to qualify VAT deferment to certain agricultural vehicles such as tractors and semi-trailers to those that are locally manufactured or assembled in a customs bonded warehouse.
VAT for Non-Residents
A new Section 64(5) is added to exempt Non Resident to appoint a tax representative where it is not practicable to appoint such tax representative due to its business circumstances.
However, a non-resident must personally apply to the Commissioner for such exemption. The law has however not defined/clarified what is “business circumstances”
THE TAX ADMINISTRATION ACT, CAP 438
Mandatory registration of Tax Identification Number
Section 22(1) is amended to require the Commissioner General of the Revenue Authority to register and issue Taxpayer Identification Number to every Tanzanian citizen who has been registered and issued with a National Identification Number. This mandatory requirement goes hand in hand with the requirement to link the National Identification Number and the Tax Identification Number. Those registered branches in Zanzibar shall continue to use the Tax Identification number issued by the Zanzibar Revenue Board.
Licensing of Tax Consultants
Section 28 is amended to provide for licensing of individuals to practice as tax consultant. Upon registration, a tax consultant is thus considered as a person empowered to act as an agent of a taxpayer under any tax law. A non licensed person is thus prohibited to act on behalf of a tax payer, unless such person is an employee or manager of a tax payer. To qualify for licensing, the law provides for conditions to be fulfilled as provided for in the regulations (to be made by the Minister).
Registration And monitoring of storage facility
A new Section 45A is added that requires any person who establishes a storage facility (of whichever size and value) with the aim of keeping goods for business purposes must register the facility with the Commissioner General. This registration also imposes the requirement for the owner of the storage facility to keep records of all stored goods and report to the Commissioner General on monthly basis and as directed by the Commissioner General. The amendment does not state the type, nature or value of goods kept or reported to the Commissioner General.
Liability of Business Managers on non-payment of Taxes
Section 65(2) has been amended to reduce and limit the liability of Managers on non payment of taxes by entities to be limited to only where the such default for non payment was due to fraud as proved in a court of law. As such Section 65(1) provides that where an entity fails to pay tax on time, a manager or any person who was a manger at the time of default shall be liable jointly and severally with the entity to pay such tax. Following the amendment, liability to managers is limited to fraud as may be proved in court.
OTHER NOTABLE AMENDMENTS
The Insurance Act Cap 394 is amended to provide for mandatory Insurance through addition of Section 133A to provide for mandatory insurance on importation of goods or operation of public markets, commercial buildings, marine vessel, ferry or pantoon.
The Land Act, Cap 113 is amended to extend the time frame for payment of defaulting interest, whereby section 33(11) is amended in order to increase the timeframe of the requirement of payment of defaulting interest on the rent due to be after 12 months instead of 6 months.
The National Payment Systems Act, Cap. 437, is amended under section 46A in order to reduce the transaction levy from a maximum of TZS 10,000 to TZS 4,000 in each transaction.
The Mining Act, Cap. 123, section 87(1) is amended in order to reduce the royalty rate to 1% on coal used as industrial raw materials and royalty rate on gold sold at refineries to 4%. The aim of this amendment is to reduce the costs of production, attract investments, promote employment, and ensure availability of adequate raw material for refinery centers.
The Occupational Safety and Health Act Cap. 297 has also been amended under section 17(3) to provide the time of 7 days upon which the Chief Inspector must issue the Certificate of registration of premises after the Inspection requirements (fulfilling the occupational and health requirements) and payment of the prescribed fees.
The Tanzania Investment Act, Cap. 38 has also been amended to empower the Minister for Finance to grant additional fiscal incentives to an investor in accordance with the tax laws upon approval of such incentives by the National Investment Steering Committee.
The Tanzania Shipping Agencies Act, Cap 415 is also amended among others under section 7 to remove the exclusive mandate for the Tanzania Shipping Agency Corporation (TASAC) on clearing and forwarding of goods. The amendment has left TASAC with only exclusive mandate on clearing and forwarding functions relating to import and export of arms and ammunition, mineral concentrates, chemical used by mining companies, Government trophies and live animals under the Wildlife Conservation Act.
The Vocational Education and Training Act, Cap. 82 is amended on Section 19(1)(i) to exempt employers from paying the Skills Development Levy (SDL) for intern (students) from higher learning institutions or technical and vocational education and training institutions who are under the Tanzania Employment Service Agency program.
