VALUE ADDED TAX BILL, 2013 NO. X OF 2013 ARRANGEMENT OF SECTIONS

Transcription

1 VALUE ADDED TAX BILL, 2013 NO. X OF 2013 ARRANGEMENT OF SECTIONS SECTION: PART I INTERPRETATION 1. Short title and commencement 2. Defined terms 3. Meaning of connected and connected persons 4. Meaning of consideration 5. Meaning of economic activity 6. Meaning of fair market value 7. Meaning of resident and non-resident PART II IMPOSITION OF VALUE ADDED TAX Division A Imposition and exemptions 8. Imposition of VAT and person liable 9. Exemptions and rates only as provided by law Division B VAT on Imports 10. Payment and collection of VAT on imports 11. Value of import 12. Imports through Zanzibar Division C VAT on Supplies 13. General rules for supplies 14. When VAT becomes payable on supplies 15. Value of supply 16. Progressive or periodic supply 17. Sale of an economic activity as a going concern 18. Rights, options, and vouchers 19. Prepayments for telecommunication services 20. Gambling supplies 21. In-kind employee benefits 22. Cancelled transactions 23. Sale of property of a debtor PART III REGISTRATION 24. Registration requirement 25. Applications for registration 26. Obligations of registered persons 27. Cancellation of registration 28. List of registered persons 29. Destination principle PART IV PLACE OF TAXATION Division A Purpose of this Part Division B Supplies made in Tanzania 30. Supplies of goods 31. Supplies relating to immoveable property 32. Supplies of services

2 ii 33. Supplier and customer registered 34. Progressive or periodic supplies Division C Supplies for use outside the United Republic of Tanzania 35. Immovable property outside Tanzania 36. Goods supplied for use outside the United Republic of Tanzania 37. Services supplied for use outside the United Republic of Tanzania Division D Special rules 38. VAT representatives of non-residents 39. Services from a foreign branch 40. Travel agents and tour operators acting as principal 41. VAT returns PART V RETURNS, PAYMENTS, AND REFUNDS Division A Returns and payments Division B Net amount of VAT payable 42. Calculation and payment of net amount Division C Input tax credits 43. Credit for input tax 44. When input tax credit may be accounted for 45. Partial input tax credit Division D Other adjustments 46. Post-supply adjustments for adjustment events 47. Post-supply adjustments for bad debts 48. Adjustments for property applied to a private use 49. Adjustment for second-hand goods purchased for re-sale 50. Adjustments relating to insurance 51. Adjustments to correct minor errors 52. Adjustment on becoming registered 53. Adjustment on cancellation of registration Division E Refunds 54. Carry forward of negative net amount for a tax period 55. Refunds without carry forward 56. Refund for overpayments 57. Process for refund applications 58. Refunds to diplomats, international bodies and non-profits PART VI DOCUMENTS AND RECORDS 59. Tax invoices 60. Adjustment notes 61. Requests for VAT documentation 62. Documentation issued by or to agents 63. Records and accounts PART VII ADMINISTRATION 64. Administration 65. Tax decisions 66. Regulations 67. Continuity of partnerships or unincorporated associations 68. Death or insolvency of taxable person; mortgagee in possession 69. Interaction with income tax

3 iii 70. Joint administration and collection of VAT in the United Republic 71. Repeal 72. Transition PART VIII MISCELLANEOUS SCHEDULE

4 VALUE ADDED TAX BILL [2013 No. XX] A BILL to repeal the Value Added Tax Act, 1997 and to provide for the imposition and collection of a modern and broad based value added tax, and for related matters. ENACTED by the National Assembly of the United Republic of Tanzania 1. Short title and commencement PART I INTERPRETATION (1) This Act may be cited as the Value Added Tax Act, [Date] [Commencement.] (2) It extends to the whole of Tanzania and, except as provided in sub-section (3), comes into effect on such date as the Minister may, by notice in the Official Gazette, appoint. (3) To the extent necessary to prepare for the implementation of this Act by the commencement day, the following provisions of this Act come into force on the date of its publication in the Official Gazette Part III; Part VI; Part VII; and (d) Part VIII except section Defined terms (1) In this Bill, unless the context indicates otherwise, adjustment event in relation to a supply, other than a supply mentioned in paragraph : means (iii) (iv) a cancellation of the supply; an alteration in the consideration for the supply; the return of the thing supplied (or part thereof) to the supplier; or a variation of, or alteration to, all or part of the supply and which has the effect that the supply becomes, or ceases to be, a taxable supply; and in relation to a taxable supply of a voucher: means the giving of the voucher in full or part payment for a supply that is exempt or zero-rated;

