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Tax Guide Tanzania

Tax Guide Tanzania

Personal Income Taxation in Tanzania

Under the tax regime of Tanzania, the residency status of the given taxpayer is also important. In this regard, it is important to consider the fact that residents in Tanzania are supposed to pay taxes on worldwide income. This implies that income sourced from within Tanzania, as well as income sourced outside of Tanzania is used for calculating Personal Income Tax.

On the other hand, non-residents in Tanzania are supposed to pay income tax on income that has been sourced from within Tanzania.

In this regard, it is important to note the fact that personal services are categorized as such if the given activity is performed within Tanzania, or is performed outside Tanzania but recipient is within Tanzania.

Personal Income Tax Rates

Personal Income is taxed as a personal income for resident individuals at a marginal progressive rate, maximum of 30%.

On the other hand, non-resident individuals are taxed at a rate of 15%.

The applicable personal income tax rates for residents are as follows:

  • For an income between 0 TZS (Tanzanian Shilling) and 270,000 TZS (Tanzanian Shilling): PIT is levied at a rate of 0%.
  • For an income between 270,001 TZS (Tanzanian Shilling) and 520,000 TZS (Tanzanian Shilling): PIT is levied at a rate of 8%.
  • For an income between 520,001 TZS (Tanzanian Shilling) and 760,000 TZS (Tanzanian Shilling): The basic tax for this income threshold is TZS 20,000. On the excess amount, PIT is levied at a rate of 20%.
  • For an income between 760,001 TZS (Tanzanian Shilling) and 1,000,000 TZS (Tanzanian Shilling): The basic tax for this income threshold is TZS 68,000. On the excess amount, PIT is levied at a rate of 25%.
  • For an income between higher than 1,000,000 TZS (Tanzanian Shilling): The basic tax for this income threshold is TZS 128,000. On the excess amount, PIT is levied at a rate of 30%.

Corporate Income Taxation in Tanzania

For business entities that are residents in Tanzania, Corporate Income Tax is charged on the aggregate income, regardless of the geography from which it has been sourced. In other words, both, income sourced from within Tanzania, as well as income sourced outside Tanzania is used to calculate Corporate Income Tax in Tanzania.

On the contrary, non-residents are supposed to pay taxes on income that has been sourced from within Tanzania only.

Corporate Income Tax Rates in Tanzania

Corporate Income is taxed in Tanzania at a rate of 30%. This rate is applicable for both, resident business entities, as well as Permanent Establishments of non-resident business entities.

Alternatively, a 5% turnover fee is charged for technical and management service providers towards mining, oil and gas related services.

For newly established companies, a reduced rate of Corporate Income Tax is applicable. Under this premise, the applicable rate is set at 25% for the first three years of operations of businesses on the stock exchange. However, only those companies are eligible for this that have around 30% shares already issued to the public.

Reduced Rates for Specific Companies:

Reduced Rates of CIT are applicable for the following business entities:

  • For new vehicle assembly plants, tractors, or fishing equipment (for the first five years of operations): CIT is levied at a rate of 10%.
  • For newly established manufacturers of pharmaceutical products, and leather products (for the first five years of operations): CIT is levied at a rate of 20%.
  • For newly established manufacturers of sanitary pads (for the first two years of operations): CIT is levied at a rate of 25%.

Alternative Minimum Tax

AMT is levied at a rate of 0.5% of the sales turnover for companies that have unrelieved tax losses for current, as well as preceding income years. However, this does not apply to agricultural companies, or companies that are engaged in healthcare or education.

Other Taxation in Tanzania

  • Value Added Tax (VAT): VAT is charged as a consumption tax across all locally sourced goods and services, at a standardized rate of 18%. However, this rate of VAT is applicable in Mainland Tanzania. For Tanzania Zanzibar, VAT is levied at a rate of 15%. Export related businesses, as well as businesses dealing with staple food supplies are zero rated when it comes to VAT.
  • Custom Duties: Custom Duties are levied across most imported goods and services in Tanzania. Under this regime, custom duties are levied in Tanzania at the following rates:
    • Raw Materials, capital goods, as well as agricultural machines: Custom Duties are levied at 0%.
    • For semi-finished goods: Custom Duties are levied at 10%.
    • For finished consumer goods: Custom Duties are levied at 25%.
    • For machinery, and related parts and equipment: Custom Duties are levied at 0%.
  • Excise Duties: Excise Duties are placed across all luxury based items depending on the product category involved.
  • Fuel Levy: Fuel Levy is charged on petroleum as well as diesel related products at a rate of TZS 413 on a liter.
  • Petroleum Levy: Fuel Levy is charged on petroleum as well as diesel related products at a rate of TZS 100 on a liter.
  • Payroll Taxes: Payroll Taxes are deducted at source by the employer, in the following ways:
    • Skill and Development levy at 4% of payroll costs.
    • Social Security Contribution levy at 20%, equally contributed by both employer and employee at a rate of 10%.
    • Workers compensation fund tariff charged at a rate of 0.6% for the private sector. For the public sector, this rate is equivalent to 0.5%.
  • Local Taxation: The following taxes are levied and collected individually:
    • Property Taxes
    • Service Levy: Imposed at 0.3% on turnover generated by corporate bodies.
    • Produce Cess: Imposed at 3% on food, and 5% on forest related products.

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