TanzaniaTax Obligations Detailed

Employers in Tanzania have various tax obligations, including payroll taxes, social security contributions, and other levies.

Payroll Taxes

• Pay As You Earn (PAYE): This is a progressive tax deducted from employees' salaries and remitted to the Tanzania Revenue Authority (TRA). As of July 2021, the rates are:
  • 0% for up to TZS 270,000 monthly
  • 8% for TZS 270,001 to 520,000 monthly
  • 20% for TZS 520,001 to 760,000 monthly
  • 25% for TZS 760,001 to 1,000,000 monthly
  • 30% for above TZS 1,000,001 monthly
• Skills Development Levy (SDL): Employers with ten or more employees pay 3.5% of their total gross emoluments. Employers with fewer than ten employees are exempt, as are certain educational institutions.
• Workers' Compensation Fund (WCF): All employers in mainland Tanzania contribute 0.5% of their employees' gross pay to the WCF.

Social Security Contributions

• National Social Security Fund (NSSF): Private sector employers contribute 10% of each employee's gross salary to NSSF. Employees also contribute 10%. There is no upper limit to these contributions.
• Public Service Social Security Fund (PSSSF): Similar to NSSF, this applies to public sector employees, with both employer and employee contributing 10% of gross salary.

Tax Administration

• Tax Year: The tax year in Tanzania follows the calendar year (January 1st to December 31st).
• Filing and Payment: PAYE, SDL, and WCF contributions are due by the 7th of the following month.
• Provisional Corporate Income Tax: Companies must file and pay provisional income tax quarterly, within three months of the end of each quarter.
• Final Corporate Income Tax: Due within six months of the year-end.

Other Considerations

• Digital Service Tax: A 2% tax on gross payments received by non-residents for services provided through digital marketplaces.
• Withholding Tax: Applies to certain payments, ranging from 5% to 15% depending on the recipient's residency.

This information is current as of February 5, 2025, and is subject to change. It is advisable to consult with a tax professional for the most accurate and up-to-date information.

In Tanzania, employee tax deductions encompass several areas, including Pay As You Earn (PAYE), social security contributions, and the Skills Development Levy.

PAYE (Pay As You Earn)

This is a progressive tax, meaning the rate increases with income. The rates (as of July 1, 2021) are:

• Up to TZS 270,000: 0%
• TZS 270,001 - 520,000: 8%
• TZS 520,001 - 760,000: 20%
• TZS 760,001 - 1,000,000: 25%
• Above TZS 1,000,000: 30%

For example, someone earning TZS 600,000 monthly would pay 8% on the amount between TZS 270,001 and TZS 520,000 plus 20% on the remaining TZS 79,999. The total calculated tax will be TZS 23,999 plus TZS 15999.8 which is a total of TZS 39998.8.

Secondary Employment: Income from secondary employment is taxed at a flat rate of 30%. This tax is withheld at the source.

Non-Resident Employees: A flat rate of 15% is applied as final withholding tax on the gross income of non-resident employees.

Directors' Fees (Non-Service Directors): Fees paid to non-full-time service directors are subject to a flat 15% withholding tax.

Social Security Contributions

Both employees and employers contribute 10% of the employee's gross salary to the National Social Security Fund (NSSF). There's no upper limit for these contributions. Submissions to NSSF are due within one month after the deduction month.

Skills Development Levy (SDL)

Employers with ten or more employees contribute 3.5% of the total gross emoluments paid to all employees. (Effective from July 1, 2023). Payment is due within the first seven days of the following month.

Other Deductions and Benefits in Kind

Certain benefits provided by employers are considered taxable income. These "benefits in kind" include:

• Housing: The taxable benefit is the lower of the market rental value or the higher of 15% of the employee's annual income and the employer's claimable expense.

• Company Car: The taxable benefit depends on engine size and vehicle age. It is not taxable if the employer does not claim expenses related to the vehicle.

• Loans: If a loan's interest rate is below market value, the difference is a taxable benefit. However, loans up to three months' basic salary, repayable within a year, are exempt.

Other deductions or benefits may also apply depending on the specific employment contract and company policy. All PAYE and SDL payments are due within the first seven days following the payroll month. Returns for PAYE and SDL should be filed electronically with the Tanzania Revenue Authority within the same timeframe.

In Tanzania, Value Added Tax (VAT) is levied on most goods and services, with specific regulations and rates for mainland Tanzania and Zanzibar.

VAT Rates and Registration Thresholds

• Mainland Tanzania: 18% standard VAT rate. A reduced rate of 0% applies to specific items. Registration is mandatory for businesses with an annual turnover of TZS 200 million or more. Businesses expecting to reach half this threshold (TZS 100 million) within six months are also required to register.
• Zanzibar: 15% standard VAT rate, while digital services are taxed at 18%. Businesses with an annual turnover exceeding TZS 100 million must register for VAT. Hotels in Zanzibar must register if their accommodation (bed and breakfast) rate is USD 100 or more per person per night.

