Individuals are categorized in two groups, small individual traders who are not required to maintain audited accounts and the medium individual traders who are required to maintain audited accounts. Small traders are taxed by presumptive tax system, whereas medium are taxed based on the annual profit determined from the audited accounts.
a) Presumptive tax system
This is a tax system where individuals are taxed based on their annual turnover. The Taxpayers under this system are not obligated to prepare and submit audited accounts to the TRA. However, he may opt not to apply the system and prepare audited accounts and pay tax based on profits.
Conditions which qualify to be in Presumptive tax system.
Rates of tax under presumptive tax System.
Under this system, tax payable is established based annual turnover shown by taxpayers records. In absence of complete records, annual turnover will be estimated based on the best judgment of the commissioner. The turnover bands and their tax rates are as stipulated below:
|Annual turnover||Tax payable when records are incomplete||Tax payable when records are complete|
|Where turnovers does not exceed Tshs 4,000,000||NIL||NIL|
|Where turnover exceeds Tshs 4,000,000/= but does not exceed Tshs 7,000,000||Tshs 100,000/=||3% of the turnover in excess of Tshs 4,000,000/=|
|Where turnover exceeds Tshs 7,000,000/= but does not exceeds Tshs 11,000,000/=||Tshs 250,000/=||Tshs 90,000/= plus 3% of the turnover in excess of Tshs 7,000,000/=|
|Where turnovers exceeds Tshs. 11,000,000/= but does not exceed Tshs. 14,000,000/=||Tshs 450,000/=||Tshs 230,000/=plus 3% of the turnover in excess of Tshs 11,000,000/=|
|Where turnover exceeds Tshs 14,000,000/= but does not exceed Tshs 100,000,000/=||NA||Tshs 450,000/=plus 3.5% of the turnover in excess of Tshs 14,000,000/=|
b) Individuals who prepare audited accounts.
This is a group of taxpayers whose annual turnover is above Tshs 100,000,000 and are required to prepare audited accounts/financial statements in respect of their business.
Rates of tax for individuals who prepare Audited Accounts
Taxpayers under this category are taxed basing on their profits. The rates applicable for this category are as follows:
|Annual Taxable Income||Tax Rate|
|Where Total Income does not exceed Tshs. 3,240,000/=||NILL|
|Where Total Income exceeds Tshs. 3,240,000/ but does not exceed Tshs. 6,240,000/=||9% of the amount in excess of Tshs. 3,240,000/=|
|Where Total Income exceeds Tshs. 6,240,000/= but does not exceed Tshs. 9,120,000/=||Tshs. 270,000/= plus 20% of the amount in excess of Tshs. 6,240,000/=|
|Where Total Income exceeds Tshs 9,120,000/= but does not exceed Tshs 12,000,000/=||Tshs. 846,000/= plus 25% of the amount in excess of Tshs. 9,120,000/=|
|Where Total Income exceeds Tshs. 12,000,000/=||Tshs. 1,566,000/= plus 30% of the amount in excess of Tshs. 12,000,000/=|
|Annual Taxable Income||Tax Rate|
|Where total income does not exceed Tshs 2,160,000||NIL|
|Where total income exceeds Tshs 2,160,000/= but does not exceed Tshs 4,320,000/=||9% of the amount in excess of Tshs. 2,160,000|
|Where total income exceeds TSHS 4,320,000/= but does not exceed Tshs. 6,480,000/=||TSHS. 1,94,400 plus 20% of the amount in excess of TSHS. 4,320,000|
|Where total income exceeds Tshs 6,480,000 but does not exceed Tshs 8,640,000||Tshs. 626,400 plus 25% of the amount in excess of T. 6,480,000|
|Where total income exceeds TSHS 8,640,000||Tshs. 1,166,400/= plus 30% of the amount in excess of Tshs. 8,640,000/=|
Filing of tax returns and payment of tax.
The statement of estimated tax payable.
The statement of estimated tax payable is a provisional return which a taxpayer is required to complete and file to the Commissioner within three months from the beginning of the year of income (which for individuals shall be calendar year).
The taxpayer is supposed to pay the estimated tax in a maximum of four installments each falling due after three months. The Due dates are as follows:
· On or before 31st March
· On or before 30th June
· On or before 30th September
· On or before 31st December
Filing of Final returns.
· A taxpayer must file a final tax return to TRA within six months after the end of each tax year. The taxpayer must file return in the period between 1st January and 30th June