5 2 approved not-for-profit organisation means an organisation recognised as a charitable or religious organisation in accordance with section 64 of the Income Tax Act, 2004; ancillary transport services means stevedoring services, lashing and securing services, cargo inspection services, preparation of customs documentation, container handling services, and the storage of transported goods or goods to be transported; association of persons includes a partnership, a trust, and a body of persons formed, organised, established, or recognised in Tanzania or elsewhere, but does not include a company or an unincorporated joint venture; Authority means the Tanzania Revenue Authority established by the Tanzania Revenue Authority Act; commencement day means the day specified for this Bill to come into effect in accordance with section 1; commercial accommodation means accommodation in a building (including part of a building or a group of buildings) operated as a hotel, motel, inn, boarding house, guest house, hostel, lodge, cottage, serviced apartment or similar establishment, or on sites developed for use as camping sites, where lodging is regularly or normally provided to four or more persons for a periodic charge; or other accommodation offered for short term occupation by individuals other than as their main residence; company has the meaning give in the Companies Act 2002; directly related to land, in relation to services, means that the services are physically performed on land; are the services of experts and estate agents relating to specific land; or are services relating to construction work undertaken or to be undertaken on specific land; entertainment means the provision of food, beverages, amusement, recreation, or hospitality of any kind, whether or not the provision of such entertainment is lawful; exempt, in relation to a supply or import, means a supply or import that is specified as exempt under this Bill, a Schedule to this Bill, or the Regulations; or a supply of a right or option to receive a supply that will be exempt; export, in relation to a supply of goods, means the removal of the goods from a place in Tanzania to a place outside the United Republic of Tanzania and, in the absence of proof to the contrary, the following are sufficient evidence that goods have been so exported evidence of the consignment or delivery of the goods to an address outside the United Republic of Tanzania; or

6 3 evidence of the delivery of the goods to the owner, charterer, or operator of a ship, aircraft or other means of transport engaged in international transport for the purpose of carrying the goods outside the United Republic of Tanzania; finance lease means a lease that is treated as a finance lease under International Financial Reporting Standards, but does not include a hire purchase agreement; financial services means any of the following services but does not include a supply of the services of arranging for or facilitating any of such services (d) (e) (f) (g) granting, negotiating, and dealing with loans, credit, credit guarantees, and security for money, including management of loans, credit, or credit guarantees by the grantor; transactions concerning money, deposit and current accounts, payments, transfers, debts, cheques, or negotiable instruments, other than debt collection and factoring; transactions relating to financial derivatives, forward contracts, options to acquire financial instruments, and similar arrangements; transactions relating to shares, stocks, bonds, and other securities, but not including custody services; transactions involving granting or transferring ownership of an interest in a scheme whereby provision is made for the payment or granting of benefits by a benefit fund, provident fund, pension fund, retirement annuity fund, preservation fund, or similar fund; transactions involving the provision, or transfer of ownership, of a life insurance contract or the provision of reinsurance in respect of such contract; the payment or collection of an amount of interest, principal, dividend, or other amount in respect of any share, debt security, equity security, participatory security, credit contract, contract of life insurance, superannuation scheme, or futures contract; fixed place, in relation to the carrying on of an economic activity, means a place at or through which the activity is carried on, being (d) a place of management; a branch, office, factory, or workshop; a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources; or a building site or construction or installation project; full input tax credit, in relation to a person and in relation to a supply to or import by the person, means a credit for all of the VAT payable on that supply or import; gambling event means the conduct of a lottery, raffle, or similar undertaking; or a race, game, sporting event, or other event that has or is intended to have an outcome; gambling supply means the supply of a ticket (however described) in a lottery, raffle, or similar undertaking; or

7 4 the acceptance of a bet (however described) relating to the outcome of a gambling event; goods means all kinds of tangible moveable property, excluding shares, stocks, securities, or money; government entity means (d) the Government of the United Republic of Tanzania or a Ministry, Department, or Agency of that Government; a body, authority, or enterprise owned or operated by the Government of the United Republic of Tanzania; or a local authority, council, or similar body in Tanzania; import when used as a verb: unless otherwise specified, means to import goods by bringing them into Tanzania from a place outside Tanzania; when used on its own as a noun: means an import of goods; imported services means services, the supply of which is not made in the United Republic of Tanzania, as determined under Division B of Part IV of this Bill or the Zanzibar VAT Act, if the services are supplied to a taxable person; immovable property includes (d) (e) an interest in or right over land; a personal right to call for or be granted an interest in or right over land; a licence to occupy land or any other contractual right exercisable over or in relation to land; the provision of accommodation; or a right or option to acquire anything mentioned in paragraphs to (d); individual means a natural person; income tax has the meaning given in section 4 of the Income Tax Act, 2004; input tax, in relation to a person, means: VAT imposed on a taxable supply made to the person, including VAT payable by the person on a taxable supply of imported services; VAT imposed on a taxable import of goods by the person; and Zanzibar input tax. input tax credit, in relation to a person, means a credit allowed for input tax incurred by the person; international assistance agreement means an agreement between the Government of the United Republic of Tanzania and a foreign government or a public international organisation for the

