TAX LAW UPDATE: TANZANIA INTRODUCES A NEW REGULATION FOR AMNESTY ON INTERESTS AND PENALTIES; AN OVERVIEW OF THE TAX ADMINISTRATION REGULATIONS, 2020
- Regulations to apply to persons assessed with interest or penalty under the Tax Administration Act or any Other Tax Law in Tanzania
- Applications to be submitted to the Commissioner General by a taxpayer or his representative
- Waiver of interests and penalties can be full or partially on overdue tax.
- Eligibility criteria to apply for the waiver
- Cancellation of the waiver after being granted.
On 8th May 2020 the Ministry of Finance and Planning issued the Tax Administration (Remission of Interest and Penalty) Regulations, 2020 (“the Regulations”). The regulations establish that eligible taxpayers may enjoy a remission/waiver of interest and penalties imposed on their outstanding tax liabilities.
The Regulations are made under section 70 (2) of the Tax Administration Act 2015 (as amended in 2018). The said section gives the Minister power to issue Regulations to provide for or regulate the power of the Commissioner General to waive all or part of the interests and penalties payable to an eligible tax payer.
Our tax department at Breakthrough Attorneys has prepared the following overview for all stakeholders on the procedures to be followed in applications for a waiver and other related matters.
2.0 Eligible persons (Regulations 2 and 5)
To start with, Regulation 2 states that “the regulation applies to any person who has been assessed with interest or penalty under the Act or any other law”. For a taxpayer to be eligible for a waiver of tax liability, the following criteria must be met;
- The taxpayer has to voluntarily disclose his tax liability
- The taxpayer must have taken initiative to clear his previous overdue debts if there are any.
- The taxpayer must not have pending objections or appeals in relation to the tax debt whose interest or penalty is sought to be waived.
- The taxpayer must agree to full payment of the principal tax liability on the due date prescribed by the Commissioner General in his decision to grant the waiver.
- The taxpayer must have lodged an application for him to be considered eligible for the waiver.
3.0 Exclusion of certain categories of interest and penalties (Regulation 8(1))
Notwithstanding Regulation 5 as detailed in 2.0 above, the Regulations establish that all interests and penalties imposed by Tax Laws administered by the Tanzania Revenue Authority (the TRA) qualify for remission except:
- Any penalty or interest emanating from an order of compounding an offence under tax laws;
- Those arising from breaches related to acquisition or use of electronic fiscal devices (EFD);
- Penalty or interest arising from fraudulent tax evasion;
- Penalty or interest arising from tax liability established as a result of tax audit or investigation;
- Any tax liability in which the applicant has statutory obligation to pay as an agent of the TRA to collect such tax from third parties and pay the same to the Commissioner, i.e.
- interest or penalty arising from failure to pay income tax payable by way of withholding tax mechanism under the Income Tax Act,
- value added tax payable under the Value Added Tax Act,
- excise duty payable under the Excise Tariff Management Act,
- airport service charge payable under the Airport Service Charge Act,
- port service Charge payable under the Port Service Charge Act,
- Penalty imposed for failure to file tax return and failure to maintain proper documents as required by any tax law
In essence, the Regulations will only benefit those taxpayers who have voluntarily disclosed their tax liabilities. For those taxpayers who are issued with assessments after the TRA conducts an audit, or who were issued with an assessment arising from what the TRA believes to be fraudulent tax evasion, these regulations will not benefit them.
The fact that the Regulations on the one hand are only available to those taxpayers without objections or pending Appeals, and on the other hand are, as clearly stated in Regulation 5(a), only applicable to those who have voluntarily disclosed their liability, is in our opinion, limiting and may hamper the spirit of the regulations, which is, avoid protracted tax litigation, and assist the government in timely tax collection in absence of the avoided disputes.
It is more likely for a taxpayer who has been slapped with an assessment of the principle amount as well as interests and penalties after an audit is conducted to be more in need of accessing an amnesty right under these regulations and applying for a waiver of the interests and penalties as opposed to one who has voluntarily disclosed his liability. By excluding those tax payers that were issued with assessments after audits were conducted by the TRA, the Regulations have alienated the category that would have benefited the most from these Regulations.
Again, a look into Regulation 8 (1) (e) (f) and (g) one may see that those excluded penalties and interests do not necessarily need to emanate from the intentions of the taxpayer based on fraud or anything; that is, they are strict liability. The list of such is long and in essence, the regulation in hindsight stands to miss its mark on trying to settle potential disputes at the earliest.
4.0 Manner and procedure for application and grant of the same
- The applicant or their representative has to fill in the prescribed form, which is found in the schedule of the Regulations, and submit the same to the TRA offices.(Regulation 4).
- The applicant must mention in the prescribed form, reasons for imposition of interest or penalty. The form must also be accompanied with such evidence that may justify the waiver of interest and penalties.
- In determining the application, if the Commissioner is satisfied that the applicant has showed good cause, the Commissioner may decide to grant the waiver for the whole or part of interest or penalty (Regulation 6).
The decision of the Commissioner to either grant remission or reject remission of interest or penalty is final, hence not appealable under the Tax Revenue Appeals or any other Act, and cannot be subjected to administrative review. (Regulation 10)
5.0 Payment of Principal tax (Regulation 7)
After the applicant has been granted with the waiver, they will be expected to pay the outstanding principal tax, in full on the date specified by the Commissioner or on any other date if there is an extension on the same.
6.0 Power of the Commissioner General to cancel the grant of remission (Regulation 9)
The Commissioner General has power to cancel his decision granting the remission and proceed with recovering principal tax and interest or penalty in full as if no remission was granted. That power is exercisable in any the following situations;
- Where a taxpayer who has been granted with a remission under the Order fails to pay the principal amount timely as specified by the Commissioner General.
- If the remission has been acquired fraudulently or through misrepresentation.
It should be noted that acquiring of remission through fraud or misrepresentation is an offence as per (Regulation 11)and one may be liable to criminal prosecution.
These “Remission Regulations” provide an opportunity and relief to taxpayers with overdue tax liabilities to apply for a waiver on interests and penalties of up to 100%as the Commissioner may decide. It is however important to note that by making use of these regulations, and applying for the said waiver, a taxpayer automatically loses the opportunity to challenge the assessed amount by objecting to the Commissioner or Appealing against the said assessment. The Regulations are clear in the fact that only applicants who do not have any pending objections or appeals with regards to the tax for which they seek remission will qualify for the waiver.
Further, given the fact that the decision of the commissioner after such an application for a waiver is made is final, it is of utmost importance that a taxpayer, before deciding to go through this route, satisfies himself that he is able to pay the principle amount when so ordered, and that should the Commissioner General refuse to grant the waiver, the said taxpayer does not take issue with not having any other avenue to challenge the said decision.
Breakthrough Attorneys encourages all taxpayers to consider carrying out an assessment of tax compliance status in order to identify any areas of non-compliance for all taxes administered by the TRA in order to make an informed decision on whether or not they may benefit from these Regulations. In this process, we advise taxpayers to seek for considered opinions from their tax and legal representatives befitting their specific facts and conditions.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.