MANAGING TAX RISKS: Does the tax amnesty apply to you?

What you need to know:

  • Last week, TRA issued a public notice explaining the scope of the tax amnesty, eligibility criteria and how one can apply for the tax amnesty. Knowing whether the tax amnesty applies to you or not is an important first step in the whole process of tax amnesty.

In his 2018/19 Budget Speech, by the Minister of Finance and Planning announced a tax amnesty. The tax amnesty will involve remission of up to 100 percent of interest and penalties.

Last week, TRA issued a public notice explaining the scope of the tax amnesty, eligibility criteria and how one can apply for the tax amnesty. Knowing whether the tax amnesty applies to you or not is an important first step in the whole process of tax amnesty.

And if it does apply, to what extent? In this article, I highlight some circumstances the tax amnesty may not apply to you.

1. Are you compliant?

If you owed TRA tax but have already paid it in full, obviously, this amnesty does not apply to you. The intention of the tax amnesty “is to give relief to taxpayers with debts by waiving 100 percent of interest and penalties to motivate them to pay principle tax liabilities voluntarily and in installments, within the financial year 2018/2019” reads part of the TRA public notice.

2. Which tax?

The tax amnesty only applies for eligible types of taxes. Main those administered by TRA on behalf of the central government such as VAT, Income tax, Excise Duty, Stamp Duty, PAYE and Withholding tax. The tax amnesty will not apply to you if the non-compliance is in respect of tax not administered by TRA.

A service levy, for example, is administered by local government authorities. Non-union taxes applicable only in Zanzibar (such as VAT in Zanzibar) are administered by the Zanzibar Revenue Board (ZRB).

The tax amnesty will also not apply to you if the non-compliance is in respect of customs duties administered by TRA under the East African Community Customs Management Act, 2004. Also, the amnesty will not apply if the non-compliance is in respect of non-tax laws administered by TRA. This includes taxes such as gaming tax, skills and development levy, property tax, advertising fees.

3. Can you settle the tax debt in a year?

One of the conditions for the remission of interest and penalties is for you to commit (“confirm”) in writing to pay the principal tax amount within the financial year 2018/19 (latest 30th June 2019) excluding penalties and interest. If you think you are not able to make and fulfill this commitment, then the tax amnesty is not meant for you.

4. Are you ready to drop your tax objection or appeal?

The tax amnesty extends to tax objections pending with TRA and tax appeals pending at the tax courts. But, obviously, this will involve the aggrieved taxpayer who wants to enroll for tax amnesty to withdraw/drop his objection or the appeal and commit not to proceed with the same.

5. Are you under audit or investigation?

If you are under an audit or investigation by TRA, then the amnesty will not apply to you for the period and taxes being audited or investigated. If, for example, TRA is auditing your VAT affairs for the year of income 2016, then you will not be eligible for tax amnesty for VAT related to 2016.

But you will be eligible for tax amnesty for VAT matters related to years of income other than 2016 and all other eligible taxes.

6. Is the unpaid tax related to crimes?

The tax amnesty will not apply to you if the unpaid taxes related to tax crimes, human trafficking, money laundering and other crimes. You have determined that the tax amnesty may apply to you. Your next question is whether you should enroll for the tax amnesty or not. My next few articles I will continue focusing on the tax amnesty.

Mr Maurus is a partner with Auditax International