8 5 provision of financial, technical, humanitarian, or administrative assistance to the United Republic of Tanzania; international transport means the services, other than ancillary transport services, of transporting passengers or goods by road, rail, water, or air (iii) from a place outside the United Republic of Tanzania to another place outside the United Republic of Tanzania; from a place outside the United Republic of Tanzania to a place in Tanzania; or from a place in Tanzania to a place outside the United Republic of Tanzania; the services of transporting passengers from a place in the United Republic of Tanzania to another place in the United Republic of Tanzania to the extent that those services are supplied as part of the supply of the services to which paragraph applies and by the same supplier; the services, including ancillary transport services, of transporting goods from a place in the United Republic of Tanzania to another place in the United Republic of Tanzania to the extent that those services are supplied as part of the supply of the services to which paragraph applies and by the same supplier; invoice means a document notifying an obligation to make a payment; Minister means the Minister charged with responsibility for matters relating to Finance; money means (d) any coin or paper currency that is legal tender in the United Republic of Tanzania or another country; a negotiable instrument used or circulated, or intended for use or circulation, as currency (whether of the United Republic of Tanzania or of another country); a bill of exchange, promissory note, bank draft, postal order, money order, or similar instrument; or whatever is supplied as payment by way of: credit card or debit card; or crediting or debiting an account, but does not include a collector s piece or an item of numismatic interest; net amount, in relation to a tax period, means the amount calculated under section 42(1); non-government organisation means an entity registered under the Non-Governmental Organizations Act 2002; output tax, in relation to a taxable person, means VAT payable by the person in respect of a taxable supply made by the person; a taxable supply of imported services acquired by the person; and

9 6 Zanzibar output tax; partnership includes two or more persons carrying on an economic activity jointly; person means (d) (e) (f) (g) an individual; a company; an association of persons; a government entity, whether or not that entity is ordinarily treated as a separate person; a foreign government or a political subdivision of a foreign government; a non-government organisation; or a public international organisation; prepaid telecommunications product means a phone card, prepay card, recharge card, or prepayment, however described and in whatever form, for telecommunication services; progressive or periodic supply means a supply made progressively or periodically under an agreement or law that provides for progressive or periodic payments; a supply by way of lease, hire, licence or other right to use property, including a supply under a finance lease; or a supply made directly in the construction, major reconstruction, or extension of a building or engineering work; registered person means a person who is registered for VAT under this Bill; registration threshold means the amount mentioned in subsection 24(4); residential premises means premises that are occupied as a residence, or that are designed to be, and are capable of being, occupied as a residence, and includes any garage, storage space, or other space associated with the premises, so long as that space is of a type commonly considered to be part of such residential premises; and any land that is reasonably attributable to the premises, but does not include any premises or part of premises that is used to provide commercial accommodation; sale means a transfer of the right to dispose of goods or immovable property as owner, including by exchange or barter, but does not include an offer or exposure of goods or immovable property for sale; services means anything that is not goods, immovable property, or money, including but not limited to: a provision of information or advice;

10 7 (d) (e) a grant, assignment, termination, or surrender of a right; the making available of a facility, opportunity, or advantage; an entry into an agreement to refrain from or tolerate an activity, a situation, or the doing of an act; and an issue, transfer, or surrender of a licence, permit, certificate, concession, authorisation, or similar right; supply includes any kind of supply whatsoever; Tanzania means Mainland Tanzania, and includes its territorial waters; Tanzania law includes a law of the United Republic of Tanzania, a District, or a local government of Tanzania; tax means the VAT imposed under this Bill and, unless the context otherwise requires, includes any interest, fine, or penalty payable under this Bill or under the Tax Administration Act, 2013 in relation to this Bill; tax decision has the same meaning as in the Tax Administration Act, 2013, and shall include the decisions mentioned in section 65; tax fraction means the amount worked out in accordance with the following formula R R where R is the rate of VAT specified in section 8(3); tax law has the same meaning as in the Tax Administration Act, 2013; tax period means a calendar month, beginning at the start of the first day of the month and ending at the end of the last day of the month; taxable import means an import of goods, other than an exempt import; taxable person means a registered person; and subject to the limitation set out in section 25(12), a person who is required to be registered for VAT; taxable supply means a supply, other than an exempt supply, that is made in Tanzania by a taxable person in the course or furtherance of an economic activity carried on by that person; or a supply of imported services to a taxable person ( the purchaser ) who acquires the services in the course of an economic activity if, had the supply been made in Tanzania by a taxable person in the course of an economic activity, it would have been taxable at a rate other than zero; and the purchaser would not have been entitled to a credit for ninety percent or more of the VAT that would have been imposed on the supply;

