On the 12th of June 2021, the Parliament of the United Republic of Tanzania passed the Finance Bill 2021 which was assented to by the President of Tanzania on the 30th of June 2021. Following the assent, The Finance Bill came into force on 1st July 2021 as the Finance Act 2021.
Overview of the Finance Act
The Finance Act in Tanzania is a legal document that contains the following Laws:
1. The Companies Act
2. The Electronic and Postal Communications Act
3. The Excise Act (Management and Tariff) Act
4. The Government Loans, Grants and Guarantees Act
5. The Gaming Act
6. The Higher Education Students Loan Board Act
7. The Income Tax Act
8. The Local Government Authorities (Rating) Act
9. The Motor Vehicle (Tax on registration and Transfer) Act
10.The National Payment Systems Act
11.The Non-Citizens (Employment Regulation) Act
12.The Ports Act
13.The Public Audit Act
14.The Road and Fuel Tolls Act
15.The Stamp Duty Act
16.The Tanzania Communications Regulatory Authority Act
17.The Tanzania Shipping Agencies Act
18.The Tax Administration Act
19.The Tanzania Revenue Authority Act
20.The Tax Revenue Appeals Act
21.The Value Added Tax Act
22.The Vocational Education and Training Act
Every Act stated above was amended while some others were only introduced in the Finance Act 2021. Notwithstanding amendments were made in all the above stated Acts, ranging from minor amendments like change of words that have no material effect on the paragraphs/ sections to major amendments. The Acts that directly affect financial institutions will be discussed in this article, notwithstanding if the amendments provided amount to a material change of processes or not.
Here are a Few Amendments to the Law
The Companies Act
- Section 85 of the Companies Act that provides for bearer shares was repealed and replaced with a provision that immediately cancels bearer shares that are not surrendered 12months following July 1st, 2021, after which, they’ll be, in their nature, Invalid.
- Section 86 deleted the “share warrant’ wherever they may appear.
- Section 117 was completely repealed, no replacements. – Prior to the repeal, it provided for register of members and share warrants.
The Electoral and Postal Communications Act
Subsection A(1) of section 164 introduced a levy to be charged on airtime. The subsequent subsection informed on intentions to develop regulations that will prescribe the manner and modality which the levy may be collected and accounted. This provision is an addition to the existent provisions of the Electoral and Postal Communications Act.
The Gaming Act
The amendment of the Gaming Act only affected gross gaming revenue in the increase and deduction of their respective percentage under section 31(A).
The Income Tax Act
A proviso was added to section 3(A) stating the extents and limits of Agents other than Independent Agents and where those Agents exceed their limitations as provided by the Act, they shall be deemed to have ‘Permanent Establishment’. The Act, however, defines this to mean, a place where a person carries on business. The Act went further to stipulate instances. The amendment in Section 10(4) provided clarity on situations not set aside for Tax exemptions to be applied beyond the tax exemption instances stated in the Act.
Addition of provisos to section 65N that emphasises that assets owned on International Pipeline shall be regarded and treated as depreciable assets and another proviso that defined International Pipeline as a cross border pipeline for transportation of crude oil.
There are a number of amendments to the Income Tax Act, mostly additions. The above stated are only to mention a few.
The National Payment Systems Act
An Addition immediately after section 46 to be known as section 46A, subsection 1 established a levy to be charged on mobile money transfer transaction at a rate ranging from 10 to 10,000 shillings. Subsection 2 restated the amendment in the Electoral and Postal Communication Act around the Minister of Communications providing a regulation that prescribes the manner and modality which the levy on mobile money transfer transactions may be collected and accounted for.
The Non-Citizens (Employment Regulation) Act
This Act was amended by the inclusion of a subsection 3 of section 16, where it is provided that any person who engages a non-citizen and fails to submit a return to the commissioner on June 30th and December 31st every year, shall be liable to a penalty of 500 thousand shillings for each month or part of the month for which the delay continues.
The Tax Administration Act
Below are the changes made to this Act:
- Section 22 of the Tax Administration Act was amended by inclusion of the word ‘employment’. The precedent Tax Administration Act only provided for businesses and Investments when it mandated the application for Taxpayer Identification Number within 15days from the commencement date.
- Section 35 was amended by adding 4 ensuing subsections after the original last subsection and the changes ranged from a provision that mandated that a taxable person that maintains documents in electronic form shall maintain a primary data server to maintain those documents in the Republic.
It also provided that the said server shall be accessible by the Commissioner General for the purpose of Tax Administration. Furthermore, primary data server means a server which stores data that is collected by a taxable or liable person in the ordinary course of business.
- The Act made additions to section 79 by adding another category for making false or misleading statements to include entering controlled transactions and failing to determine the income and expenditure in a manner that is inconsistent with the arms-length principle and further provide the penalty to be one hundred percent of the tax fall
Implications of the Amendments in the Act on Financial Institutions
This move by the Tanzanian government is commendable. It’s important that regulators frequently review laws guiding operations of financial institutions according to the changing times. These amendments serve to further expand the reach of the law and seal up exploitable loopholes.