BUDGET ANALYSIS 2016/2017 TAX VIEWPOINT PROPOSED TAX CHANGES Value Added Tax (VAT):- Bitter- Sweet for Tourism indus...
BUDGET ANALYSIS 2016/2017
TAX
VIEWPOINT
PROPOSED
TAX CHANGES
Value
Added Tax (VAT):-
Bitter- Sweet for Tourism industry
Tourist services have been VAT
exempt, however from 1 July 2016 tourist services will be VATable at the
statutory rate of 18%, For tourists, the additional 18% will relatively be pass
on to them, consequently it will be expensive to visit attractions, for tour
companies can now be able to claim their input VAT compared to when tourist services
were VAT exempt which means technically in taxation they were not able to claim
input VAT on exempt supplies.
Good news for Contractors
Now all bitumen are VAT exempt,
bitumen is mostly used by contractors as a binder to aggregate particles in road
construction, also used by makers of waterproofing products and used in sealing
flat loofs.
Mind your Steps
New VAT arrangement between Tanzania
Mainland and the Zanzibar stipulates that, the Government of Zanzibar will now collect
VAT on the supplies from Mainland Tanzania to Zanzibar, and Mainland Tanzania
will collect VAT on the supplies from Zanzibar to Mainland Tanzania; Previously
Mainland Tanzania used to collect VAT on supplies to Zanzibar and refund the
amount to Zanzibar. The new arrangement is cost saving to Mainland on
administrative costs in collecting Vat on behalf of Government of Zanzibar.
All Unprocessed Food stuffs and Unprocessed
Agricultural products are now VAT exempt
including un-processed vegetables, un-processed fruits, cereals, Live fish and
Soya beans
Dietary Supplements
Vitamins and food supplements are now
VAT exempt
Water Guards
Water treatment chemicals have now
been included in VAT exempt List.
Major boost for Aviation in Tanzania
Insurance services in general is a
VAT-able service, now the Government has announced that from 1 July 2016,
Aviation Insurance will be VAT Exempt. This is a Megadeal for Air Tanzania,
Fastjet, and Precision Air to mention just a few.
Devil in the Detail for Stock brokers, Banks and
Financial Institutions
Introduction of VAT on fee based
financial services.
Most common fee based financial
Activities includes, (i) Merger and Acquisition Services(ii) Stock Broking
Services (iii) Portfolio Management Services (iv) Capital Restructuring
Services (v) Corporate Financial Counselling (vi) Issue Management Services and
Credit Rating Services.
Stock brokers, Banks and Other
Financial Institutions have to wait to see
the details in the Finance Act 2016 to clearly understand the detail of this
VAT introduction, if the minister meant Fee-only or precisely Fee- based.
Income Tax changes
Decisive Powers on Rental Income
The Commissioner General (CG) of TRA
has now been given power to determine rental income based on the minimum market
value to charge withholding tax on rental income. CG can now decide to
re-determine self declared Rent to what he considers to be minimum market value
of rent of respective property for tax Purpose.
Armed Forces detached from Tax Exemptions
Exemption included Excise Duty, VAT
and Import Duty through Armed forces canteens and shops, The Government will
now provide allowances as an alternative and suitable way to
deliver the goods to them. The allowance will enable the armed forces to
procure their own requirements according to their preferences
PAYE:
An
additional TShs. 3,800 per month for every employee , as
the minimum Tax rate have gone down from 11% from 9% , that is Tax rate on
taxable income that exceeds TShs 170,000 but does not exceed 360,000 is now 9%
that is 2% of TShs 190,000. Note that, other tax bands and rate remained the
same.
Send-off Pay:
Income
Tax exemption on final gratuity to members of parliament has been removed,:-as
a send-off pay, each Member of Parliament receives TShs 160 Million.
Remove Withholding tax exemption
On shares or securities listed in the
Dar es Salaam Stock Exchange that are owned by a resident person or a non
resident person who either alone or with other associate controls less than 25
percent of the controlling shares of the issuer Company; Previously these
shares were considered to be Non-investment assets as per Section 3 of
Income Tax Act hence exempted from Withholding Tax on investments accorded to
other shares listed in DSE.