11 8 telecommunication service means a transmission, emission, or reception of signals, writing, images, sounds, or information of any kind by wire, radio, optical, or other electromagnetic systems, and includes: a transfer or assignment of the right to use capacity for such transmission, emission, or reception; and a provision of access to global or local information networks, but does not include a supply of the underlying writing, images, sounds, or information; telecommunications provider means a person licensed by the Tanzania Communications Regulatory Authority or an equivalent foreign body to provide telecommunication services; time of supply means in relation to a supply of goods: the time at which the goods are delivered or made available; in relation to a supply of services: the time at which the services are rendered, provided, or performed; in relation to a supply of immovable property: the earlier of the time at which the property is created, transferred, assigned, granted, or otherwise supplied to the customer; or delivered or made available; TIN means a tax identification number issued to a person under section 28 of the Tax Administration Act, 2013; total amounts wagered, in relation to a person and a tax period, means the sum of the following amounts the amount paid to the person, whether in money or in kind, for all of the gambling supplies made by the person in the tax period; and any amounts recovered by the person in the tax period in respect of an amount written off in the current or a previous tax period that were included in total monetary prizes under paragraph (d) of the definition of that term; total monetary prizes, in relation to a person and a tax period, is the sum of the following amounts, whether or not the relevant gambling event, gambling supply, or gambling loss occurred during the tax period the monetary prizes paid by the person in the tax period because of the outcome of gambling events; amounts of money paid in the tax period by the person to a customer of the person s gambling supplies because of an agreement between them requiring the person to repay a proportion of the customer s losses from those supplies; a negative amount, if any, computed under section 20(2) in the immediately preceding tax period; and

12 9 (d) an amount that the person writes off as a bad debt in the tax period in relation to all or part of the consideration that is due as a debt to the person for a gambling supply made by the person; trust, in the definition of an association of persons, means the person or persons acting from time to time in the capacity of trustee or trustees of a particular trust estate; trust estate means property held by a person or persons acting as trustee for a settlement, trust, or estate; VAT or Value Added Tax means the tax imposed on taxable supplies or taxable imports under this Act; VAT return means a return that a person is required to file with the Authority, in which information is provided about that person s or some other person s liability to pay tax under this Bill and, as if applicable, the Zanzibar VAT Act; voucher means a voucher, stamp, token, coupon, or similar article, including an article issued electronically, which can be redeemed by the holder for supplies of goods, services, or immovable property, and includes a prepaid telecommunications product, but does not include a postage stamp; Zanzibar means Tanzania Zanzibar and includes its territorial waters; Zanzibar input tax, in relation to a person, means: VAT imposed under the Zanzibar VAT Act on a taxable supply made to the person, including VAT payable under that law by that person on a taxable supply of imported services; and VAT imposed under the Zanzibar VAT Act on a taxable import of goods by the person, where taxable supply, imported services, and taxable import have the meanings given in the Zanzibar VAT Act; Zanzibar output tax, in relation to a taxable person, means VAT payable by the person in respect of a taxable supply made by the person; and a taxable supply of imported services acquired by the person, where taxable supply, imported services, and taxable import have the meanings given in the Zanzibar VAT Act; Zanzibar VAT means the tax imposed on taxable supplies or taxable imports under the Zanzibar VAT Act, where taxable supplies and taxable imports have the meanings given in the Zanzibar VAT Act; and zero-rated, in relation to a supply or import, means a supply or import that is specified as zero-rated under this Bill or the Regulations; or a supply of a right or option to receive a supply that will be zero-rated. (2) Defined terms that have different defined meanings for different contexts shall take the meaning applicable to the context.

13 10 3. Meaning of connected and connected persons (1) Two persons are connected persons if the relationship between them is such that one can reasonably be expected to act in accordance with the intentions of the other, or that both can reasonably be expected to act in accordance with the intentions of a third person. (2) One person is connected with another, and vice versa, if they are connected persons. (3) Without limiting subsection (1) or (2), the following are persons connected with each other an individual and (iii) (iv) (v) the husband or wife of the individual; a relative of the individual; the husband or wife of a relative of the individual; a relative of the individual s husband or wife; and the husband or wife of a relative of the individual s husband or wife; (d) (e) a partnership and a partner in the partnership, if the partner, either alone or together with persons who are related to the partner under another paragraph of this subsection, controls ten (10) percent or more of the rights to income or capital of the partnership; a company and a shareholder in the company, if the shareholder, directly or indirectly, either alone or together with persons who are connected with the shareholder under another paragraph of this subsection, controls ten (10) percent or more of the voting power in the company or the rights to distributions of income or capital by the company; a company and another company, if a person, directly or indirectly, either alone or together with persons who are connected with the person under another paragraph of this subsection, controls ten (10) percent or more of the voting power or the rights to distributions of income or capital in both of them; and a person acting in the capacity of trustee of a trust and an individual who is or may be a beneficiary of that trust or, in the case of an individual, whose relative is or may be a beneficiary of the trust. (4) One person controls another if the former is legally or operationally in a position to exercise restraint or direction over the latter. (5) Relative of an individual means a brother, sister, ancestor, or lineal descendant. 4. Meaning of consideration (1) Consideration, in relation to a supply, means the sum of the following amounts: the amount in money paid or payable by any person, whether directly or indirectly, in respect of, in response to, or for the inducement of the supply; and the fair market value of anything paid or payable in kind, whether directly or indirectly, by any person in respect of, in response to, or for the inducement of the supply. (2) Without limiting subsection (1), the consideration for a supply includes

