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Taxation of Ngo and Npo in Tanzania and Zanzibar

NGOs and NPOs in Tanzania and Zanzibar may qualify for certain tax exemptions if they obtain status as a "charitable" or "religious" organization. To qualify, the organization must apply to the tax authority and prove that it operates solely to relieve poverty, advance education, or support public health/infrastructure. Those that qualify receive income tax exemptions on income used for charitable activities or 25% of income from charitable businesses. Individuals may also deduct donations to these organizations from their own taxable income. Both regions provide customs duty and VAT exemptions on some imports by NGOs for humanitarian purposes.

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0% found this document useful (0 votes)
261 views3 pages

Taxation of Ngo and Npo in Tanzania and Zanzibar

NGOs and NPOs in Tanzania and Zanzibar may qualify for certain tax exemptions if they obtain status as a "charitable" or "religious" organization. To qualify, the organization must apply to the tax authority and prove that it operates solely to relieve poverty, advance education, or support public health/infrastructure. Those that qualify receive income tax exemptions on income used for charitable activities or 25% of income from charitable businesses. Individuals may also deduct donations to these organizations from their own taxable income. Both regions provide customs duty and VAT exemptions on some imports by NGOs for humanitarian purposes.

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Praygod Manase
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TAXATION OF NGO AND NPO IN TANZANIA AND ZANZIBAR

TAXATION OF NGO AND NPO IN TANZANIA AND ZANZIBAR

One of the questions that is often asked on taxation is whether Non-Governmental


Organisations (NGOs) are subject to taxation. This is because most people believe that since
most NGOs are not for profit-making, they are not taxed.

A. Tax Exemptions

In both Mainland Tanzania and Zanzibar, all forms of NPOs (e.g., NGOs in mainland
Tanzania, and societies and companies limited by guarantee in Zanzibar) may enjoy a partial
income tax exemption by obtaining “charitable” or “religious” organization status. An NPO
must submit an application to the Commissioner-General of the Tanzania Revenue Authority
to be recognized as a “charitable” or “religious” organization. To be considered a
“charitable” organization, an NPO must be established and function solely as an
organization for (i) the relief of poverty or distress of the public; (ii) the advancement of
education; or (iii) the provision of general public health, education, water or road
construction or maintenance (The Income Tax Act, 2019 Section 64(8)(a)).

“Charitable” or “religious” organizations are granted a tax exemption for the following types
of income:

All income that is applied towards the organization’s activities that relieve poverty or
distress of the public, advance education, or provide for public health, education, water, or
road construction or maintenance, where these activities provide reasonable benefits to
residents in the United Republic of Tanzania; and
Twenty-five percent of the organization’s income is from its charitable business (The Income
Tax Act, 2019 Section 64).
Any income that a “charitable” or “religious” organization receives that is not put towards
its activities during the year will be treated as taxable income.

B. Deductibility of Donations

In both Mainland Tanzania and Zanzibar, gifts to “charitable” or “religious” organizations


may be deducted from an individual’s or entity’s income for the purposes of calculating
taxable income (The Income Tax Act, 2019 Section 16(1)(a)). The deduction to the income
tax shall not exceed two percent of the income, as calculated under Sections 7 through 9 of
the Income Tax Act. Individuals and entities may also claim deductions from the income tax
for contributions made to the AIDS Trust Fund and other Tanzanian Government initiatives
to fight against COVID-19 (The Finance Act of 2020 Section 31). This deduction does not
apply to donations to private sector or NGO efforts to combat AIDS or COVID-19.

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TAXATION OF NGO AND NPO IN TANZANIA AND ZANZIBAR

Customs Duties, Excise Duties, and Value-Added Tax

MAINLAND TANZANIA

Goods imported into Tanzania by an NGO that are intended to be used solely by the NPO for
certain humanitarian and development purposes can be exempted from customs duties (see
The Customs Tariff Act, 1968 Third Schedule Rule 10). The customs duty will become due if
the exempted goods are transferred, sold, or conveyed in any way to another person not
entitled to the exemption (The Customs Tariff Act, 1968 Third Schedule Rule 10(3)).

To claim an exemption from the customs duty, an NGO must send an application to the
Tanzania Revenue Authority with the following attachments:

Letter from the head of the organization applying for duty and tax remission or on
his/her absence the person acting on behalf substantiating the ownership of the goods;
Copy of the registration certificate(s) of the applying organization;
Letter from the District Commissioner substantiating the existence of the project in
the respective District;
Letter from the Ward Executive Officer substantiating the existence of the project in
the respective Ward;
Organization’s annual procurement plan;
Organizations utilization report accounting for the remission granted during the
previous year;
Copies of Bill of Lading/Air waybill/Road Consignment Note, Invoice, Packing List, List
of beneficiaries, and donation certificate in case of donation; and
Any other relevant information to support the application.
The value-added tax (VAT) rate is 18 percent. The threshold for VAT registration is
TZS 100 million (approximately USD 43,000) (The VAT Act, 2014 Section 28 and the
VAT (General) Regulations, 2015 Regulation 14). Foreign grants are not subject to
VAT, nor are NGOs’ imports for certain humanitarian and disaster relief (The VAT Act,
2014 Exemption Schedule Part II).

ZANZIBAR

Certain goods and services, including those imported by international organizations or aid
agencies, are exempt from the excise duty (The Excise Duty Act Third Schedule). Imports by
societies and companies limited by guarantee are not included in this list of exemptions
from Zanzibar’s excise duty. The Excise Duty Act does not lay out a procedure to claim the
exemption, but in practice, the Zanzibar Revenue Board adopts the same procedure as the
Mainland has in place for claiming customs duty exemptions, noted above.

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TAXATION OF NGO AND NPO IN TANZANIA AND ZANZIBAR

The VAT rate is 15 percent. The threshold for VAT registration is a taxable turnover of over
TZS 50 million (approximately USD 21,500). Foreign grants are not subject to VAT or
similar taxes. As in Mainland Tanzania, the importation of certain goods and services are
exempt from the VAT, such as those that provide relief from natural calamities and disasters
or contribute to government-approved projects on health, education, water supply, and
infrastructure (The Value Added Tax Act, No. 4 of 1998 Third Schedule).

www.abcattorneys.co.tz |+255 688 609 931 | [email protected]. | 3

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