Payment to Approved Retirement Fund Striped off
Withholding Tax Exemption
Withholding tax on payments made to
approved retirement fund arising from investment incomes has been
imposed,
Tax Exemption From the Horse Mouth
When reading the Budget, The Minister
Mentioned that NGO’s and Religious Institutions will now start paying Taxes on
importation and ask for Refund including Filing an application to the Ministry
of Finance for Approval before any importation.
We have to wait and see how this is
incorporated in the Finance Bill and Finance Act 2016.
“the Government will continue to
control tax exemptions to religious institutions and investors to ensure they
are productive and beneficial to the nation”.
In view of this, the Government
will amend relevant legislations in order to address tax exemption
abuses. These amendments will be incorporated in the Finance Bill 2016.
Among other things, the amendments will require beneficiaries
to pay taxes and apply for refunds which will be reimbursed upon verification.
Changes
in the Excise Duty
Not a Good day for Telecoms
Introduction
of excise duty of 10% on both receiving mobile Money
To also cover commission received in
the provision of mobile money services. Previously 10% excise duty was on
sending mobile money, so most Telecoms commission was mostly allocated on
receiving money to do away with Excise duty.
Soft Plastic Bags Banned
The Government has decided to abolish
the manufacturing, selling, buying and use of soft plastic bags of less than 50
microns.
Natural Gas
The excise duty rate on Natural Gas
from cent 43 per cubic feet to cent 45 per cubic feet
With exception to bottled water which Excise duty
has remained the same all other Non Petroleum Products Excise duty has
increased by inflation rate of 5%
Including soft drinks, locally and
imported produced fruit juices, beers, energy drinks and non-alcoholic
beverages, Wine, Spirits, Cigarettes, lubricating oils and greases,
Imported Furniture discouraged
To increase excise duty rate of
imported furniture from 15 percent to 20 percent
The
excise duty rate on “cigar” remains at 30 per cent
Skills
Development Levy (SDL)
Skills Development Levy (SDL)
Skills Development Levy has gone down
by 0.5% from previous 5% to 4.5% starting 1 July 2016.
The Motor Vehicles Tax on Registration and
Transfer
Motor Vehicle Registration fee has
gone up from the current rate of Shs. 150,000 to Shs. 250,000 per
motor vehicles and from Shs. 45,000 to Shs. 95,000 per
motor cycle and tricycles;
Dig Deeper to Personalized your Motor Vehicle.
Fee for Personalized Registration
Numbers has double to TShs. 10 Million from 5 Million, for every
three years.
Over to You
Mandate of
collecting property tax has been transferred from
Local Government Authorities to the Tanzania Revenue Authority.:-TRA will
estimate tax and make valuation of the properties; institute proper remittance
procedures of property tax to respective local governments; dispute resolution
and review property tax exemption.
Minor Tax Changes
The Government has decided to
maintain the current levels of taxes and levies on fuel so that we maintain
price stability and provide economic stability.
Changes in the East African Community Customs Management
Act, 2004
Common
External Tariff (CET)
Measures to protect Local manufactures, cement,
Iron, Aluminium cans, fishing nets, “oil and petrol filters” crude edible oil
To
Protect Local Cement Industries, Tanzania to increase import duty rate on
cement from the current rate of 25 percent to 35 percent which is classified
for one year.
Increase
the CET rate on flat rolled products of iron or non-alloy steel from 0 percent
to 10 percent.
Increase
the import duty rate on Bars and rods of iron and steel from 10 percent to 25
percent.
Increase
the CET rate on Aluminium milk cans from 10 percent to 25 percent.
Increase
the import duty rate from 10 percent to 25 percent on made up fishing nets.