14 11 any duty, levy, fee, charge, or tax (including VAT imposed under this Bill) that is payable by the supplier on, or by reason of, the supply; and included in or added to the amount charged to the customer; (d) any amount charged to the customer that is calculated or expressed by reference to costs incurred by the supplier; any service charge that is automatically added to the price of the supply; and any amount expressed to be a deposit paid when goods are sold in a returnable container and which may be refunded on the return of the container. (3) The consideration for a supply does not include a price discount or rebate allowed and accounted for at the time of the supply. (4) An exact reimbursement of costs incurred as agent for the payer does not form part of the consideration for the supply made by the agent to the person paying the reimbursement. 5. Meaning of economic activity Meaning of economic activity (1) Economic activity means an activity carried on continuously or regularly by a person, which involves or is intended to involve the supply of goods, services, or immovable property, including but not limited to an activity carried on in the form of a business, profession, vocation, trade, manufacture, or undertaking of any kind, whether or not the activity is undertaken for profit; and a supply of property by way of lease, hire, licence, or similar arrangement; and a one-off adventure or concern in the nature of a trade. Inclusions (2) Anything done during or in respect of the commencement or termination of an economic activity is part of the economic activity, including but not limited to the making of a supply, import, or acquisition. Exclusions (3) The following shall not be treated as economic activity the activities of an employee providing services in that capacity to an employer; activities performed as a director of a company, except where the director accepts such office in carrying on a business, in which case those services shall be regarded as being supplied in the course or furtherance of that business; except where the activity is carried on as a business a private recreational pursuit or hobby of an individual; or

15 12 an activity of a person other than an individual that is essentially carried on as a private recreational pursuit or hobby of a member or owner of the person, or of a connected person; or (d) an activity carried on by an individual, or by an association of persons all of the members of which are individuals, without a reasonable expectation of profit. Clarifications (4) The fact that it is illegal to carry on an activity does not prevent the activity being an economic activity. (5) The place where an activity is carried on is irrelevant for the activity to be an economic activity. 6. Meaning of fair market value Fair market value of supplies (1) The fair market value of a supply, including a supply given as in-kind consideration for another supply, is the consideration the supply would fetch in an open market transaction freely made between persons who are not connected; or if it is not possible to determine an amount under paragraph, the consideration a similar supply would fetch in an open market transaction freely made between persons who are not connected, adjusted to take account of the differences between such supply and the actual supply. Clarifications (2) One supply is similar to another if it is the same as, or closely resembles, the other supply in character, quality, quantity, functionality, materials, and reputation. (3) The fair market value of a supply shall be determined on the basis of the market conditions, including the registration status of the supplier, prevailing at the time and place of the actual supply. Fall back rule (4) If the fair market value of a supply cannot be determined under subsection (1), it may be determined using any method approved by the Authority for calculating an objective approximation of the consideration the supply would fetch in an open market transaction freely made between persons who are not connected. Fair market value of things (5) The fair market value of particular goods, services, or immovable property ( things ) at a particular time is what would have been the fair market value of a supply of those things by a taxable person at that time.

16 13 7. Meaning of resident and non-resident Meaning of resident for individuals (1) An individual is a resident at a particular time if the permanent home of the individual is in Tanzania; the individual has been or will be present in the United Republic of Tanzania on one hundred and eighty-three (183) days or more in the current calendar year of which at least half of those days have been in Tanzania; or the individual is or will be present in the United Republic of Tanzania in the calendar year and was present in the United Republic of Tanzania on more than one hundred and twenty-two (122) days during each of the two immediately preceding calendar years of which at least half of those days have been in Tanzania. Meaning of resident for companies (2) A company is a resident at a particular time if it is incorporated under a Tanzania law; or its centre of management and control is in Tanzania. Meaning of resident for trusts (3) A trust is a resident if the majority of the trustees of the trust are resident of Tanzania; or its centre of management and control is in Tanzania. Meaning of resident for other associations of persons (4) An association of persons other than a trust is a resident at a particular time if it is formed in Tanzania; or its centre of management and control is in Tanzania. Meaning of resident for government entities (5) A government entity is a resident of Tanzania. Meaning of resident of Zanzibar (6) An individual, company, trust, or association of persons is a resident of Zanzibar if it would be a resident or Zanzibar under subsections (1), (3), (4) or (5) by replacing the references to Tanzania by Zanzibar. (7) The following are residents of Zanzibar: the Revolutionary Government of Zanzibar, its departments and agencies; bodies, authorities, and enterprises owned or operated by the Revolutionary Government of Zanzibar; and

