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TANZANIA REVENUE AUTHORITYTRA
TANZANIA REVENUE AUTHORITYISO: 9001:2008 Certified
SEMINAR PRESENTATIONON
WITHHOLDING TAX
5TH & 6TH OCTOBER 2016
ITA, DAR ES SALAAM
TANZANIA REVENUE AUTHORITYTRA
Agenda
Introduction
Imposition of Withholding tax – Sec. 81, 82, 83 &
83A
Withholding Tax Base
Filing Returns and Payments
Consequences for failure to pay and file returns
Role of accountants and Supplies Officers
Conclusion
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TANZANIA REVENUE AUTHORITYTRA
1.0 Introductions
Your Facilitator
Beatus Nchota
Manager – Tax Audit
Domestic Revenue Department – Head Office
Email: bnchota@tra.go.tz
Participants Introductions
Who is who?
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TANZANIA REVENUE AUTHORITYTRA 4
TANZANIA REVENUE AUTHORITYTRA
Withholding Tax
Is a tax that is required to be withheld by the personmaking “payment” of certain amounts to another personin respect of goods supplied or services rendered
It is a tax deducted at source because the person makingpayment has an obligation to withhold
Payment for these purposes is defined in the ITA 2004 asfollows:
“Payment includes the transfer of assets or money, thetransfer or decrease of a liability, the provision ofservices, the use or availability for use of money or asset
and the creation of an asset in another person”
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TANZANIA REVENUE AUTHORITYTRA
Withholding Tax Concepts
Withholdee- A person receiving or entitled to receive apayment from which income tax is required to bewithheld.
Withholding Agent - A person required to withholdincome tax from a payment made to a withholdee.
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TANZANIA REVENUE AUTHORITYTRA
Types of Withholding Taxes
Final Withholding Taxes are taxes in which thewithholdee cannot claim any tax credit when calculatingthe income tax payable for a year of income.
(Sec. 86 of ITA, 2004)
Non Final Withholding Taxes: are taxes which thewithholdee is entitled for a tax credit an amount equal tothe tax treated as paid for the year of income in whichthe amount is derived.
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TANZANIA REVENUE AUTHORITYTRA
Imposition of withholding tax
Payer must be resident
Payment should have a source in the URT (Sec. 68 & 69)
Note: For that all government institutionsare resident corporations hence qualifyfor withholding taxes obligations
In accordance of Section 81,82,83 and 83A of ITA, 2004tax shall be withheld from the payment of the following;
Employment income
Investment returns
Service fees
Goods and services
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TANZANIA REVENUE AUTHORITYTRA
Employment income – Sec. 81
A resident employer is required to withhold tax when
making payment of chargeable income to an employee.
Tax is deducted at the statutory personal income tax
rates, with a top marginal rate of 30% applying to
amounts in excess of TZS 720,000 per month. For non-
resident employees a flat rate of 15% applies
(Refer TRA Tax Data Card)
Directors’ fee (Non executive) - a flat rate of 15% applies
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TANZANIA REVENUE AUTHORITYTRA
Included Payments – Sec. 7(2)
Payments of wages, salary, payment in lieu of leave, fees, commissions, bonuses, gratuity or any subsistence travelling entertainment or other allowance received in respect of employment or service rendered
Payments providing any discharge or reimbursement of expenditure incurred by the individual or an associate of the individual
Payments for the individual's agreement to any conditions of the employment
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TANZANIA REVENUE AUTHORITYTRA
Included Payments - Sec. 7(2)…Cont
Retirement contributions and retirement payments
Payment for redundancy or loss or termination ofemployment
Other payment made in respect of employment includingbenefits in kind quantified in accordance with section 27of the ITA, 2004
Other amounts as may be required to be included as perthe rules governing amounts used in calculating theincome tax base
Annual director’s fees payable to a director other than afull time service director
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec. 7(3)
Exempt amounts and final withholding payments;
On premises cafeteria services that are available on a
non-discriminatory basis;
Any subsistence, travelling, entertainment or other
allowance that represents solely the reimbursement to
the recipient of any amount expended by him wholly and
exclusively in the production of his income from his
employment or services rendered;
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec. 7(3)…Cont
Medical services, payment for medical services, and payments for insurance for medical services to the extent that the services or payments are:
Available with respect to medical treatment of the individual, spouse of the individual and up to four of their children; and
Made available by the employer (and any associate of the employer conducting a similar or related business) on a non-discriminatory basis;
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec. 7(3)…Cont
Benefits derived from the use of motor vehicle where the
employer does not claim any deduction or relief in
relation to the ownership, maintenance or operation of
the vehicle;
Benefit derived from the use of residential premises by
an employee of the Government or any institution whose
budget is fully or substantially out of Government budget
subvention;
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec. 7(3)…Cont
Payment providing passage of the individual, spouse of
the individual and up to four of their children to or from
a place of employment which correspond to the actual
travelling cost where the individual is domiciled more
than 20 miles from the place of employment and is
recruited or engaged for employment solely in the service
of the employer at the place of employment;
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec. 7(3)…Cont
Payment that it is unreasonable or administratively
impracticable for the employer to account for or to
allocate to their recipients.
