2. VAT on Imported Goods and Services
• In addition to the costs of goods, the taxable value of
imported goods must include insurance, freight,
import duty, excise duty and any other tax or levy
payable on the goods except VAT (Section 14(1)).
• However, the taxable value of the imported service is
only the open market prices of the supply as no
insurance, freight or other expenses are involved in
importation of services (Section 14(2)).
3. VAT on Imported Goods and Services
Example
Joshua Co. Ltd imported goods worth TZS 20,000,000
from London, after paying freight of TZS 2,000, 000;
insurance for TZS 1,000,000 and TZS 200,000 for
clearance at a UK port.
Required
Determine the taxable value for VAT purpose given the
import duty as 25%, excise duty of 20% and VAT rate of
18%
4.
5. Payment/Collection of VAT on Imports
• The value added tax payable on a taxable import shall be
paid
a. Where goods are entered for home consumption in
Mainland Tanzania, in accordance with the provisions of
VAT Act, 2014 and procedures applicable under the East
African Customs Management Act
b. In any other case, where goods are imported for use in
Mainland Tanzania (for both permanent and temporary),
on the day the goods are brought into Mainland Tanzania
and in the manner prescribed under the East African
Customs Management Act.
6. Claimable Input Tax
• Traders who are registered for VAT are required to
charge VAT on their sales and must account for this
output tax to TRA, but such traders are allowed to
recover from the TRA the input tax which they pay to
their own supplies.
• The input tax that a person can claim must be
accounted for together with the output tax in the
same value added tax return in which the tax credit is
claimed.
7. Claimable Input Tax
• Furthermore, a registered person cannot be allowed
to claim input tax credit for acquisition of goods,
services or immovable property to the extent that it is
used to provide entertainment.
• Such a tax shall be excluded unless it is in relation to
the ordinary course of a business which continuously
or regularly supplies entertainment for a
consideration, or the provision to an employee of
food, non-alcoholic beverage, accommodation or
transportation for use wholly and exclusively for the
purposes of the employees business.
8. Input Tax Defined
Input tax in relation to a taxable person is defined as
a. Value added tax imposed on a taxable supply made
to the person, including value added tax payable by
the person on a taxable supply of imported services;
b. Value added tax imposed on a taxable import of
goods by the person; and
c. Input tax charged under the law governing
administration of value added tax applicable in
Tanzania Zanzibar
9. Input Tax Credit Defined
• Input tax credit is a credit allowed for input tax
incurred by the person; It should be remembered that
not all input taxes are claimable.
• According to VAT act, 2014 the following are non
claimable input taxes
i. Input taxes paid on entertainment
ii.Acquisition of right of membership or entry of
sporting, social or recreational club.
iii.Passengers vehicle
10. Conditions for Input Tax Deduction
• The deduction is allowed when the following conditions are
met:
a. There is a relationship between input taxes and taxable
supplies made by a taxable person. Consequently, input
taxes paid on acquiring exempt supplies or taxable supplies
which are subsequently sold as exempt supplies are not
deductible.
b. The incurrence of input taxes should be proved by
electronic fiscal receipts, or any other evidence to the
satisfaction of a Commissioner, or court of law.
11. Conditions for Input Tax Deduction
• For the case of Input tax incurred in Tanzania Zanzibar, an
authentication of Zanzibar treasury is required before input
tax incurred is deducted
c. The deduction is time barred after expiration of six months
from the issue of electronic fiscal receipts or other
evidence
d. Input taxes on motor vehicle and business entertainment
are not deductible.
12. Partial Input Tax Credit
• Generally, taxable persons who sell both exempt and taxable
supplies are called ‘partial exempt traders’ because they are
partially allowed to deduct their input taxes.
• These persons are allowed to choose one of the partial input
taxes computation methods given by Government Notice No.
177 Regulation (7).
• According to this regulation, the choice is between standard
method and attribution method but once selection is made,
it has to be used for a whole accounting period.
13. Partial Input Tax Credit
• A trader will first of all be required to categorize his supplies into
Taxable Supplies (T) and All supplies (A) and determine the ratio
of T/A from the supplies.
• Section 70 states that :-
i. If the ratio of T/A is greater than 0.90 (90%), the taxpayer may
claim all input tax incurred for the period.
ii. If the ratio of T/A is less than 0.10 (10%) the taxpayer shall not
be allowed to claim all input tax incurred for the period.
iii.Otherwise there will be partial recovery
14. Standard Method
• The regulation has provided five steps to follow when using
this method of apportionment (Government Notice NO. 177
Regulation 8(1)). These steps are:
a. Compute total taxable supplies VAT exclusive and exempt
supplies from SALES in a particular month.
b. Add the total taxable supplies and exempt supplies above.
c. Compute input taxes incurred in that month for purchasing
taxable and exempt supplies excluding input taxes incurred
on purchase of car and businesses entertainment.
15. Standard Method
d. Find the ratio of total taxable supplies in step ‘a’
over total supplies i.e. taxable supplies plus exempt
supplies in step ‘b’.
e. Deductible input taxes are given as the product of
the total input taxes in step ‘c’ and ratio in step ‘d’
or:
17. Attribution Method
• The attribution method tries to trace how purchased
goods and services are to be used.
• Once subsequent uses of goods and services are
established, input taxes can be easily categorized into
those related to exempt supplies, taxable supplies and
to both taxable and exempt supplies (Government
Notice NO. 177 Regulation 8(3))
18. Attribution Method
• This method provides more appropriate input tax
deduction than the standard method because input
taxes are linked directly to supplies made.
• But, it requires complicated record keeping to
separate input taxes into those related to taxable
supplies, exempt supplies and to both of them. Also it
is a little bit complicated than the standard method.
Therefore, only larger traders may prefer this method.
19. Attribution Method
• The regulation provides the following steps when the
attribution method is chosen:
1. Classify input taxes in a particular period into:
a.Category “A” input taxes directly attributable to taxable
supplies.
b.Category “B” input taxes attributable to exempt supplies
[exempt input tax], and
c. Category “C” input taxes attributable to exempt and
taxable supplies. E.g. input taxes incurred on transporting
both exempt and taxable purchases.
20. Attribution Method
2. Find the ratio of total taxable supplies over total
supplies as in the standard method
3. Multiply the ratio in step ‘b’ above and the amount
in Category C in step ‘a’.
4. Compute input taxes deductible as input in
Category A + input tax in step ‘c’ or deductible