17 14 local authorities, councils, or similar bodies in Zanzibar. Tie-breaker rules between Tanzania and Zanzibar (8) If an individual who would be a resident under subsection (1) is also treated as a resident of Zanzibar if the individual has only one permanent home in either Tanzania or in Zanzibar, the individual is a resident of either Tanzania or Zanzibar, according to where the permanent home is situated there; if the individual has a permanent home in both Tanzania and Zanzibar, the individual is a resident of Tanzania for the purpose of this Act; the individual is a resident of Tanzania for the purpose of this Act if the individual does not have a permanent home in Tanzania or Zanzibar but the individual is or will be present in Tanzania for at least as many days in the current calendar year as in Zanzibar; or has been present in Tanzania in the two preceding calendar years for at least as many days as in Zanzibar. (9) Notwithstanding subsections (2), (3) and (4) a company, a trust, or an association of persons other than a trust, is a resident of Tanzania if its only fixed place in the United Republic of Tanzania is in Tanzania; and a company, a trust, or an association of persons other than a trust that, but for this paragraph, would a resident of both Tanzania and Zanzibar, is a resident of Tanzania if its centre of management and control is in Tanzania. Meaning of non-resident (10) A person that is not a resident, other than a resident of Zanzibar, is a non-resident. 8. Imposition of VAT and person liable Imposition PART II IMPOSITION OF VALUE ADDED TAX Division A Imposition and exemptions (1) Value Added Tax is hereby imposed and payable on taxable supplies and taxable imports. Person liable to pay VAT (2) The person liable to pay the VAT imposed under subsection (1) shall be in the case of a taxable import: the importer; in the case of a taxable supply that is made in Tanzania: the supplier; in the case of a taxable supply of imported services: the purchaser.

18 15 VAT rate and amount of VAT payable (3) The amount of VAT payable shall be calculated by multiplying the value of the supply or import by the VAT rate, which shall be if the supply or import is zero-rated: zero (0) percent; in any other case: XX (number) percent. Zero-rate overrides exemption (4) If, but for this subsection, a supply would be both exempt and zero-rated, the supply shall be zero-rated rather than exempt. 9. Exemptions and rates only as provided by law Exemptions and rates to be specified by law (1) Except to the extent that this Bill expressly provides otherwise no supply, class of supplies, import, or class of imports shall be exempt or zero-rated; and no person or class of persons shall be exempted from paying the VAT imposed under this Bill. (2) To avoid doubt, no promise or commitment made, or understanding given, whether in writing or otherwise, by any person or any government entity or employee thereof shall over-ride subsection (1). Effect of treaties (3) Where an agreement entered into between the Government of the United Republic of Tanzania and another Government or an international agency, and approved by the Minister, entitles a person to an exemption from tax on the person s purchases or imports, the exemption is effected under this Bill for goods imported by the person: by exempting the import; for taxable supplies to the person: by providing for the VAT payable on the supply to be refunded to the person on application by that person. 10. Payment and collection of VAT on imports Division B VAT on Imports (1) Subject to section 12, VAT payable on a taxable import shall be paid if the goods are entered for home consumption in Tanzania: at the same time and place, and in the same manner, as if it were a duty of customs payable under the East African Customs Management Act, 2004; in any other case where goods are imported for use in Tanzania: on the day the goods are brought into Tanzania and in the manner prescribed by the Authority. (2) The liability to pay VAT on a taxable import shall arise by the operation of this section and shall not depend on the making of an assessment by the Authority of the amount of VAT due.

19 16 (3) The Authority shall collect VAT due under this Bill on a taxable import at the time of import and shall, at that time, obtain the name and TIN (if any) of the importer, the single good declaration, and the invoice values (if any) in respect of the import; and may make arrangements for such functions to be performed on the Authority s behalf in respect of imports through the Tanzania Posts Corporation. (4) Unless a contrary intention appears to the extent that they are relevant, and with such exceptions and modifications as necessary, the provisions of the East African Customs Management Act, 2004 shall apply for the purposes of this Bill as if the VAT payable on taxable imports were customs duty payable under that act; and terms used in this Bill in respect of an import of goods shall have the same meaning as in the East African Customs Management Act, Value of import General rule (1) The value of an import of goods shall be the sum of the value of the goods for the purposes of customs duty under the East African Customs Management Act, 2004, whether or not duty is payable on the import; the amount of any customs duty payable on the import; and to the extent not included under paragraph or the cost of insurance and freight incurred in bringing the goods to Tanzania; and the amounts of any tax, levy, fee, or fiscal charge (other than customs duty and VAT) payable on the import of the goods. Value of returning goods (2) Where goods are imported after having been exported for the purpose of undergoing repair, maintenance, cleaning, renovation, modification, treatment, or other physical process; and the form or character of the goods has not been changed since they were exported, the value of the import shall be such amount of the increase in their value as is attributable to the repair, maintenance, cleaning, renovation, modification, treatment, or other physical process. 12. Imports through Zanzibar (1) Subject to subsection (2), where goods are imported from Zanzibar no VAT is payable on the import. (2) If goods are imported in Tanzania by or on behalf of a person who previously imported those goods in Zanzibar in the same state from outside the United Republic of Tanzania; and

