TAKE HEED AS THE YEAR 2020 IS WINDING UP

The calendar year 2020 (“The Year”) has been marred with perturbed events including but not limited to the threat of World War III upon United States of America (USA) drone killing of Iranian general, impeachment trial of President Donald Trump of USA, Brexit finally happening after years of delays and false starts, the demise of the arguably Greatest Footballer of all time, Diego Armando Maradona who will be laid to rest on the outskirts of Buenos Aires and the outbreak of the novel virus pandemic which has disrupted the world economy as well as prompting the global population to adopt the new normalcy including but not limited to Working From Home (WFH), social distancing, change in consumption behaviours and travelling restrictions.

There is an African proverb which says “There is no distance that has no end” meaning with time almost everything tends to come to an end. For instance, the battle on preventing and eliminating the novel virus pandemic seems to near its end as the vaccine jointly developed by Pfizer and BioNTech is showing positive results (the test trials have indicated the vaccine is 90% effective on preventing the novel virus infections). Furthermore, upon witnessing a series of perturbed events during the Year we are almost to the end with strong hope that a new year will bring more desirable events.

As the Year is nearing its end, it is of paramount importance to take note of the following;

                    i.       Electronic Filing Compliance

On 5th August 2020, Tanzania Revenue Authority (TRA) rolled out the electronic submission of tax returns (“E-Filing”). Upon registration with the E-Filing portal, taxpayers are now able to lodge online the tax returns namely statement of tax withheld for employees / monthly PAYE return, Skills and Development Levy (SDL) monthly return, Statement of Estimate Tax Payable (SETP) and Final return of income.

Have you already registered with the E-Filing portal? Are you lodging the requisite online tax returns timely? Have you already appointed a declarant (to lodge returns on your behalf) and auditor (to certify the final return of income? Have you mastered the relevant know how on the online submission of the tax returns? It is of vital importance for all taxpayers with obligation to file tax returns to ensure that they are full complying with the rolled-out E-Filing.

                  ii.       Tax Identification Number (TIN) requirement

The rolling out of the electronic submission of tax returns has imposed a new obligation on employees vide the statement of tax withheld for employees alias monthly PAYE return. All employees are now required to have valid TIN registration whereas employers are required to ensure that all of their current and prospect employees possess valid TIN registration.

To employees, do you possess a valid TIN registration? To employers, have you ensured that all your employees possess valid TIN registration? With the set-out deadline of 31st December 2020 fast approaching, it is of vital importance to ensure that the imposed TIN requirement on employees is timely adhered to.

                 iii.       Transfer Pricing (TP) Guidelines

For the purpose of ensuring alignment with the interpretation of the Tax Administration (TP) Regulations, 2018 (“TP Regulations 2018”), TRA issued the TP Guidelines 2020 (“Guidelines”) on 1st July 2020. The issuance of the Guidelines comes two years after the issuance of the TP Regulations 2018. Though the issued Guidelines doesn’t replace the prior issued TP Regulations 2018, the Guidelines serve as a practical guidance to the taxpayers in relation to the TP Regulations 2018.

As a taxpayer, do you expect to incur related party transactions in the subsequent financial year? As a taxpayer, have you incurred related party transactions for the current financial year? It is of paramount importance that all taxpayers with current or potential related party transactions become conversant with the issued Guidelines to ensure alignment with TRA in terms of determination of arm’s length prices and sustaining consistency in administration of the tax laws.

                 iv.       Estimate/Projection Revision

The provisions of section 89(1)(b) of the Income Tax Act (ITA), 2004 require every instalment payer for a year of income to file with the Commissioner Statement of Estimate Tax Payable (SETP) at the end of three months period after the commencement of the year of income. For taxpayers whose year of income coincides with the calendar year, the due date for submission of the SETP was on or before 31st March 2020.

Furthermore, every taxpayer is accorded a right to revise the lodged estimate on or before the last day of the third (First quarter), sixth (Second quarter), ninth (Third quarter) and twelfth months (Fourth quarter) of the year of income while stating the reasons for revision.

With eleven (11) months down the line for the current financial year, how does your projected performance compare to the actual financial performance? If the variance between the two exceeds twenty percent (20%), it is imperative that a revised estimate be lodged with the Commissioner on or before the end of December 2020.

                   v.       Outstanding Tax Liability

The provisions of section 54(1) of the Tax Administration Act (TAA), 2015 require every taxpayer to pay any tax at the time specified in the tax law under which the said tax is charged. Failure to comply with the aforesaid provisions of the tax law will lead to imposition of interest for failing to pay tax computed at statutory rate compounded monthly pursuant to the provisions of section 76(1) of the TAA, 2015.

Do you have any outstanding tax liability with TRA? Have you devised a strategy to ensure the settlement of the said liability? It is of paramount importance that taxpayers establish their outstanding tax liability as well as proceeding to secure a settlement arrangement on the said liability pursuant to the provisions of section 55 of the TAA, 2015.

                 vi.       Tax Health Check Review

In the normal course of living our human life, it is advised to have periodic health checks to determine whether we are suffering from any illness or injury. The intention of the advised health checks is to determine potential health issues before the same emerges and hampers our human life.

As a running business is usually imagined to be similar to a living organism meaning it can be health or sick, fit or underperforming then it is imperative to determine the condition state of your business as the year end is approaching. Hence, a tax health check review may be required to establish any potential tax exposure or tax saving opportunity in relation to the current year of income thereon devising a relevant way forward.

                vii.       Record Keeping

The TAA, 2015 provisions require every taxable person within the United Republic of Tanzania to maintain relevant documents in paper or electronic form. As the year is nearing its end, it is of paramount importance that all taxpayers maintain information to be provided or filed with the Commissioner i.e. hardcopy tax returns or documents that will enable the accurate determination of the tax payable under any tax law i.e. executed contracts, tax invoices, TP documentations, payroll schedules and copies of VAT lodged returns to name a few.

Benedict Kombaha is a tax professional and enthusiast. He has drafted this article in his personal capacity and the views expressed herein are his personal views.