Several amendments have been made on the Income Tax Act, (cap. 332) with an impact on foreign entities in Tanzania as shown below:
It is now a requirement to use electronic fiscal receipts to authenticate purchases made in a particular year of income. Expenditure deductions not supported by electronic fiscal receipts will not be allowed for tax purposes. Exclusion applies to sellers of goods or suppliers of services who are foreign citizens with no permanent establishment in Tanzania or any person who is not required to issue electronic receipts as per the Tax Administration Act.
Offsetting of tax losses is now limited to 60% from the previous 70% of the current year chargeable income.
Several exemptions have been introduced. These include: Exemption on application of change in control rules for a change resulting from allotment of new membership interest in a resident entity. The rules are under section 56 of the Income Tax Act, 2004. An exemption from payment of Alternative Minimum Tax (AMT) to entities engaging in tea processing for three years running from 1 July 2024 to 30 June 2027. Also exemption on withholding tax will apply on interest paid by resident financial institutions to non-resident financial institutions and funds with an agreement with the Government of Tanzania. The objective is to reduce interest rates on loans to resident financial institutions so as they can offer affordable credit to customers.
Broadening of the definition of asset to include digital asset. Also introducing a withholding tax of 3% on payments made to resident persons for transfer of digital assets. A withholding tax of 5% has also been introduced on payments made by residents and non-residents to resident digital content creators.
For construction industry, there is an extension of the 10% withholding tax on rental payments to a resident person for the use of construction equipment or machinery.
Reduction of withholding tax on royalty payments to resident sports entities or Tanzania Football Federation (TFF) has been reduced to 5%.
Inclusion of entities engaging in the advancement of health services and environmental protection in the scope of charitable entities under section 64 of the Income Tax Act, 2004.
For details on Tanzania tax matters, visit our Tanzania tax partner’s website at www.auditaxinternational.co.tz
