Tanzania: VAT and DST obligations for nonresident providers of cross-border electronic services
All nonresident providers of electronic services must register for VAT and DST voluntarily using a simplified registration framework
The Tanzanian Revenue Authority (TRA) recently issued a public notice [PDF 131 KB] outlining the value added tax (VAT) and digital service tax (DST) obligations of nonresident providers of cross-border electronic services. According to the notice, all nonresident providers of electronic services must register for VAT and DST voluntarily using a simplified registration framework developed by the TRA. The notice also provides a registration manual [PDF 2.9 MB] for this purpose.
Background
Effective 1 July 2022, the Tanzanian VAT and DST rules mandate nonresidents to register under the simplified registration framework if they provide electronic services to consumers in Tanzania. The term "electronic services" refers to services delivered or provided via the internet or other electronic means. These include search engines, downloadable digital content, application software, subscription media, distance learning, live streaming, online data warehousing, electronic booking services, sharing and gig economic activities, advertising, and intermediation services.
Electronic services are sourced to Tanzania if the payment proxy, which includes credit or debit card information and bank account details of the recipient of the electronic services, is in Tanzania; or the resident proxy—which includes the billing or home address, or access proxy, which includes internet address, mobile country code of the SIM card of the recipient—is in Tanzania.
Tanzania's rules do not establish a registration threshold. Therefore, nonresidents making sales within the scope of these rules are obligated to collect VAT at an 18% rate and pay a 2% DST on all gross payments within the scope.
KPMG observation
Many jurisdictions are increasing their enforcement of taxes on cross-border digital services. This notice from the TRA shows a clear effort to improve compliance by simplifying the process and guiding taxpayers through it.
It is also worth noting that Tanzania exemplifies a jurisdiction that has harmonized its VAT rules on electronic services and the DST regimes and seems to have opted to administer both regimes concurrently for convenience as it requires nonresidents to register for both regimes simultaneously.
Nonresidents providing electronic services in Tanzania may need to thoroughly review their activities, especially considering there is no registration threshold for both regimes, and the regimes apply to the same services.
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Chinedu Nwachukwu | chinedunwachukwu@kpmg.com