Allowance payable to an employee who offers intramural
private services to patients in a public hospital; and
Retirement contributions and retirement payments
exempted under the Public Service Retirement Benefits
Act
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TANZANIA REVENUE AUTHORITYTRA
Excluded Amounts – Sec 7(3)…Cont
Housing allowance, transport allowance, responsibility
allowance, extra duty allowance, overtime allowance,
hardship allowance and honoraria payable to an
employee of the Government or an institution the
budget of which is fully or substantially paid out
of Government budget subvention.
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TANZANIA REVENUE AUTHORITYTRA
Important Note About PayrollAccounting
Principles of deduction
Taxable income
Do not deduct non allowable deductions such as loan
repayment, health insurance, trade union contributions
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TANZANIA REVENUE AUTHORITYTRA
Illustrative examples on
Terminal Benefits
and
Redundancy Payments
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TANZANIA REVENUE AUTHORITYTRA
Investment returns – Sec. 82
Tax is withheld from investment returns such as
dividend, interest, natural resource payment, rent or
royalty.
The payment must have a source in the United Republic.
Based on the nature of payment, source rules are
expounded under section 68 & 69 of ITA, 2004
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TANZANIA REVENUE AUTHORITYTRA
Rates for withholding tax – Sec. 82
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Category of payment To resident
To Non -resident
Dividend Where payer is listed on DSM Stock
Exchange Where a resident Company holds 25%
shares or more Dividend from other corporations
5%
5%
10%
5%
N/A
10%
Interest 10% 10%
Rent Land and buildings Aircraft lease Other assets
10%10%N/A
10%10%15%
Natural resource payment 15% 15%
Royalties 15% 15%
TANZANIA REVENUE AUTHORITYTRA
Exemptions to Sec 82
Payments made by individuals unless made inconducting a business;
Interest paid to a resident financial institution
Payments that are exempt amounts (Exemptpayments are expounded under the SecondSchedule of the ITA, 2004)
Rent paid to a resident person for the use of an assetother than land or buildings or aircraft
Interest payable to a non-resident bank by a strategicinvestor
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TANZANIA REVENUE AUTHORITYTRA
Withholding Tax on Goods & Services – Sec. 83 and 83A
Tax is withheld on payments made in respect of:
Service Fee with a source in URT paid to a non resident
Service fee for provision of professional services paid to a resident
person
Management and Technical Service Fee paid to a resident person by
person engaged in extractive industry (Mining, Oil and Gas)
Insurance premium with a source in URT paid to a non resident
Money transfer commission to a money transfer agent
Payments made for the supply of Goods to the Government or its
institutions whose budget is wholly or substantially financed
by the Government budget subvention
TANZANIA REVENUE AUTHORITYTRA
WHT on Professional services
“Professional Service” means services rendered by a person
licensed as a practitioner by any recognized professional body
and shall include other services or activities of an independent
business character including consultancy, legal, architectural,
engineering, supervisory, accounting, auditing medical artistic,
survey, theatrical performance, sports, exhibition, private
security services, private investigation and consultancies in
various disciplines or any entertainment held or given other than
those for remuneration under contract of employment–Sec 83(3)
TANZANIA REVENUE AUTHORITYTRA
Rates for withholding tax – Sec. 83
25
Category of payment To resident
To Non -resident
Supply of Goods to government or its
institution
2% N/A
Service Fee 5% 15%
Management and Technical Service Fee
(Mining, oil and gas)
5% 15%
Money transfer commission 10% N/A
