Business Tax and Levies

Business Tax and Levies in Tanzania

The Ministry of Finance is responsible for determining tax structure and classification. Basically, there are those types of tax referred to as Direct tax, which is mainly tax on income; while Indirect tax is tax on consumption and international trade. This article will introduce some of the common tax that business people are responsible for paying in Tanzania.

What is Corporation tax?

As a business person you will be required to pay Corporation tax. Corporation income tax is a tax levied on corporation taxable profit for all companies registered and/or doing business in Tanzania. The applicable corporation income tax rate is 30%, and is usually paid in two stages. The provisional tax is paid based on the taxpayer’s own estimates at the beginning of the business year; and final tax is paid after the official assessment of the total income in the respective year of income. It is payable at the Tanzania Revenue Authority (TRA).

What is a Value Added Tax (VAT)?

VAT is a general consumption tax assessed on the value added to goods and services at a standard rate of eighteen percent (18%.) It is a consumption tax because it is born ultimately by the final consumer. It is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain.

What is the Skills Development Levy?

Another tax is the Skills Development Levy, which is a tax on payroll, which is paid by employers who employ more than four employees. It is levied at 6% of the payroll emoluments. Out of this, 2% goes directly to the Vocational Education and Training Authority for the purposes of providing skills to the workforce that employers require. Agricultural employment is exempted from the Skills Development Levy.

What is Withholding tax on employment?

A Withholding tax, also called a Retention tax, is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government. In Tanzania, Withholding tax applies mostly to employment income.
An example of Withholding tax is tax on salary /income of an employee (PAYE). Section 81 of the Income Tax Act requires an employer to withhold tax from the payments made to an employee. The employer is required by Section 84 (1) to pay the tax withheld to TRA within seven days after the end of each calendar month.

What other taxes are there in Tanzania?

We also have tax on international trade and it includes:

• Import Duty
• Excise Duty 
• Value Added Tax (VAT) on imports
• Other internal taxes, fees, levies and user charges, which are collected from various sources, for example Motor vehicle registration tax, Motor vehicle transfer tax, and Port and Airport departure service charges. 

There are also other taxes not mentioned here and others related to specific sectors/industry, for example the Game of Chance and Gambling Tax. 

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