2012-13 Budget Newsletter

SiSi consultants 2012-13 Budget Newsletter www.sisiconsulting.com August 2012 Inside this issue: Zanzibar 2012-13 Budget highlights Page 1 4 Tanzania Mainland 2012-13 Budget highlights Page 5 9 New Immigration Fees Page 10-11 Special points of interest: Zanzibar sets new Hotel Levy rate to 18% (page 1) Zanzibar reduces grace period on land rent to 6 months (page 3) Zanzibar to remove Tax Holidays on EPZ/Free Port (page 3) Mainland raises the minimum taxable personal income to TSH 170,000 (page 5) Immigration fees increased (page 10-11) Issue Num 1, 2012

Zanzibar Stamp Duty (Stamp Duty Act N. 6 of 1996) Stamp Duty on trading increased to 3%. This duty applies to traders with turnover below the threshold for VAT registration and those not under Hotel Levy system for all sales exceeding TZS 1,000. Stamp duty rate for trading was previously charged at the rate 1.5%. Port Services Charges and Airport Fees. Ports Service Charges for passengers travelling between Zanzibar and Tanzania Mainland increased from TZS 1,000 to TZS 2,000 per passenger. Airport Fees increased from USD 30 to USD 35 for every passenger travelling outside the United Republic of Tanzania and from TZS 5,000 to TZS 10,000 for passengers travelling within the United Republic of Tanzania. Stamp duty on loans. The Government has proposed to set a cap on Stamp Duty c h a rg e d on loans. Such loans were previously charged at a rate of 1% of the value of the loan. Such stamp duty is considered as an obstacle to growth of financial services sector and on capital investments thus slowing down the growth of the economy and affecting its competitiveness with neighboring countries. Hotel Levy (Hotel Levy Act N. 1 of 1995) Hotel Levy rate increased to 18%. The tax rate has been increased from 15% to 18% and will affect all Hotels, Restaurants and Tour Operations Services not registered under VAT system. Petroleum (Petroleum Levy Act N. 7 of 2001) Increase of Petroleum tax rate by TZS 50 per litre of petrol and diesel fuel only. Page 1

Zanzibar Tax Administration (Tax Administration And Procedures Act N. 7 of 2009) Rental/Lease of investment projects(hotels) for operation purposes. The government proposed to amend the above act in order to cub tax evasion. The incidence of any tax liability to fall also on the owner of the hotel project duly registered with ZIPA. This measure aims to ensure proper notification is made to the tax authorities on decision of the owners of the hotel projects to rent/ lease their properties to other companies. VAT (The Value Added Tax Act N. 4 of 1998) Increased Threshold for VAT registration. The government raised the minimum threshold that taxpayers would be obliged to register for VAT from annual turnover of TZS 15 million to TZS 30 million. This measure will help Small and Medium Enterprises (SMEs) to find opportunities to grow before their registration with the VAT System. The increase of the minimum threshold will also increase efficiency in that it will only allow those large businesses with higher turnovers to be registered with VAT system. Skills and Development Levy (The Vocational Training Act N. 8 of 2006) Distribution of revenue from Skills and development levy (SDL). The government will apportion the revenue collected into 60% to higher education and 40% to vocational training. Exempting government from paying SDL. The Government and its institution, receiving subventions from the consolidated fund, will be exempted from paying the SDL. The government will however set aside an amount of money not less than 3% but not exceeding 5% of the total wage bill for the purpose of higher education and vocational training. This measure will counter the double counting of government contribution of SDL. Page 2

Zanzibar ZIPA (Zanzibar Investment Promotion and Protection Act N. 11 of 2004) Amendment of grace period on land rent. Approved enterprise may (previously shall ) be exempted from paying land rent during construction period, provided that such exemption shall not exceed six months from the date of the lease Reduction of tax exemption (tax holiday) to the investment projects. The government proposed to remove tax holidays in new investment projects in the Free Economic Processing Zones (EPZ) and Free ports. This will only apply to the new investment projects and does not include those which have previously been classified under t he above. Labour Reschedule of minimum payment of PAYE for foreign experts. The government through ZIPA, Department of Work, Department of Immigration and Tanzania Revenue Authority is expected to review thoroughly the minimum salary levels of foreign experts. This measure aims to avoid tax evasion, ensure that all employed foreigners pay their taxes as per their earnings and maintain the government stance on employment of citizens. Page 3

