BUDGET ANALYSIS

2017/2018
TAX VIEWPOINT

PROPOSED TAX CHANGES

 Value Added Tax (VAT):-
Bitter- Sweet for Capital goods industry

Importation and local purchase of machines and plants used in

production of edible oil, textile, leather, veterinary and
pharmaceutical are now VAT exempt.
Technically in regard to Taxation it will be relatively cheaper to
import than to buy locally because local producers of plants and
Machinery will have input VAT that will not be able to claim on
exempt supplies, therefore they will be forced to shift their input
VAT to the buyers of these Machines giving advantage to foreign
producers.
In Taxation, the best way to meet Government Objective of
providing relief of Taxes in purchase of Machines and Plants is to
charge VAT at Zero rate (rather than VAT exemption) which will
promote production of these machine locally by allowing
producers to claim input VAT and boost employment and
Industrialisation in the country.
 Major Boost for Tanzania Ports and Logistic
Industry

From July 2017 VAT on Ancillary transport services in relation

to goods in transit when they are in the Tanzania will be charged
at ZERO Rates, this is a major boost to clearing agents and Oil
Marketing Companies. This will boost documentation work be
done in the country and by Zero rating of VAT will allow Clearing
Agents and Oil Marketing Companies to Claim input VAT making
their service cheaper.
In July 2015 VAT on Ancillary transport services in relation to
goods in transit was introduced, stakeholders were up-in-arms
that this introduction would result in loss of employment in
most logistic and Marketing companies, as an extra 18% VAT
cost would result into foreign Customers to do all the logistics
themselves.
 VAT on locally produced compounded animal
feeds and Fertilised eggs for incubation are now
exempted; this is key boost to Livestock keepers
in the country.

Income Tax changes

 Megadeal for New assemblers of vehicles, tractors and
fishing Boats.

New Assemblers will be charged a Reduced Corporate Income

Tax of 10% instead of 30% for Five Years from commencement
of operations. The Government will sign a Performance
Agreement with the assemblers to reflect the responsibilities of
both parties.

Alternative Minimum Tax Hullabaloo has been

Resolved
For a number of Years there was chaos on Alternative Minimum
Tax basis on which is which, because under charge section of
the Income Tax Act the Basis for Perpetual unrelieved loss was
three years while the Tax rate in the Fifth Schedule indicated
the basis is five Years, this controversy has now been resolved
by the Minister amending the Fifth Schedule to also indicate
three years basis as it is in the charge Section of the Act.
 Non-Commercial Vehicles

In Calculating depreciation in Taxation (depreciation allowance),

the Value of a non commercial Vehicle was limited to TShs
15,000,000. if you bought a non-commercial vehicle for more
than 15Million the excess of 15million was not recognised as a
legitimate cost of the Vehicle,

From July 2017 The depreciation basis for Non-Commercial

Vehicles has been increased to TShs 30,000,000 that is double
the previous amount.

For Taxation purpose a Non-Commercial Vehicle are all road

vehicles that are by specification design can not to carry a load
of more than half a tonne (500kg) such as, Saloon Cars and
SUVs or vehicles that by design cannot carry more than 13
passengers. Please Note That: All vehicles that are used in
transportation business and vehicle rental business are
considered to be commercial Vehicles
 Small Miners hit hard

There is introduction of 5% Final withholding Tax of the total

market value of minerals to all small miners. This is an Extra
Burden to Small Miners.

EMPLOYEES TAKE HOME:

No changes on PAYE rates for the year starting July 2017 to

June 2018
 Changes in the Excise Duty

Annual Motor Vehicle Licence Fee has been Abolished

Annual Motor Vehicle Licence Fee has been abolished. This
Measure will by and large reduce Motor Vehicle Owners annual
logistic burden of going to TRA for renew of Motor Vehicle
Licences and traffic police habitual checks on Motor Vehicle
Licence and will address long outstanding complaint of imposing
fee even if the vehicle is out of use. Annual Motor Vehicle
Licence Fees will be paid only once during Motor Vehicle
first registration.
The Government to compensate for loss of revenue by abolishing
Annual Motor Vehicle Licence, has increase Current Excise
Duty rates on Petrol, Diesel and Kerosene by TShs. 40 per
litre.

Amnesty

The Government has decided to forgive all unpaid Motor Vehicle

Licence Fees.
 The Local Government Finance Act

Produce Cess
Produce Cess has been reduced from 5 percent to 3 percent for
cash crops and from 5 percent to 2 percent for food crops. This
standardization will help to curb market distortion because
traders were favoring areas with lower cess.

Produce Cess should not be applied on the transportation of

crops of less than one ton from one Local Government Authority
to another.
Skills Development Levy (SDL)

Skills Development Levy (SDL)

Skills Development Levy of 4.5% has been maintained

Some changes in the East African Community Customs Management

Act, 2004

Common External Tariff (CET)

Grant duty remission on wheat grain apply duty rate of 10 percent instead of 35
percent for one year to boost supply of Wheat to meet demand.

Grant Duty Remission on LABSA at duty rate of 0 percent instead of 10

percent for one year. This is a major boost to soap industries.

Continue to grant duty remission on CKD kits for motorcycles at a duty rate of
10 percent instead of 25 percent for one year.

Grant duty remission of 0 percent to local manufacturers of motor vehicle air

filters

Fees and levies to be abolished are as follows:

To abolish fees imposed on fertilizer (standards inspection,
radiation inspection and weight and measures) by the Tanzania
Bureau of Standards (TBS), Tanzania Atomic Energy
Commission (TAEC) and Weight and Measures Authority (WMA).
The measure intends to increase agricultural productivity;
 To abolish standards inspection fee on cash crops such as
cotton, tea, cashew-nuts and coffee imposed by the Tanzania
Bureau of Standards (TBS).

To abolish Service Levy imposed on guest houses which are

subject to Guest House Levy;

To abolish a Levy imposed on posters that direct people to the

places where public services such as schools, and hospitals or
dispensaries are available

To abolish fees imposed on livestock when they are in the market

for auction;

Tanzania Revenue Authority will start collecting levy on posters

intended for commercial purposes by 1st of July, 2017

Nota Bene:- these proposed tax changes when approved shall

become effective on 1st July, 2017, unless stated otherwise.

This Brief Budget Analysis has been prepared by:

Innocent Wilfred Makundi- Consultant- Tax Services

(BAF, MBA-CM, CPA, Tax Consultant)
CONTACTS:
Mob: +255-713-670126.
Facebook: www.facebook.com/innocent wilfred
Email: Innocentmakundi@gmail.com