Tanzania rakes in Sh12.6 billion from non-resident digital entities

Dar es Salaam. The Tanzania Revenue Authority (TRA) has collected Sh12.6 billion in digital tax levied on non-resident entities in the past two years.

This follows enactment of the Finance Act, 2023, which authorises the government to collect tax in the digital economy from non-resident entities.

Some of the entities are Apple, Meta (Instagram, Facebook, WhatsApp, Threads), TikTok, Microsoft, Google and Netflix, Deloite and X (formerly Twitter).

TRA digital economy manager Erick Mabula said the authority collected Sh914 million during the first year of implementing the law.

Read: Making digital tax work for Tanzania 

Collections during the current financial year had reached Sh11.6 billion by February 2024.

“Revenue collected during that period include both value added tax (VAT) and income tax. We are optimistic that by the end of this financial year, collections will have increased significantly,” he said.

In line with the law, TRA started by registering 33 non-resident entities in 2022/23. However, as of February 2024, the number had risen to 67.

To broaden tax collection from digital platforms, Mr Mabula said TRA will focus on increasing registrations by identifying new non-resident entities.

Although TRA has successfully collected taxes from various sectors, he added that the authority was working out ways of getting its rightful revenue from online advertising, search engines, live streaming and downloadable applications.

TRA is currently engaging other state institutions such as the Bank of Tanzania (BoT) and Tanzania Communications Regulation Authority (TCRA) with a view to setting up an integrated automated system.

“We will conduct a feasibility study to see how much can be collected without over-taxing or under-taxing the relevant taxpayers,” Mr Mabula said.

He added that the digital business is a new sector that is constantly evolving.

However, the current scope of what TRA can actually do, as guided by the Finance Act, involves only the Business to Consumer mode.

“But now we want to improve the Finance Act and include the Business to Business mode,” Mr Mabula said.

The Finance Act, 2023 was designed for both non-residents and residents, but it is more challenging to register resident entities despite the law requiring TRA to do so.

Explaining, he said TRA has not been able to identify a big number of resident entities which conduct online businesses. It has also not yet been established how much such businesses earn because most of them “hide their businesses”.

 However, TRA is aware that there is a “huge” number of resident entities doing online business.

“To bridge the gap, identify high numbers of residents, conducting online business, TRA has been making a close monitoring to identify residents in various regions. As a start, we have identified regions, we are closely monitoring various business strategic regions from there we will go countrywide,” Mr Mabula said.

TRA senior economist Ezekiel Swema asked the relevant entities to comply with the regulation and register their digital businesses so that they can be given Tax Identification Numbers.

“What we want is fairness and that is why we need people to understand. We cannot run away from technology and we need people to comply. We are going to offer full support to those who are willing to register their businesses, but those who are reluctant to comply must know there are legal implications,” he said.