Zanzibar Road Licenses Amendment of road license rates. The government has amended the rate for the road license from a flat rate of TZS 24,000 per vehicle to reflect the weight of the vehicle through its engine size. Following rates include a charge TZS 15,000 per motor vehicle per year and TZS 3,000 per motorcycle of two or three wheels as carbon emission fee. Num. Type Class Engine sizes Fees-TZS 1 Motor cycles-two wheeled BA 50 CC 13,000 2 Motor cycles-three wheeled BB 50 CC 18,000 3 Motor cycles-two wheeled CA 50 CC- 125 CC 23,000 4 Motor cycles-two wheeled CA Over 125 CC 28,000 5 Motor cycles-two wheeled CA Over 250 CC 33,000 6 Motor vehicles-private cars DA 501 CC- 1,500 CC 65,000 7 Motor vehicles-private cars DA 1,501 CC- 2,500 CC 90,000 8 Motor vehicles-private cars DA 2,501 CC- 5,000 CC 115,000 9 Motor vehicles-private cars DA Over 5,000 CC 140,000 Page 4

Tanzania Mainland Income Tax (Income tax Act 2004, Cap 332) Introduction of NIL tax bands for turnover below TZS 3,000,000 under the presumptive tax scheme (simplified tax system for individual business people and entrepreneurs). Below is a table for the new rates. Num. Annual Turnover Tax on incomplete records Tax on complete records 1 0-3,000,000 NIL NIL 2 3,000,000-7,500,000 100,000 3 7,500,001-11,500,000 212,000 4 11,500,001-16,000,000 364,000 5 16,000,000-20,000,000 575,000 2% of turnover in excess of 3 Million 90,000 + 2.5% of turnover in excess of 7.5 Million 190,000 + 3% of turnover in excess of 11.5 Million 325,000 + 3.5% of Turnover in excess of 16 Million Tax free amount in regard to PAYE increased from TZS 135,000 to TZS 170,000 as per the amended table shown below; Num. MONTHLY TAXABLE INCOME TAX RATE 1 2 3 4 5 Where income does not exceed Tshs. 170,000/= Where total income exceeds Tshs. 170,000/= but less than Tshs. 360,000/= Where total income exceeds Tshs. 360,000/= but less than Tshs. 540,000/= Where total income exceeds Tshs. 540,000/= but less than Tshs. 720,000/= Where total income exceeds Tshs. 720,000/= NIL 14% of the amount in excess of Tshs. 170,000/= Tshs. 26,600/= plus 20% of the amount in excess of Tshs 360,000/= Tshs. 62,600/= plus 25% of the amount in excess of Tshs 540,000/= Tshs. 107,600/=plus 30% of the amount in excess of Tshs 720,000/= Page 5

Tanzania Mainland Introduce 5% withholding tax on dividends paid by resident corporations to resident corporate shareholders who hold 25% of more of the shares. This abolishes exemption which was previously enjoyed under section 54(2) of the income tax Act. Introduce 10% withholding tax on interest income by non-residents on deposits with Tanzanian banks. Introduce capital gains tax on a sale of shares in a resident corporation by foreign/non-resident shareholder. Exempt withholding tax on interest charged by foreign banks on loans to strategic investor. Exempt income tax on Dar es Salaam Stock Exchange. Exempt income tax on gaming licences as it is already subjected to gaming tax. VAT (The Value Added Tax Act, Cap 148) Introduce 10% VAT for selected for previously relieved supplies under third schedule of the Act. They include; NGOs, individuals, companies and TIC certificate holders (other than those already enjoying exemptions under existing certificates). Exempt VAT on Electronic Fiscal Devices and classify it under the exempt supplies list of the second schedule of the VAT Act. Exempt VAT on various equipment used for storage, transportation and distribution of natural gas (compressed natural gas and piped natural gas). Such equipments includes; CNG Vehicle conversion kits, CNG Vehicle conversion kits, High pressure Vessels (CNG and LPG Cylinders, Natural Gas compression plants equipments, Natural gas pipes (Transportation and Distribution Pipes),CNG Storage Cascades, CNG Transportation Trailers, Natural Gas metering Equipments, Pipeline fittings and valves, CNG Refueling/filling equipments, PNG/CNG accessories, Gas Receiving Unit, Condensate Stabilizer, Flare Gas System, Air & Nitrogen System, Condensate Tanks and Loading Facility, System Piping and Pipe rack, Instrumentation, and Gas Cooker which is specifically designed for gas. Page 6

