Failure to comply with various provisions of tax laws requirements may attract penalties and interest in tax recovery. This section provides a brief description of Interest and Penalties involved and the way they are administered.
Interest
1. Interest for underestimating tax payable
Installment payers who estimate their income tax payable for the year of income are expected to show high level of accuracy in estimation. Failure to estimate tax within the allowed limits results into underestimation, which shall attract interest.
This applies where an instalment payer’s estimate or revised estimate of income tax payable for a year of income under section 88 of the Income Tax Act is less than eighty percent (80%) of the correct amount.
The amount if interest that an installment payer shall pay for each period shall be calculated at the statutory rate and compounded monthly, applied to the excess of-
the total amount of income that would have been paid by way of installments during the year of income to the start of the period had the person's estimate or revised estimate equaled the correct amount; over
the amount of income tax paid by installments during the year of income to the start of the period.
Note; The instalment payer shall be liable for interest for each month or part of a month from the date the first instalment for the year of income is payable until the due date by which the person shall file a return of income for the year of income under section 91(1) of the Income Tax Act.
2. Interest for failure to pay tax.
If any amount of tax imposed under any tax law remains unpaid after due dates as required by the respective tax law or regulation, attracts interest. The interest shall be charged at the statutory rate on the amount of tax outstanding at a given time.
In case, a withholding agent fails to pay the withholding tax due, he may not recover from the withholder an interest payable due to this failure
Interest payable under this section or under any other tax law shall not be affected or waived for the reason of delay due to court proceedings or any other dispute resolution process
Penalties
1. Failure to maintain documents
Failure to maintain proper documents as required by a tax law attracts a penalty for each month or part of the month during which the failure continues. The penalty in case of individual shall be 1 currency point and for a body corporate shall be 10 currency points.
The amount of tax attributable for a certain period and the manner of apportionment of tax assessed shall be determined by the commissioner on a just and reasonable basis
2. Penalties for failure to file tax return
Failure to file return or pay tax on due dates attracts penalty for each month or part of month during which failure continues.
The amount of penalty is taken as the higher of the following:
• 2.5% of the amount of tax assessed with respect to the tax return less tax paid by start of the period towards that amount, or
• In case of an individual, 5 currency points, and for a body corporate is 15 currency points
Note:
The penalties apply separately for a failure to file an estimate/provisional return and for a failure to file a final return.
3. Penalty for making false or misleading statements
False or misleading statements may result to tax shortfalls and this attracts penalties. The penalties are as follows:
• where the statement or commissions is made without reasonable excuse, penalty shall be 50% of the tax shortfall
• where the statement or omission is made knowingly or recklessly, penalty shall be 100% of the tax shortfall.
Note:
The penalty shall be increased by 10% for the second or subsequent repetition and shall be reduced by 10% if the person voluntarily discloses the statement prior to its discovery by tax officer or the next tax audit of the person
A person is said to make a false or misleading statement if he makes a statement to a tax officer which is false or misleading in a material particular or omits to include in the statement made to the tax officer, any matter or thing without which the statement is misleading in a material particular.
4. Penalty for aiding and abetting.
A person who aids, abets, counsels or induces another person to commit an offence contravenes the provisions of the law. Upon conviction, this person shall be liable for a penalty of 100% of the tax shortfall.
Offences
Contravening the provisions of tax laws may result to offences. This involves procedures until conviction of a person and the respective tax recovery mechanisms for various offences are provided by the Tax Administration Act, 2015.
Introduction:
Skills and Development Levy: is a levy imposed under Section 14 of the Vocation Education Training Act, Cap. 82 and collected by TRA.
Chargeability:
SDL is charged based on the gross emolument of all payments made by the employer to the employees employed by such employer in the particular time (month). It is important to understand that SDL is due and payable by an employer.
The gross emoluments are a sum of amount from salaries, wages, payments in lieu of leave, fees, commissions, bonuses, gratuity, any subsistence travelling, entertainment or other allowance received by employee in respect of employment or service rendered.
Where in any case an employer pays emoluments to any employee at intervals of less than a month or at intervals of greater than a month, such payments shall apply as if such employee was entitled to monthly payments and the monthly chargeable emoluments of such employee in respect of any month shall be deemed to be the chargeable emoluments that would have accrued to the employee had the emoluments been payable monthly.
Who is liable for SDL?
Any employer who employs ten or more employees shall pay SDL from gross emoluments.
Applicable rates:
The rate applicable for SDL is 3.5% of the total emoluments paid to all employees during the month. The employee includes permanent employees, part time employees, secondary employees, casual laborers etc.
Employer’s obligation:
To calculate the amount of the levy and pay the amount to Commissioners account to the respective Tax Region in which such employer is registered.
The SDL payments shall be made using form ITX 300.01.E - Employment Taxes Payment Credit Slip.
To prepare a monthly return and submit to the TRA office on or before the 7thday of the month following the month of the payroll.
To prepare and remit half year certificate which tally with the monthly returns submitted during the period.
The Skills and Development Levy shall not be charged to: -
- a Government department or a public institution which is wholly financed by the Government;
- Diplomatic Missions;
- The United Nations and its organizations;
- International and other foreign institutions dealing with aid or technical assistance;
- Religious institutions whose employees are solely employed to: -
- administer places of worship;
- give religious instructions or generally to administer religion;
- Provide public health
- charitable organizations,
- registered educational institutions, including-
- nursery, primary and secondary schools;
- vocational, educational and training schools; and
- universities and higher learning institutions.
- local government authority;
- intern students from higher learning institutions or technical and vocational education and training institutions who are under the Tanzania Employment Service Agency program;
- farms employers whose employees are directly and solely engaged in farming and shall not include employees who are engaged in the management of the farm or processing of farming products.
Charitable Organization
Means a resident entity of a public character that satisfies the following conditions:
(a) the entity was established and functions solely as an organization for:
- the relief of poverty or distress of the public;
- the advancement of education; or
- the provision of general public health, education, water or road construction or maintenance; and
(b) the entity has been issued with a ruling by the Commissioner under Section 11 of the Tax Administration Act, Cap. 438 currently in force stating that it is a charitable organization or religious organization.
Note
Exemptions for Zanzibar is applicable only from (a-d) and g) above