Further tax update on Finance Act 2016

  • More collection powers to TRA

Further to the tax update we issued on 15 July 2016, please find this second update:

  1. Amendments to the Companies Act: The Registrar of Companies is now legally duty bound to supply the Commissioner General (CG) with any information the CG will require for taxation purposes. What was a vague connection between BRELA and TRA is now being strengthened.
  2. Amendments to the Local Government Finance Act and the Urban Authorities (Rating) Act: The amendments have the effect of shifting from the Local Government Authorities to the Tanzania Revenue Authority the mandate to evaluate, assess, collect, account, and recover property rate. Also, decisions of the CG when administering property rates are now appealable to the Tax Revenue Appeals Board, as is the case with other tax laws.
  3. Amendment to the Income Tax Act: Definition of depreciable assets has been amended to expressly exclude mineral or petroleum rights in the definition of depreciable assets. Further, in our previous update and based on the document available at that time, we had commented that the imposition of withholding tax on services  rendered by non-residents from outside Tanzania that appeared in Finance Bill 2016 amending the Income Tax Act 2004 was now deleted.

    However, what we are informed of is that whilst the final version of the Finance Act 2016 deleted this amendment under section 69, it instead covered it in the definitions section where it is stated that “service rendered means transmitting or delivering of service in the United Republic of Tanzania irrespective of the place of performance of service.”This effectively means that although there was a deletion in the insertion by the Finance Bill 2016 amending section 69 of the Income Tax Act, this new definition would imply that from 1 July 2016 withholding tax applies irrespective of the place of rendering such services. You are kindly requested to take note of this very important change in legislation as it will affect all companies that are using non-resident service providers for technical and other services. Thus, withholding tax of 15% on such services will now apply.

  4. Amendments to the Railways Act: The list of goods and equipment exempted from the railway development levy has been extended to include, amongst others, pharmaceutical goods and equipment, and fertilizers, as defined under the East African Community Common External Tariff.