BUDGET ANALYSIS 2017/2018 TAX VIEWPOINT PROPOSED TAX CHANGES Value Added Tax (VAT):- Bitter- Sweet for Capital goods i...
BUDGET ANALYSIS 2017/2018
TAX
VIEWPOINT
PROPOSED
TAX CHANGES
Value
Added Tax (VAT):-
Bitter- Sweet for Capital goods industry
Importation and local purchase of machines
and plants used in production of edible oil, textile, leather,
veterinary and pharmaceutical are now VAT exempt.
Technically in regard to Taxation it
will be relatively cheaper to import than to buy locally because local
producers of plants and Machinery will have input VAT that will not be able to
claim on exempt supplies, therefore they will be forced to shift their input
VAT to the buyers of these Machines giving advantage to foreign producers.
In Taxation, the best way to meet
Government Objective of providing relief of Taxes in purchase of Machines and
Plants is to charge VAT at Zero rate (rather than VAT exemption) which will
promote production of these machine locally by allowing producers to claim
input VAT and boost employment and Industrialisation in the country.
Major Boost for Tanzania Ports and Logistic
Industry
From July 2017 VAT on Ancillary
transport services in relation to goods in transit when they are in the
Tanzania will be charged at ZERO Rates, this is a major boost to clearing
agents and Oil Marketing Companies. This will boost documentation work be done
in the country and by Zero rating of VAT will allow Clearing Agents and Oil
Marketing Companies to Claim input VAT making their service cheaper.
In July 2015 VAT on Ancillary
transport services in relation to goods in transit was introduced, stakeholders
were up-in-arms that this introduction would result in loss of employment in
most logistic and Marketing companies, as an extra 18% VAT cost would result
into foreign Customers to do all the logistics themselves.
VAT on locally produced compounded animal feeds
and Fertilised eggs for incubation are now exempted; this is key boost to
Livestock keepers in the country.
Income
Tax changes
Megadeal for New assemblers of vehicles, tractors
and fishing Boats.
New Assemblers will be charged a Reduced
Corporate Income Tax of 10% instead of 30% for Five Years from
commencement of operations. The Government will sign a Performance
Agreement with the assemblers to reflect the responsibilities of both parties.
Alternative Minimum Tax Hullabaloo has been
Resolved
For a number of Years there was chaos
on Alternative Minimum Tax basis on which is which, because under charge
section of the Income Tax Act the Basis for Perpetual unrelieved loss was three
years while the Tax rate in the Fifth Schedule indicated the basis is five
Years, this controversy has now been resolved by the Minister amending
the Fifth Schedule to also indicate three years basis as it is in the charge
Section of the Act.
Non-Commercial Vehicles
In Calculating depreciation in
Taxation (depreciation allowance), the Value of a non commercial Vehicle was
limited to TShs 15,000,000. if you bought a non-commercial
vehicle for more than 15Million the excess of 15million was not recognised as a
legitimate cost of the Vehicle,
From July 2017 The depreciation basis
for Non-Commercial Vehicles has been increased to TShs 30,000,000 that
is double the previous amount.
For Taxation purpose a Non-Commercial
Vehicle are all road vehicles that are by specification design can not to carry
a load of more than half a tonne (500kg) such as, Saloon Cars and SUVs or
vehicles that by design cannot carry more than 13 passengers. Please Note That:
All vehicles that are used in transportation business and vehicle rental
business are considered to be commercial Vehicles
Small Miners hit hard
There is introduction of 5%
Final withholding Tax of the total market value of minerals to all
small miners. This is an Extra Burden to Small Miners.
EMPLOYEES TAKE HOME:
No
changes on PAYE rates for the year starting July 2017 to June 2018
Changes
in the Excise Duty
Annual Motor Vehicle Licence Fee has been
Abolished
Annual Motor Vehicle Licence Fee has
been abolished. This Measure will by and large
reduce Motor Vehicle Owners annual logistic burden of going to TRA for renew of
Motor Vehicle Licences and traffic police habitual checks on Motor Vehicle
Licence and will address long outstanding complaint of imposing fee even if the
vehicle is out of use. Annual Motor Vehicle Licence Fees will be paid
only once during Motor Vehicle first registration.
The Government to compensate for loss
of revenue by abolishing Annual Motor Vehicle Licence, has increase
Current Excise Duty rates on Petrol, Diesel and Kerosene by TShs.
40 per litre.
Amnesty
The Government has decided to forgive
all unpaid Motor Vehicle Licence Fees.
The Local Government Finance Act
Produce Cess
Produce Cess has been reduced from 5
percent to 3 percent for cash crops and from 5 percent to 2 percent for food
crops. This standardization will help to curb market distortion because traders
were favoring areas with lower cess.
Produce Cess should not be applied on
the transportation of crops of less than one ton from one Local Government
Authority to another. Skills Development Levy (SDL)
Skills Development Levy (SDL)
Skills Development Levy of 4.5% has
been maintained
Some changes in the East African Community Customs
Management Act, 2004
Common
External Tariff (CET)
Grant duty
remission on wheat grain apply duty rate of 10 percent instead of 35 percent
for one year to boost supply of Wheat to meet demand.
Grant Duty
Remission on LABSA at duty rate of 0 percent instead of 10 percent for one
year. This is a major boost to soap industries.
Continue to
grant duty remission on CKD kits for motorcycles at a duty rate of 10 percent
instead of 25 percent for one year.
Grant duty
remission of 0 percent to local manufacturers of motor vehicle “air filters”
Fees
and levies to be abolished are as follows:
To
abolish fees imposed on fertilizer (standards inspection, radiation inspection
and weight and measures) by the Tanzania Bureau of Standards (TBS), Tanzania
Atomic Energy Commission (TAEC) and Weight and Measures Authority (WMA). The
measure intends to increase agricultural productivity;
To
abolish standards inspection fee on cash crops such as cotton, tea, cashew-nuts
and coffee imposed by the Tanzania Bureau of Standards (TBS).
To
abolish Service Levy imposed on guest houses which are subject to Guest House
Levy;
To
abolish a Levy imposed on posters that direct people to the places where public
services such as schools, and hospitals or dispensaries are available
To
abolish fees imposed on livestock when they are in the market for auction;
Tanzania
Revenue Authority will start collecting levy on posters intended for commercial
purposes by 1st of July, 2017
Nota
Bene:- these proposed tax changes when approved shall become effective on 1st
July, 2017, unless stated otherwise.
This
Brief Budget Analysis has been prepared by:
Innocent
Wilfred Makundi- Consultant- Tax Services
(BAF,
MBA-CM, CPA, Tax Consultant)
CONTACTS:
Mob:
+255-713-670126.
Facebook:
www.facebook.com/innocent wilfred
Email: Innocentmakundi@gmail.com
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