Q&A – 5 December 2011

Delay in filing VAT return

I got delayed in submitting my VAT return due to heavy traffic. By the time our accountant reached the TRA offices in Ilala from Pugu Road, the offices were closed and they very unfairly refused to open the doors for him. The next day when we submitted the returns, we were assessed with a penalty. Isn’t this few hours delay penalty that is being imposed unreasonable? Isn’t TRA being unfair with us? Also what does the law say about VAT on advertised goods? At what stage does one charge VAT?
SO, Dar

There is an old English saying that says that there are two certainties in life- death and the taxman! TRA being your taxman is not your enemy but your partner in development. The taxman is usually disliked all over the world!

TRA has set the end of the month as the deadline in which the previous months VAT return must be filed. You must appreciate that TRA deals with thousands of tax payers and has set deadlines that must be complied with. You had one whole month to file your return. You did not and waited for the last day in which to file and now claim there was traffic.

The TRA has a right to charge you a penalty which they have done; the VAT Act provides for this and we do not see any unfairness or unreasonableness. We suggest you pay the penalty unless you think you have other good reasons to ask for a waiver, which the Commissioner General may grant at his discretion.

You second part of the question is not very clear. If you are asking about the advertised prices of goods, the VAT Act is clear in that all such prices must be quoted inclusive of tax. Hence for shops that quote prices before VAT and surprise you at the purchase counter are in breach of the law.

You have further asked us what stage does VAT get charged. The VAT Act specifically provides for this in that VAT is chargeable at the earlier of any of the following: when goods are removed from the premises of the supplier, a tax invoice is raised, payment is received or service is rendered. Hence you might have performed a service but not raised an invoice. As per the law, the VAT is chargeable even if the invoice has not been raised. Most traders are under the wrong impression that VAT is only applicable at the time of raising an invoice. That is not the case.

Mortgaged property on lease

I am about to sign a 30 month lease with a landlord who has mortgaged the property to a bank to secure some large sums. I have seen the mortgage instrument which does not mention anything about leasing the premises. The landlord says this is standard practice in the market. How can I better secure myself?
SU, Moshi

If you are going to lease the premises for more than a year, then even if the mortgage instrument does not mention whether the mortgagor can lease the premises or not, the mortgage has an implied term under the law, that should the mortgagor wish to lease the land for more than a year, consent from the mortgagee, the bank, is required.

This is an implied term that automatically gets included in the mortgage in view of the Land Act and it does not matter whether it is mentioned or not in the mortgage instrument. The rationale for this is that should the borrower default, the bank would not have to wait too long to recover as any potential buyer will likely require vacant possession. In any case, the bank can still sale the mortgaged premises subject to the lease that you would have entered into with the mortgagor.

Other implied terms in the mortgage instrument include that the mortgagor must maintain insurance in the joint names of the bank and him/herself, to keep the building in good repair and not to transfer or assign the right of occupancy without the consent of the mortgagor . The law further states that if the mortgagor defaults in any of the implied terms, and the mortgagee intervenes to fix the breach, any such sums that the mortgagee spends in fixing such breach, can be added to the principal amount of the borrower.

In your case, we recommend that you ask the landlord/mortgagor to get consent from the bank; usually if the mortgagor is maintaining his or her loan account well, the bank would not withhold the consent. The bank cannot also unreasonably withhold such permission to lease the mortgaged premises.

Tax on vehicle transfer

I sold my vehicle to my wife, and have been assessed to pay tax on the transfer. Is there any transfer tax on vehicles after they have been registered in Tanzania? What are the consequences of not paying transfer tax?
DI, Dar

The Motor Vehicle (tax on registration and transfer) Act is clear in that any transfer of a motor vehicle attracts transfer taxes. However the same Act provides that if the transfer is from a husband to a wife, then the said transfer does not attract tax.

As long as she is your wife, and you can prove it, you can challenge the assessment raised against you.

The law states that if you do not pay taxes under this Act, and if convicted, the person shall have their car forfeited which shall be disposed by the Government as it deems fit.