Increase
the import duty rate from 10 percent to 25 percent on “oil and petrol filters”
Grant
stay of application of CET rate to manufacturers of crude edible oil and apply
10 percent instead of 0 percent for one year
High tensile bars which not manufactured in the
region:-Grant stay of application of CET rate of 25 percent on iron and steel
products which are used in construction of bridges and bridge sections,
classified under HS Code 7308.10.00 and instead apply duty rate of 0 percent
for one year;
Grant the stay of application of CET rate of 25
percent on “automotive bolts and nuts” classified under HS Code 7318.15.00 and
apply duty rate of 10 percent for one year
Grant duty remission to manufacturers of “bolts
and nuts” classified under HS Code 7228.30.00 and 7228.50.00 by charging a duty
rate of 0 percent instead of 10 percent . This measure will enable
manufacturers to obtain raw materials at reasonable price since they are not
manufactured in the region
Grant duty remission of 0 percent to local
manufacturers of motor vehicle “air filters”
Reinstated:- Grant import duty remission of 0
percent on splints which are raw materials used in the manufacture of matches
due to lack of adequate matured forests, last year Import duty exemption for
splints used in the manufacturing of matches was removed
Reduce progressively import duty remission levels
on sugar and sugar confectionery from the current rate of 10 percent. Reduction
of import duty rate will be as follows: 2016/17 the rate will be 15 percent;
2017/18 the rate will be 20 percent, and 2018/19 the rate will be 25 percent.
The current duty rate of 10 percent undermines local production and promotes
importation of the product and abuse in the usage of the product
Grant duty remission to manufacturers of
“Aluminium cans” encouraging production of “Aluminium cans” in the region;
Grant stay of application of EAC CET rate of 35
percent on Wheat (Wheat grain) due to lack of capacity in the region to produce
wheat to satisfy the demand;
Increase the specific duty rate on worn clothes and
shoes from 0.2 USD/Kg to 0.4 USD/kg intended to gradually phase-out importation
of used clothes and footwear in the region.
Increase Import Duty rate from 10 percent to 25
percent for one year on paper products
EAC Customs Management Act, 2004
Additions
Exemptions for hospitals Under 5th Schedule EAC-CMA Refrigeration equipment,
incinerator’s equipments,staff uniforms, blood collection tubes
Grant
duty remission to the manufacturers of Inputs for the manufacture of deep cycle
batteries
Grant
duty remission for inputs or raw materials for use in the manufacture of solar
equipments
Fees and levies to be abolished are as follows:
o Tanzania
Food and Drugs Authority
o Export
Permit for food – Tsh. 50,000;Retention fees for Human and Veterinary medicines
from domestic manufacturers – Tsh. 100,000;Duplicate Certificate for Human and
Veterinary medicines from domestic manufacturers – USD 50;Duplicate Certificate
for Human and Veterinary medicines from foreign manufacturers – USD
100;Evaluation of product promotional materials – Domestic – USD 50;Abreviated
Advert – Domestic – USD 25;Duplicate certificate for foreign food, medicines
medical devices – USD 100;Duplicate certificate for foreign Medical devices
domestic – USD 30;Duplicate certificate for Medicines Domestic – USD
50;Retention fees for imported In Vitro Diagnostics (IVD) – USD 150;Retention
fee for domestic manufactured cosmetic manufactured cosmetics – Tsh.
30,000;Pre-registration GMP inspection fees for domestic pharmaceutical
manufacturing sites – USD 250;Medical representative foreign per company – USD
1,000;1% FOB value for cosmetics raw materials;0.5% FOB for importation of
pharmaceutical raw materials;Hospital permit for Psychotropic and Narcotics –
Tsh. 10,000;Import permit for Psychotropic and Narcotics – Tsh. 50,000;Export
certificates for pharmaceuticals – Tsh. 50,000;Certificate of Pharmaceutical
Product – Tsh. 50,000;Inspection of new food processing facilities – small –
Tsh. 100,000;Disposal certificates;Health certificates – Tsh. 50,000; and Trade
fair fees – Tsh. 200,000.
Cotton
Board
o Uhuru
touch contribution – Tsh. 450,000; and Fee for District Council to deliberate
on cotton buyers – Tsh. 250,000;
Tea Board
Fire and rescue levy – Tsh. 800,000.
Coffee
Board
Cherry Processing License – USD 250
Cashewnut
Board
o Cooperative
Union levy – Tsh. 20/- per kg;Transportation Fee – Tsh. 50/- per kg;Task Force
on Various Issues – Tsh. 10/- per kg;Storekeeper costs – Tsh. 10/- per kg.
Nota
Bene :- these proposed tax changes when approved shall become effective on 1st
July, 2016, unless stated otherwise.
This
Brief Budget Analysis has been prepared by:
Innocent
Wilfred Makundi- Consultant- Tax Services
(BAF,
MBA-CM, CPA, Tax Consultant)
CONTACTS
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Email: Innocentmakundi@gmail.com
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