MANGING TAX RISKS : Withholding tax system in Tanzania
What you need to know:
- The person whose income tax is withheld is deemed to have paid income tax equal to the amount of tax withheld.
We noted in last week’s article that withholding tax is a mechanism by which a payer of an amount subject to withholding tax is obliged to collect an amount of income tax by applying a specified rate of tax.
The person whose income tax is withheld is deemed to have paid income tax equal to the amount of tax withheld.
We also noted that the withholding agent is required to remit the tax withheld within seven days from the end of the calendar month in which the tax was withheld. In return the withholding agent shall provide the withholdee with a withholding tax certificate and the later will use the certificate as an evidence of tax paid by way of withholding tax.
Further, we discussed the advantages and relevance of withholding tax system.Today’s article looks at payments subject to withholding tax in Tanzania.
Payments Subject to Withholding Tax in Tanzania
Employment Income Payments (Pay As You Earn (PAYE))
PAYE is common name used to describe withholding tax on employment income payments whereby an employer is required to withhold income tax using the applicable rates.
Technical Services
These are services in respect of mining or petroleum operations i.e.services of earthmoving, engineering and construction including geological,geo-technical and metallurgical services, seismic survey, data interpretation, drilling orsuch any services.
Other Payments
Payments of dividend, interest, natural resource payment, rent o rroyalty. Other payments subject to withholding tax are service fee having a source inURT and paid to a non-resident person, specified service fees paid to a residentperson; insurance premium having a source in URT paid to a resident person andmoney transfer commission paid to a money transfer agent.
The following table summarizes amounts and rates applicable to various payments subject to withholding tax:
* The withholding tax rate on dividends of a company whose at least 30 per cent of its shares are listed in Dar es Salaam Stock Exchange is 5 per cent. The withholding tax rate on dividends from a resident corporation to another resident corporation holding at least 25 per cent of shares or voting power of the issuing corporation is 5 per cent.
Mr Makundi is a Partner with Auditax International
