Summary of the Finance Act, 2017
Abolition of annual motor vehicle license and escalation of excise duty on fuel.
- Abuse of charitable status by charitable organizations addressed.
- Withholding tax to small and medium scale of miners.
- Emphasis on Government e-payment system (GePG).
- Abolition of VAT on transit goods to be consumed outside Tanzania
- Government and public authorities to open accounts with, and deposit money to the Bank of Tanzania.
- Non-Tanzanians to subscribe shares to the Companies licensed under EPOCA and listed under DSE.
- Companies holding application service license are exempted from issuing to the public 25% of its shares.
The Finance Act, 2017 (“the Act”) came into operation on the 1st day of July, 2017. The Act provides for amendments of various laws with a view to impose and alter certain taxes, duties, levies and fees. It further amends other written laws relating to the collection and management of public revenues.
There are no major changes made to the Act comparing to what was proposed on the Finance Bill, 2017 tabled at the national assembly on the 14th day of June, 2017. Highlights of the Finance Bill, 2017 was published on the website of Breakthrough Attorneys on the 22nd of June 2017. Below is a summary of changes introduced by the Act:
1. The Bank of Tanzania Act, Cap 192 (“BOT Act”)
Section 32 of the BOT Act has been amended with the aim of compelling the Government and public authorities to open and deposit money to the Bank of Tanzania (BOT). The BOT has been mandated to make regulations for the implementation of this amendment.
2. The Electronic and Postal Communications Act, Cap, 306 (EPOCA)
Section 26 of EPOCA has been amended to widening the scope of floating shares held by companies licensed under the Act and listed to the Dar es Salaam Stock Exchange to include other nationals other than Tanzanians. The amendments were also made to exempt a company holding application service license from issuing 25% of its shares to the public. EPOCA has also been amended to delete the interpretation of the word local shareholders.
3. The Excise (Management and Tariff) Act, Cap 147
This Act has been amended to alter rates for some excisable items. The notable change is the abolition of annual motor vehicle registration license which has led to an increase in excise duty of TZS. 40/= per litre of fuel. The abolition is viewed as a relief to vehicle owners who had overdue payments resulting from compounding penalties arising from delayed payments of motor vehicle licenses. However, the increase of excise duty is expected to have an impact on increase of other services and goods due to the increase on the fuel prices.
4. The Income Tax Act, Cap. 332
Section 19 has been amended by adding new sub-section section 19(2)(e) with a view to eliminating ambiguities in law and mitigate revenue loss due to hedging or financial speculation arrangements which are occasioned by treating respective transactions as separate business and ring fencing of the resultant gain.
Section 69 has been amended so as to curb tax avoidance in re-insurance services rendered outside Tanzania with a source payment from Tanzania. It is also introduced a new section 83B in order to impose withholding tax on payments derived by small and medium sale of miners. Small scale miners shall be required to withhold tax at the rate of 5% of the market value of the minerals.
5. The Local Government Finance Act, (Cap. 290).
Section 31A of this Act has been amended so as to enable the Tanzania Revenue Authority (TRA) collect fees for billboards, posters and hoarding all over the county. This is criticized by some scholars as grab of the revenue sources from local government authorities after property tax which was introduced in the previous Finance Act, 2016.
Section 37 has been amended for the purpose of recognizing informal small vendors. The schedule to the Act has been amended for the purpose of exempting informal small vendors from paying levies. Section 67 has been repealed on the matter of a general penalty. The same provide for a penalty on a situation where one contravenes the provisions of the Act, of which no specific penalty has been provided.
The schedule has also been amended to grant exemption to abator charges, service levy payable by guest house, posters that give direction to areas that offers social service, pharmacies and drug shop establishment fee and fees and levy payable by small renders situate outside special business places running with capital of one hundred thousand shillings.
6. The Mining Act, Cap. 123 (Mining Act)
Section 18 of the Mining Act has been amended to restrict a mineral right holder or a licensed dealer to export mineral unless the person has paid the inspection fee. Section 90 has been amended to impose inspection fee on minerals to be exported by mineral right holder or a licensed dealer and it is proposed to be one per centum of gross value. Section 112 of the Mining Act has also been amended to enable the Minister responsible for mining to make regulations to enhance and operationalize inspection and impose inspection fee.
7. The Public Finance Act, Cap 348
Section 6A has been added to the Public Finance Act, Cap 348. The same requires all public moneys to be collected through Government e-payment system. The amendment intends to curb loss of revenues collected by Ministries, Departments and Public Institutions.
8. Tanzania Revenue Authority Act, Cap 399 (TRA Act)
Section 16 (8) has been added to the TRA Act so as to facilitate proper representation of testimony or submission of evidence before judicial or investigative organs by the Tanzania Revenue Authority so as to ensure effective protection of Government revenue is attained by involving tax officers who handled or dealt with tax cases being prosecuted or investigated by such organs.
9. The Tax Administration Act, Cap. 438
Various amendments has been made under this Act so as to enhance voluntary tax compliance by improving chargeability and collection of interest on late payments of taxes, enabling the collection of penalties arising out of breach of tax laws to be collected by the Tanzania Revenue Authority (TRA) as intended by relevant tax laws, improving the powers of search and investigation of tax offences including restraint powers in enforcing offences related to use of EFD machines vested on TRA, introducing time limitation for application of tax refunds by taxpayers, and recognizing demand notes issued for collection of property rate as tax assessment, together with ensuring legal clarity by correcting errors existing in various tax laws.
10. To the Urban Authorities (Rating) Act, Cap 289
Sections 3, 6, and 16 of the Act has been amended so as to enable the Minister responsible for finance to impose rates in respect of buildings situated in urban areas. The amendment has also been done so as to set property tax rates chargeable to buildings which are not valued in accordance with the Act.
11. The Value Added Tax Act, Cap. 148
Section 59 of the Act has been amended in order to relieve importers of goods from paying VAT on ancillary services. The amendments are in line with the destination principle where VAT is paid at a place where goods or services are consumed. The amendment was done so as to reduce cost of transportation and make ports more competitive with a view to increasing Government revenue. This is a relief to the stakeholders in the transportation industry who have called upon the Government to abolish VAT on ancillary services for transit goods which has been imposed for only over a year ago. The VAT Act 2014 classified transit goods as zero rated supplies based on the destination principle but later, the same was changed through the 2016 amendments. The move was attacked by the general public and stakeholders and it was attributed as the main cause for declining business to the Dar es Salaam port towards the end of 2016 and the beginning of 2017.
Part I of the Schedule to the Act has been amended so as to provide tax exemption on animal feeds and fertilized eggs so as to promote animal husbandry. Part II of the Schedule to the Act has been amended so as to grant tax exemption on capital goods namely; the importation of machinery for manufacturing vegetable oil, textiles, pharmaceutical products, hides and skin to promote industrialization and attract investment.
12. The Vocational Education And Training Act, Cap 82
Section 19 of the this Act has been amended in order to exempt the imposition of skills and development levy (SDL) on private schools for the purpose of reducing the burden of operating expenditures so as to enable schools to provide quality education with affordable costs. The Written Laws (Miscellaneous Amendments) (No.3) Act, 2013 amended Section 19 of this Act by giving the Minister for Finance power to exempt SLD. Such power started to be exercised in 2014 (see the Finance Act 2014), 2015 (see the Finance Act, 2015) and now in 2017 whereby a number of categories of employers i.e. religious institutions, charitable organizations, farms employers have been exempted prom paying SLD.
The corporate department at Breakthrough Attorneys has prepared a summary of legislative developments i.e. this Finance Act, 2017 for ease of reference to the general public and interested stakeholders.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.