Tanzania Mainland Customs (The East African Community CET and Customs Management Act, 2004) Num. Items HS Code Current rate Proposed rate 1 2 Wheat grain & meslin respectively-until LABSA used as raw material for soap manufacturing-until 2013 1001.90.20, 10% 0% 3402.11.00, 3402.12.00 10% 0% 3 Palm Stearin, RDB- until 2013 1511.90.40 10% 0% 4 Food supplement & Mineral mix for infant feeding 2106.90.91 10% 0% 5 Cathodes 7403.11.00 10% 0% 6 Castor oil and its fractions 1515.30.00 10% 0% 7 Electricity 2716.00.00 10% 0% 8 Set Top Boxes 8528.71.00 25% 0% 9 Inner glass flask used in thermos 7020.00.90 25% 0% 10 Road guards 7308.90.90 25% 10% 11 Software 8523.80.00 25% 0% 12 Cements 2523.90.00 35% 25% 13 Galvanised wire 7217.20.00 0% 10% 14 Deemed capital goods - Exempted 10% 15 Motor vehicles with 3,000 cc and above - Exempted 25% 16 All inputs in production/manufacture of medical diagnostic kits - 10%-25% 0% 17 Bee-keeping and related equipments - 10%-25% 0% 18 19 20 21 Machinery & spare parts in mining activities,excluding spare parts for - 10%-25% 0% Inputs for production of nutritious food products for infants and HIV/AIDS patients - 10%-25% 0% Refrigerated trailers of milk & meat - 10% 0% Goods imported for Armed forces Canteen Organization (AFCO)- Until 2013-0% 0% Page 7

Tanzania Mainland Excise (The Excise (Management & Tariff) Act, cap 147) Abolish excise duty on fuel used for oil and gas exploration. Abolish excise duty of TZS 40 per litre on HFO (heavy fuel oils). Introduce excise duty on music and film products including DVDs, VCDs, CDs, video and audio tapes etc. This will be effective from 1 st January 2013. Introduce excise duty of TZS 0.35 per cubic feet on natural gas for industrial use. Introduce excise duty on imported non-utility vehicles for all beneficiaries except for beneficiaries who are currently enjoying VAT exemption like mining companies, Diplomats and diplomatic missions, religious organizations and donor funded projects. Increase excise duty on Airtime from 10% to 12%. Excise duty on imported fruit juices to be TZS 83 per litre and for locally produced at TZS 8 per litre. Adjust the specific excise duty rates on soft drinks, beers, spirits, cigarettes and wine as follows: Num. Items Current rate Proposed rate 1 Carbonated Soft drinks TZS 69 per Litre TZS 83 per Litre 2 Beer from local un-malted cereals TZS 248 per Litre TZS 310 per Litre 3 Other beers TZS 420 per Litre TZS 525 per Litre 4 5 Wine with more than 25% imported grapes Wine with domestic grape content TZS 1,345 per Litre TZS 145 per Litre TZS 1,614 per Litre TZS 420 per Litre 6 Spirits TZS 1,993 per Litre TZS 2,392 per Litre Excise duty on cigarettes has been amended as follows: Num. Items Current rate Proposed rate 1 Cigarettes without filter tips & having more than 75% domestic tobacco TZS 6,820 per 1,000 cigarettes TZS 8,210 per 1,000 cigarettes 2 Cigarettes with filter tips & having more than 75% domestic tobacco TZS 16,114 per 1,000,000 cigarettes TZS 19,410 per 1,000,000 cigarettes 3 Other cigarettes TZS 29,264 per 1,000,000 cigarettes TZS 35,117 per 1,000,000 cigarettes 4 Cut Rag or Cut Filler TZS 14,780 per kg TZS 17,736 per kg 5 Cigars 30% 30% Page 8

Tanzania Mainland Export levy (Export levy Act, Cap 196) Increase of export duty on raw hides from 40% or TZS 400 per kg to 90% or TZS 900 per kg, whichever is greater. Gaming tax (The gaming Act, Cap 40) Increase in gaming tax for Casinos from 13% of gross gaming revenue to 15% of gross gaming revenue. Introduce gaming tax on sports betting at a rate of 6% of the total stakes. Introduce gaming tax on SMS lotteries at a rate of 43%. Introduce gaming tax of 15% on internet casinos. Gaming tax shall be final tax and the operators will not be subjected to income tax. Motor vehicles (The motor vehicle registration & transfer Act, Cap 124) Introduce fee of TZS 5 million for personalized plate numbers for three years. All vehicles imported which are more than 8 years old will now be subjected to excise duty of 20%. East African Development Bank (EADB) (East African Development Bank Act, Cap 231) Accord immunity status to all properties owned by the EADB. Give the EADB corporate status. Empower the Minister of Finance to implement the decisions of the EADB s governing board, by amending the schedule to Act through the Government Notice and subsequently inform the Parliament. Aviation (Airport departure services charges Act, Cap 365) Increase in Airport Service Charges from the current rate of USD 30 to USD 40 for passengers travelling outside the country and from TZS 5,000 to TZS 10,000 for local travel passengers. Page 9

New Immigration fee rates With effect from 1st August 2012 the following new rates are in place for various services offered by Immigration Department: 1. RESIDENCE PERMIT CLASS A: CATEGORY SECTOR ELIGIBILITY REASON FEES IN US$ A-1 Prospecting and Mining Persons intendingto engage into prospecting for minerals or mining A-2 Large scale trade and business Persons intending to engage into specific trade A-3 Prescribed profession Members of prescribed profession in and consultancy services possession of prescribed qualifications intending to practice such profession and consultancy services 3,000 3,000 3,000 A-4 Large scale manufacturing and processing A-5 Large scale agriculture and animal husbandry Persons intending to engage into large scale manufacturing and processing Persons intending to engage into agriculture or animal husbandry A-6 Artisans Persons intending to engage into activities like tailoring, goldsmiths, cobblers and engineering works A-7 Small scale farming, trade, business and fishing Persons in the country engaged in small scale farming, trade, business or fishing A-8 Peasants Persons who have resided for a long time in the country as paesants, pastoralists and other legally recognized small scale activities 2,500 2,000 2,000 1,000 Tshs 10,000/= 2. RESIDENCE PERMIT CLASS B: CATEGORY SECTOR ELIGIBILITY REASON FEES IN US$ B Specific employment by specific employer Person who has been offered a specific employment by a specific employer and he or she has the required qualifications and experience 2,000 Page 10

3. RESIDENCE PERMIT CLASS C: CATEGORY SECTOR ELIGIBILITY REASON FEES IN US$ C-1 Researchers and employees of Non- Government Organization (NGO) duly registered Researchers and persons employed by Non-Government Organizations 500 C-2 Retired persons Retired persons who have an assured adequate income to sustain him/her and dependants while residing in the country 500 C-3 Approved religious activities (Missionaries), Persons engaged in religious activities approved by the Government Volunteers and Students (Missionaries), Volunteers and Students 500 C-4 Winding up affairs of contract and sick persons Persons engaged in winding up their affairs and attending medical treatment 200 Page 11

For further information contact: Victoria Kamazima kamazima@sisiconsulting.com Mohamed Wario wario@sisiconsulting.com Disclaimer This newsletter contains general information only, and is not a substitute in place of such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. The newsletter highlights of both Tanzanian mainland and Zanzibar are based on each honorable minister s budget speech and does not in any way oblige or form a liability on our part; neither does it supplement their speeches. SiSi consultants