Filing and Payment Deadlines

• VAT returns and payments are due on the 20th of the following month. If the 20th falls on a weekend or holiday, the deadline shifts to the next business day.
• As of July 2023, non-resident providers of electronic services must file VAT returns by the 20th of the following month.

Exempt and Zero-Rated Supplies

• Exempt Supplies: These are not subject to VAT and do not allow for input tax deductions. Examples include certain agricultural and educational materials and services, healthcare services, and unprocessed food.
• Zero-Rated Supplies: While not taxed, zero-rated supplies permit businesses to claim input VAT deductions. These include exports and supplies to tourists with proof of goods being removed from Tanzania.

Digital Services

• Non-resident providers of electronic services (e.g., online advertising, streaming services) must register for VAT and a 2% Digital Service Tax (DST). There's no registration threshold.
• A simplified VAT registration portal was launched in 2023 for non-resident digital service providers.

Additional Information

• The Tanzania Revenue Authority (TRA) manages VAT. They offer a simplified registration framework for non-resident providers.
• VAT on imported goods is payable at the point of import, alongside any customs duties.
• A reverse-charge mechanism applies to imported services.
• Businesses must issue invoices for all transactions and retain them for at least five years.
• Real-time transaction reporting is mandatory in Tanzania through the Electronic Fiscal Device Management System (EFDMS).
• While e-invoicing isn't mandatory, it's encouraged.
• VAT refunds should be processed within 30 days of application, according to the 2024-2025 budget.

This information is current as of February 5, 2025, and might be subject to change. Consulting the Tanzania Revenue Authority website or a tax advisor is recommended for the most up-to-date details.

Tanzania offers a range of tax incentives to stimulate investment and economic growth. These incentives are primarily administered by the Tanzania Investment Centre (TIC) and the Export Processing Zones Authority (EPZA).

TIC Incentives

• General Investment Incentives:
  • Eligibility: Minimum investment of USD 50,000 for Tanzanian citizens and USD 500,000 for foreign investors or joint ventures.
  • Benefits: Exemption from import duty on capital goods and raw materials. A 75% import duty exemption on deemed capital goods. Reduced corporate tax to 20% for the first five years for pharmaceuticals, textiles, and leather product manufacturing. Reduced corporate tax to 10% for the first five years for assembly of motor vehicles, tractors, fishing boats, or outboard engines. Capital allowances: 100% for agriculture and 20% for mining (first 5 years).
• Strategic Investment Incentives:
  • Eligibility: Investments exceeding USD 20 million for Tanzanian-owned projects and USD 50 million for foreign-owned projects with significant economic impact.
  • Benefits: Negotiated incentives based on the project's specifics. May include enhanced tax exemptions, infrastructure support, and streamlined regulatory processes.

EPZA Incentives

• Export Processing Zones (EPZs) and Special Economic Zones (SEZs):
  • Benefits: A 10-year corporate tax holiday followed by a 25% tax rate for the next ten years. Exemption from withholding tax on dividends to non-residents for 10 years. Exemption from import duty and VAT on raw materials, machinery, equipment, and other inputs. Exemption from stamp duty. 100% investment deduction on capital expenditure over 20 years. Exemption from tax on dividends for ten years. Duty and tax-free import of goods from domestic areas permissible. Duty-free import of raw materials for factory construction. Duty-free export of produced goods. Exemption from income tax on interest on borrowed capital.

Other Tax Incentives

• Newly Listed Companies: Reduced corporate tax from 30% to 25% for three years, provided at least 35% of shares are issued.
• Manufacturing: Reduced corporate tax to 20% for the first five years for new manufacturers of pharmaceutical or leather products with a performance agreement with the government.
• Agriculture, Manufacturing, and Tourism: Generous capital deduction provisions.
• Mining: Reduced royalty rates on gold sold at refinery centers from 6% to 4%. Exemptions from income tax on gains from the transfer of mineral rights and information to government-investor partnerships, gains on the transfer of free-carried interest shares to the government, and gains on the transfer of shares to the government through the Treasury Registrar.
• VAT Exemptions: Zero-rated VAT on the supply of gold to the Bank of Tanzania and licensed refineries. Zero-rated VAT on locally manufactured fertilizers and garments made with domestically produced cotton (extended until June 30, 2025). Exemption on the supply of double-refined edible oil from locally grown seeds by a local manufacturer (extended until June 30, 2025). Exemption on aircraft engines and parts to local manufacturers or assemblers. Exemption on the supply of sewerage services by water and sanitation authorities. Exemption on goods for official use by the armed forces.

Application Procedures

For TIC incentives, investors should apply to the Tanzania Investment Centre. For EPZA incentives, investors should apply to the Export Processing Zones Authority. Detailed information on specific requirements and procedures can be obtained from these respective agencies. Keep in mind that this information is current as of February 5, 2025, and may be subject to change.