20 17 had the person imported the goods directly into Tanzania from outside the United Republic of Tanzania in a taxable import, the person would not have been entitled to an input tax credit for the VAT that would have been payable under this Act; then VAT is payable on the import of those goods in Tanzania, unless the person can show to the satisfaction of the Authority that VAT was paid under the Zanzibar VAT Act on the import and that VAT is not refundable under any law, regulation or practice in Zanzibar; and is at least equal to the amount of VAT that would have been payable under this Act had the goods been imported directly into Tanzania from outside the United Republic of Tanzania in a taxable import. (3) If subsection (2) is not met, the amount of VAT payable under subsection (2) is the amount worked out under section 10 and section 11, decreased by the amount of VAT, if any, that is not refundable in Zanzibar; subsection (2) is not met, the VAT payable under subsection (2) is the difference between the amount of VAT that would have been payable had the goods been imported directly into Tanzania from outside the United Republic of Tanzania in a taxable import, and the amount of VAT that was actually paid in Zanzibar. Division C VAT on Supplies 13. General rules for supplies Subject matters of supply (1) Anything, except money, that is capable of being supplied may be the subject matter of a supply. Subcategories of supply (2) For the purposes of this Bill, every supply that is capable of being made shall be categorised as: a supply of goods; a supply of immovable property; or a supply of services. Clarification (3) To avoid doubt, the following are examples of a supply of goods a sale, exchange, or other transfer of the right to dispose of goods as owner, including under a hire purchase agreement; and a lease, hire, or other right of use granted in relation to goods, including a supply of goods under a finance lease.

21 18 Single and multiple supplies (4) Where a supply consists of more than one element, the following criteria should be taken into account to determine how this Bill applies to the supply (d) (e) every supply should normally be regarded as distinct and independent; a supply that constitutes a single supply from an economic, commercial, or technical point of view should not be artificially split; the essential features of the transaction should be ascertained in order to determine whether the customer is being supplied with several distinct principal supplies or with a single supply; there is a single supply if one or more elements constitute the principal supply, in which case the other elements ( the ancillary or incidental supplies ) are treated as part of the principal supply; a supply shall be regarded as ancillary or incidental to a principal supply if it does not constitute for customers an aim in itself but is merely a means of better enjoying the principal thing supplied. 14. When VAT becomes payable on supplies Basic rule (1) The VAT imposed on a taxable supply becomes payable at the earlier of the time when an invoice for the supply is issued by the supplier; the time when any part of the consideration for the supply is paid; or the time of supply. Exception for progressive or periodic supplies (2) Where, because of section 16, a progressive or periodic supply is treated as a series of separate supplies, any VAT imposed on each such supply becomes payable at the earliest of (d) if the supplier issues a separate invoice for the supply, the time when the invoice is issued; the time when any part of the consideration for the supply is paid; the time when payment of the consideration for the supply is due; or if the supplier and customer are connected persons, or if the total value of all of the separate supplies that make up the progressive or periodic supply exceeds [specify amount should be the same as in subsection (2)] for a periodic supply: the first day of the period to which the supply relates; for a progressive supply: the time of supply. Exception for lay-by sales (3) Where a taxable supply of goods is made under a lay-by agreement,

22 19 the VAT imposed on the supply becomes payable each time any part of the consideration is paid for the supply; and the amount of VAT that becomes payable at each such time is the tax fraction of the amount paid. (4) For the purposes of subsection (3), lay-by agreement means an agreement for the sale and purchase of goods under which, the price is payable by at least one additional payment after the payment of a deposit; delivery of the goods takes place at a time after payment of the deposit; and ownership of the goods is transferred by delivery. Exception for vending machines (5) Where a taxable supply is made through a vending machine, meter, or other automatic device (not including a pay telephone) that is operated by a coin, note, or token, the VAT becomes payable when the coin, note, or token is taken from the machine, meter, or other device by or on behalf of the supplier. Other exceptions (6) The Minister may make Regulations prescribing that VAT becomes payable at a later time than would otherwise apply under this section for (d) a taxable supply that is subject to a statutory cooling off period under a Tanzania law; or a taxable supply that occurs before the total consideration for the supply is certain; a taxable supply made under an agreement that provides for retention of some or all of the consideration until certain conditions are met; or a taxable supply for which the correct VAT treatment will not be known until a later time. 15. Value of supply Taxable supplies (1) The value of a taxable supply made in Tanzania is the consideration for the supply, reduced by an amount equal to the tax fraction of that consideration. (2) The value of a taxable supply of imported services is the consideration for the supply. Non-taxable supplies (3) The value of a supply that is not a taxable supply is the consideration for the supply. Supplies for no consideration (4) To avoid doubt, the value of a supply for no consideration is nil. Gifts to approved not-for-profit organisations (5) Where an approved not-for-profit organisation ( the done ) gives an insignificant recognition or acknowledgement in response to an unconditional gift of goods, services, immovable