Insurance Premium 0% 5%
TANZANIA REVENUE AUTHORITYTRA
Exemptions to Sec 83
Payments made by individuals unless made inconducting a business; or
Payments that are exempt amounts (Exemptpayments are expounded under the SecondSchedule of the ITA, 2004)
TANZANIA REVENUE AUTHORITYTRA
Exempted Government Institutions
(Second Schedule of the ITA, 2004)
Amounts derived by the Government (includingExecutive Agency established under the ExecutiveAgencies Act, 1997) or any local authority of the UnitedRepublic or by the Revolutionary Government ofZanzibar or any local authority of Zanzibar exceptamounts derived from business activities thatare unrelated to the functions of government;
Therefore it follows that amounts derived by governmentinstitutions on business related activities are subjected toWHT
Refer detailed list of exempt amounts under theSecond Schedule of the ITA, 2004)
TANZANIA REVENUE AUTHORITYTRA
Withholding Tax Base
Withholding Tax shall be computed on the amount
exclusive of VAT without deduction of expenses or
allowances
Where services are provided and payments are made to
the withholdee of cash plus provision of benefits and
facilities the withholding tax base shall include the
amount paid for the benefits or facilities
TANZANIA REVENUE AUTHORITYTRA
Example 1
ABC Limited invoice in relation to Consultancy services provided to Dar es Salaam City Council has the following amount:
W/Tax will be charged on TSZ 10,000,000/=
W/Tax is 5%*10,0000,000/=
= 500,000/=
DESCRIPTION AMOUNT
Service Fee 10,000,000/=
VAT 1,800,000/=
Total 11,800,000/=
TANZANIA REVENUE AUTHORITYTRA
Example 2
FLG Consultants were hired by Kinondoni District
Council to carry consultancy work. The contract terms
involved payment of accommodation in a 5 star hotel for
4 staff of FLG for 20 days by the client. The contract
price was quoted at TZS 150,000,000/=. The Client Paid
a total of TZS 16,000,000/= as Accommodation for FLG
staff stay at Serena Hotel.
TANZANIA REVENUE AUTHORITYTRA
Example 2 - Cont…
…After completion of work, FLG raised an Invoice with the following amount:
W/Tax Base
Consultancy fee 150,000,000/=
Accommodation to staff 16,000,000/=
W/Tax Base 166,000,000/=
Description Amount
Consultancy Fee 150,000,000/=
VAT 27,000,000/=
Total 177,000,000/=
TANZANIA REVENUE AUTHORITYTRA
Withholding Tax Base for Mixed Supplies (Goods & Services)
If the invoice raised involves both supply of Goods and
Services, a separation must be made for value for Goods
and Services
If payment involves Construction Works, the payment
subject to WHT shall be based on the ratio of 3:2 for
Materials and Services respectively
TANZANIA REVENUE AUTHORITYTRA
Example 3
XYZ was hired to conduct a Survey for Ministry ofEducation. The contract involved also supply of Booksand Stationeries where there was a need. Aftercompleting the work, XYZ raised an invoice with thefollowing details
DESCRITION AMOUNT
Survey Fee 70,000,000/=
Books and Stationeries 30,000,000/=
VAT 18,000,000/=
Total 118,000,000/=
TANZANIA REVENUE AUTHORITYTRA
Example 3…Cont
W/Tax will be charged as follows:
W/Tax on Goods (2%*30,000,000/=)
= 600,000/=
W/Tax on Service (5%*70,000,000/=)
= 3,500,000/=
Note:
Failure to separate the figures in respect of the value for goods and services attracts WHT at the rate of 5% on the entire amount
(5%*100,000,000) = 5,000,000/=
TANZANIA REVENUE AUTHORITYTRA
Example 4
Mgeni Contractors were awarded a contract to constructa new office for Ministry of Finance in Dodoma. One ofthe invoice raised based on percentage of completion hadthe following amount:
DESCRIPTION AMOUNT
Value of work 600,000,000/=
VAT 108,000,000/=
Total 708,000,000/=
TANZANIA REVENUE AUTHORITYTRA
Example 4…Cont
W/Tax Base 600,000,000/=
W/Tax on Goods (2%*360,000,000/=)
= 7,200,000/=
W/Tax on Services (5%*240,000,000/=)
= 12,000,000/=
Material Service
3 2
3/5*600,000,000/= 2/5*600,000,000/=
360,000,000/= 240,000,000/=
TANZANIA REVENUE AUTHORITYTRA
Time for Payment & Filing – Sec. 84
