The Value Added Tax (General) (Amendment) Regulations, 2018 published on 19 October 2018. These regulations clarify The Value Added Tax Act, 2014 and amend the Value Added Tax (General) Regulations, 2015.
The following are brief details of the amendments:
Partial input tax credit (section 70 in the Value Added Tax Act, 2014)
The amendment has clarified that the Act allows the taxpayer who has both taxable and exempt supplies to apportion his input tax as per the Method 2 which was previously allowed under the old VAT Act.
This method allows the taxpayer to divide his input tax into 3 categories.
A: Input tax directly attributable to taxable supplies. This can be fully claimed.
B: Input tax directly attributable to exempt supplies. This cannot be claimed.
C: Input tax attributable to both taxable and exempt supplies. This has to be apportioned as per the formula in section 70 in the Value Added Tax Act, 2014
Apportionment of input tax for a supplier of financial services (section 27 in the Value Added Tax (General) Regulations, 2015)
The supplier of financial services can now include the value of supplies of imported services in his apportionment. These were previously excluded from the apportionment.
Conditions for approval of Deferral of Value Added Tax (section 5 in the Value Added Tax (General) Regulations, 2015)
The commissioner general can now approve an application of deferment of value added tax on imported capital goods if the VAT payable for each unit of the capital goods is TZS 10,000,000 or more. Previously, approval could only be granted if the VAT payable was at least TZS 20,000,000 on each unit.
Supply of financial services
Financial services for which no consideration is charged are exempt from VAT as per item 13 under Schedule Part 1 of the Value Added Tax Act, 2014 .
The following clarifications have been made:
A supply made in relation to a payment system or for a payment service is not exempt if consideration is based on fee.
Payment system means a facility consisting of payment instruments, banking and transfer of money procedures, interbank funds transfer system or payment system provider’s systems that ensure the circulation of money.
A payment service means service of money transfer through payment system.
The following services shall not be considered financial services:
- Safe custody for money or documents
- Brokerage services
- Debt collection or factoring services
- Legal, accounting, record packaging services and tax agency services including tax advisory services.
Accounting and record packaging services may include:
- Services related to a financial clearing system
- Posting of financial transaction or maintenance of the account of customers of supplier of financial service
- Services ancillary to the above
Periodic statement to be issued by supplier of financial services
A supplier of financial services is required to issue periodic statements to customers which shall be deemed to be tax invoices.
It is not necessary for the periodic statement issued to bear the words “tax invoice” in the header or bear sequential numbering.
The periodic statement must be issued within 10 days following the end of the month to which the tax period relates.
The periodic statement must include the following:
- Name, address, Tax payer Identification number (TIN) and VAT registration number (VRN) of the service provider and the customer
- Date of the periodic statement
- Description and value of each transaction listed on the periodic statement
- Total consideration, excluding VAT for the listed transactions
- Applicable VAT rate and total VAT charged
- Total price payable by the recipient of the service
In case the customer is not a taxable person, the supplier is required to issue a normal statement which may not necessarily contain all the details of a normal periodic statement.
A taxable person who has incurred input tax in relation to a supply of financial services in a particular period shall not claim the input tax unless he is in possession of the periodic statement at the time of filing the return.
Goods transported to Zanzibar from mainland Tanzania
To enjoy zero rating for locally manufactured goods transported from mainland Tanzania to Zanzibar, the manufacturer must produce the following documents:
- Tax invoice generated by electronic fiscal device (EFD)
- Landing certificate
- Single Administrative Document
- Transire
- Certified copy of VAT registration certificate of the customer
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