23 20 property, or money by another person ( the donor ), the value of the supplies by the donor and the donee is nil. Exceptions for supplies to connected persons (6) Where a person makes a supply to a customer who is a connected person if the supply is a taxable supply made in Tanzania, the value of the supply is the fair market value of the supply, reduced by the tax fraction of that fair market value if the customer would not be entitled to a full input tax credit for the acquisition of the thing supplied; and the supply is made for no consideration, or for a consideration that is lower than the fair market value of the supply; if the supply is a taxable supply of imported services, the value of the supply is the fair market value of the supply if the customer would not be entitled to a full input tax credit for the acquisition of the thing supplied; and the supply is made for no consideration, or for a consideration that is lower than the fair market value; or if the supply is not a taxable supply: the value of the supply is the fair market value of the supply. 16. Progressive or periodic supply Separate supplies (1) Each progressive or periodic part of a progressive or periodic supply shall be treated as a separate supply. (2) If the progressive or periodic parts of a progressive or periodic supply are not readily identifiable, the supply shall be treated as a series of separate supplies each corresponding to the proportion of the supply to which each separate part of the consideration relates. Time of supply for leases etc. (3) For the purpose of determining the time of supply for each part of a lease or other supply of a right to use property, the supply shall be treated as being made continuously over the period of the lease or right of use. 17. Sale of an economic activity as a going concern (1) An economic activity is sold as a going concern if everything necessary for the continued operation of the economic activity is supplied to the person to whom the economic activity is sold; and the purchaser makes the acquisition in the course of, or for the purposes of, an economic activity it carries on or will carry on after the sale. (2) Part of an economic activity is itself an economic activity if that part is capable of being operated separately.

24 21 (3) Where a taxable person makes supplies in Tanzania as part of a transaction for the sale of an economic activity as a going concern by that taxable person to another taxable person the supplies are treated as a single supply that is made in Tanzania; and that single supply is treated as if it were not a supply. (4) For the purposes of working out the supplier s entitlement to input tax credits in relation to a transaction to which subsection (3) applies any input tax incurred in acquiring goods or services for the purposes of the transaction shall if the supplier otherwise makes only taxable supplies: be treated as relating to those supplies; in any other case: be calculated in accordance with section 45; and the value of the single supply of the going concern shall not be included in any calculations made under section Rights, options, and vouchers Prevention of double taxation (1) If a supply of a right, option, or voucher was a taxable supply; and another supply ( the subsequent supply ) is made on the exercise of the right or option, or in return for a voucher given in full or part payment for the subsequent supply, the consideration for the subsequent supply is limited to the additional consideration, if any, given for the subsequent supply or in connection with the exercise of the right or option. Prevention of non-taxation (2) If a supply of a right, option, or voucher was not a taxable supply; and another supply ( the subsequent supply ) is made on the exercise of the right or option, or in return for a voucher given in full or part payment for the subsequent supply; and the subsequent supply is a taxable supply, the consideration for the subsequent supply includes the consideration, if any, given for the supply of the right, option, or voucher. Reimbursements (3) Where a taxable supply ( the subsequent supply ) is made on the exercise of a right or option, or in return for a voucher given in full or part payment for the subsequent supply; and

25 22 the taxable person ( the supplier ) who makes the subsequent supply receives or will receive a payment from another person ( the payer ) in respect of the exercise of the right or option or the acceptance of the voucher, or because of the making of the supply, the supplier shall be treated as having made a taxable supply to the payer and the amount received shall be treated as consideration for that supply. Input tax credits (4) If a taxable person buys a voucher; and uses the voucher to pay for other supplies ( the subsequent supplies ); and subsection (1) excludes the consideration paid for the voucher from the consideration for the subsequent supplies; and had subsection (1) not applied, the person would have been entitled to an input tax credit for the acquisition of the subsequent supplies, this Bill shall apply to the person as if the person were entitled to the input tax credit that would have been allowed. (5) The Minister may make regulations prescribing what documentary evidence, in lieu of a tax invoice, the taxable person must hold in support of the input tax credit and in the absence of such regulations any documents from which the underlying tax burden can reasonably be calculated may be used in support of the input tax credit. Vouchers are not goods (6) A supply of a voucher shall be treated as a supply of services. 19. Prepayments for telecommunication services Scope and definitions (1) This section applies to a supply, by a telecommunications provider, of a prepaid telecommunications product; and a supply by a person who acts as a distributor, agent, or other intermediary (referred to in this section as a telecommunications intermediary ) in relation to the supply of a prepaid telecommunications product; but does not apply to a supply by one telecommunications provider to another. Intermediaries acting as principal (2) Where a telecommunications provider supplies a prepaid telecommunications product to a telecommunications intermediary at a discount from the intended retail price, the consideration for the supply shall be calculated as if the intermediary had paid the intended retail price.