Payment 7 days after the end of the month ofdeduction
Filing of returns
30 days after the end of each 6-monthcalendar period
TANZANIA REVENUE AUTHORITYTRA
Filing Statement of Taxes Withheld – Sec. 84Every withholding agent shall file to TRA within 30 daysafter the end of every each six month calendar period astatement of taxes withheld on
Goods
Service fee
Interest
Employment taxes – PAYE
Dividends
Rent
Royalty
Money transfer commission
TANZANIA REVENUE AUTHORITYTRA
Tax Return - Statement of Taxes Withheld
All tax return forms can be downloaded through
www.tra.go.tz
TANZANIA REVENUE AUTHORITYTRA
Withholding Certificates – Sec. 85
A withholding agent is required to prepare and serve a
withholding certificate to all withholdee’s separately for
each month within 30 days after the end of the month of
deduction
TANZANIA REVENUE AUTHORITYTRA
Consequences for failure to withhold – Sec. 84 A withholding agent who fails to withhold income tax in
accordance with the law must nevertheless pay the tax
that should have been withheld in the same manner and
at the same time as tax that is withheld together with
interest
A withholding agent who fails to withhold income tax but
pays the tax that should have been withheld to TRA shall
be entitled to recover an equal amount from the
withheldee
TANZANIA REVENUE AUTHORITYTRA
Consequences for failure to file returns – Sec. 78 of TAA,2015
A withholding agent who fails to file a tax return
(statement of taxes withheld and paid ) on due date shall
be liable for a penalty for each month or part of the
month during which the failure continues calculated as
the higher of
2.5% of the amount assessable per tax return less the amount of
tax paid at the start of the period towards that amount or
Tshs 225,000 in case of a body corporate or Tshs 75,000 for an
individual
TANZANIA REVENUE AUTHORITYTRA
Submission of Contract Documents to TRA
In compliance with regulation 109 of The Public
Procurement Act No. 7 of 2011 published through GN. No.
446 of 2013 which states that
“The Accounting Officer shall ensure that copies of all
contracts are sent to the Authority, Attorney General,
Controller and Auditor General, Internal Auditor General or
Government Asset Management Division as the case may be,
and the Tanzania Revenue Authority within thirty days
from the date of signing the contract”
TANZANIA REVENUE AUTHORITYTRA
Conclusion
Accountants and Procurement
Officers play a key role in
enforcing compliance to tax
laws
Accountants are urged to work
in collaboration with vote
holders to enforce W/Tax
requirements
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TANZANIA REVENUE AUTHORITYTRA
Key Issues to Remember Ensure all payments are made upon
submission of fiscalisedInvoices/Receipts
Submission of contract documents toTRA
Payment of WHT (Both PAYE andOther W/Taxes) to TRA within 7 daysafter the end of the month ofdeduction
Submission of WHT Certificatessigned by withholdee and withholderto TRA evidencing payment and servea copy of certificate to the withhloldee
Filing WHT returns within 30 daysafter the end of every six calendarmonths
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TANZANIA REVENUE AUTHORITYTRA
Q&A?
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TANZANIA REVENUE AUTHORITYTRA 47
Together We Build Our NationExpectation of the Government is to increase revenue, to fully fund its budget through domestic funding to carter for national development. We are all obliged to pay tax and ensure compliance to tax laws as a sign of patriotism. Let’s play our part.
TANZANIA REVENUE AUTHORITYTRA
“Light Tomorrow with Today”
Thank You
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TANZANIA REVENUE AUTHORITYTRA
Note: These slides were prepared and presented for illustration purposes and do not represent the opinion of the Authority nor override the provisions of the laid tax laws. Revisit the provision of the tax laws for clear interpretation of the tax laws
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