1.1 Mineral right holders and the mineral dealers to set aside gold for processing

Change:

Section 59 of the Mining Act, CAP 123, has been amended by requiring the mineral right holders and the mineral dealers to set aside gold for processing, smelting, refining and trading within the Country. Minister to set the % in regulations but should not be less than 20%.

As per the budget speech by the Minister for Finance, the provision will not apply to Mining Companies in Tanzania having a signed agreement with the Government of the United Republic of Tanzania for the objectives of carrying   out mining projects in the Country. The Government will renegotiate with Mining Companies for the purpose of considering the possibility of implementing the requirements of this provision without affecting the terms to the Agreement. Section 90A (3) of the Mining Act, CAP 123 has also been amended to exempt the supply of gold to the Bank of Tanzania (BOT) from paying inspection fee of 1 percent.

Implication:

Through the changes made in the Tanzania Mining Act, gold refineries are expected to have adequate feedstock for processing.

1.2 Royalty for gold or gemstone by deposit of the refined gold or gemstone

Changes:

One third of royalty payable to the Government for gold or gemstone shall be through deposit of the refined gold or gemstone into the National Gold and Gemstone Reserve at the Bank of Tanzania. This amendment goes parallel with making this royalty paid as a final payment. Also the Bank of Tanzania (BOT) has been recognized as the Statutory Gold Dealer.

Impact:

The measures are intended to incentivize the supply of Gold to BOT as well as reducing associated cost to enhance growth of National gold and foreign currency reserve and addressing the shortage of US Dollars for various international transactions. 

1.3 Amendment of Section 56 of the Income Tax Act

Change:

The Income Tax Act has been amended to exclude applicability of Section 56 on allotment of shares in a resident entity. There is no exclusion for non-resident entity,

Implications: This amendment limits the exemption included in the Finance Act 2023 i.e. section 56 not applicable where changes in underlying ownership emanates from issue of shares by a company to resident companies only.  This change will affect MNEs raising capital through issue of shares in international stock markets as the change in control rules will apply hence exposure to capital gains tax under section 90 of the Income Tax Act.

1.4 A requirement to have Electronic Fiscal Receipts (EFDs) receipts to support Expenditure Deduction

Change:

Section 11 of the Income Tax Act, Cap 332 has been amended by adding a requirement to use electronic fiscal receipts to authenticate purchases made in a particular year of income. The measure will exclude sellers of goods or suppliers of services who are foreign citizens with no permanent establishment in Tanzania or any person who is not required to issue electronic receipts as per section 36(2) of TAA.

The government objective is to emphasize the issuing of electronic fiscal receipts and protect government revenue.

Implication:

Financial Institutions will need to ensure purchases are supported by EFDs and a robust record keeping system is in place. However, disputes could arise with the tax authority when only electronic fiscal receipts are recognised. These could arise from expenses recognised through accrual accounting, those whose suppliers cannot issue receipts, quality of receipts etc. