Overview
A supply of electronic services delivered from outside Tanzania to a customer that is not registered for VAT in Mainland Tanzania at the time when the service is provided is subject to VAT in Tanzania. The person responsible for accounting for the VAT is the supplier of such services. Initially, the VAT legislation required non-resident suppliers of electronic services to appoint a local representative for compliance purposes. The Finance Act, 2022 (FA 2022) introduced changes to the VAT legislation to allow non-resident electronic service providers to register for VAT (in accordance with procedures prescribed in the Regulations) without requiring a local VAT representative (i.e. simplified registration). The Regulations were subsequently issued and provided, among other components, the scope, registration, filing and payment requirements, penalties, interest and offences.
The Regulations are effective from 1 July 2022, providing a grace period of six months (see Regulation 4(7) for nonresident suppliers to register (i.e. at the latest by 1 January 2023)).
A non-resident supplier of electronic services would have to check whether their customers are VAT registered or not to determine whether they have VAT obligations in Tanzania. While there is no legislated mechanism for doing so, we recommend that the non-resident supplier collects the VAT Registration Number (VRN) and VAT Registration certificate from their customers. There is no publicly available portal to check such information.
Release date: April 2024
Key provisions applicable to VAT on ESS |
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| Table 1 |
Services in scope |
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The scope of electronic services is limited to the following as defined under section 51(2) of the Value Added Tax Act, 2014 (VATA 2014). “Electronic services” means any of the following services provided or delivered through a telecommunications network:
The Regulations expound on the above definitions. |
Registration and compliance |
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Registration The registration portal for non-residents is now live for registration and can be found at https://taxpayerportal.tra.go.tz/#/. For registration to be completed, Regulation 4 of the Regulations provides the necessary details to be included in the registration:
Other information not listed in the Regulations is also required, such as social media information and the contact person’s passport number, etc. |
Compliance Once registered for VAT, a person shall be required to file a return online in a prescribed form, and the return shall be accompanied with tax payable in respect of electronic services rendered in the tax period. The registered person shall pay tax and file a return to the Commissioner General on or before the twentieth (20th) day of the month following the month to which the return relates. Where the twentieth day falls on a Saturday, Sunday or a public holiday, the return shall be lodged on the first working day following a Saturday, Sunday or public holiday. |
Invoicing |
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The Electronic Services Regulations exempt nonresident registrants from having to acquire and use electronic fiscal devices for invoicing purposes. Currently, there are no explicit invoicing requirements for non-residents who supply digital services. However, tax invoice requirements are covered under section 86 of the VATA 2014. Invoices must show the following:
It is unclear at this point whether non-resident suppliers must abide by the above requirement for invoicing purposes, as there is no exemption from this requirement nor special rules. To be prudent, we recommend that the non-residents include this information in their invoices. |
VAT on costs |
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| Non-residents cannot recover VAT on costs. |
Other considerations |
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Requirement to appoint a tax representative The non-resident service provider may appoint a tax representative or register directly using the online portal. |
Applicability of Digital Service Tax (DST) A non-resident supplier must account for DST (2%) on payment received from a customer where electronic services are supplied to a resident individual customer (i.e. B2C). On the other hand, DST does not apply when the service is provided to a resident business (i.e. B2B). |
Particulars |
Description |
Scope |
Unregistered persons (regardless of whether they are B2B or B2C) |
Liability to remit VAT |
Non-resident supplier |
VAT rate |
18% |
Taxable value |
Sales value, including any duty, levy, fee, or charge (exclusive of VAT) |
Effective date |
1 July 2022 |
VAT registration threshold |
No threshold |
Tax invoice |
Currently, there are no explicit invoicing requirements for non-residents supplying digital services. See further details in the “Invoicing” section below. |
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