United States

Tanzania’s value-added tax for electronically supplied services

Tanzania has had recent success attracting investors; the country is most notably known for being home to Africa’s highest mountain, Mount Kilimanjaro and the Serengeti.

The following content was reviewed and updated as of Jan. 8, 2019.

Legislative effective date

Value-added tax (VAT)

Statute of limitation

Five years. However, there is no statute of limitation in case of willful negligence or fraud.

Standard rate of VAT

18 percent

Electronic supplies

According to S.51(2) of the VAT Act, “electronic services” means any of the following services provided or delivered through a telecommunications network:

  1. Websites, web-hosting, or remote maintenance of programs and equipment
  2. Software and the updating thereof
  3. Images, text and information
  4. Access to databases
  5. Self-education packages
  6. Music, films and games, including gaming activities
  7. Political, cultural, artistic, sporting, scientific, and other broadcasts and events including broadcast television

Registration

The VAT registration threshold is 100 million Tanzanian shillings (TZS) (approx. $45,000 U.S. dollars). Therefore, any person making any kind of taxable supply, including electronic services with turnover of above TZS 100 million, must be registered for VAT and issue invoices for all supplies made in Tanzania. When determining the threshold for taxable supplies, the value of imported services must be included.

Nonresident suppliers are required to register for VAT if they make taxable supplies in Tanzania, on which VAT needs to be charged, and they will need to appoint a VAT representative for these purposes.

However, the provision of electronic services by a nonresident supplier is not considered to be a supply made in Tanzania, unless the nonresident has a permanent establishment in Tanzania from where the supply is made. On this basis a nonresident supplier of electronic services will not need to register for VAT in Tanzania.

That said, a business-to-business (B2B) customer of imported electronic services will be required to self-assess VAT via the reverse charge mechanism, but an end consumer of the same service will not have a similar obligation and will receive the service without incurring a VAT charge.

Customer identification

Given that nonresident suppliers are not required to collect or remit consumption tax, there are no specific requirements to identify and categorize Tanzanian customers between business and end consumers.

Customer location

There are no requirements obliging a nonresident supplier to identify the location of a consumer. A resident taxpayer supplying taxable goods or services is obliged to declare the identity of a B2B customer and its location on the tax invoices (i.e., name, address, VAT number and tax identification number).

Supplier identification

The tax authorities do not seek information on nonresident suppliers of electronic services as no VAT is payable by the nonresident supplier. However, taxpayers who are required to self-assess VAT via the reverse charge mechanism (B2B customers) will require invoices from nonresident suppliers as proof of services received.

While the VAT Act requires registration of nonresidents with a resident VAT representative where the income sourced in Tanzania exceeds the threshold, the supply of digital services to customers in Tanzania from a nonresident supplier are not considered to be made in Tanzania.

Procedural matters

VAT returns are to be filed monthly.

Late payment of VAT attracts interest at the statutory rate plus fixed penalties for incorrect filing of returns.

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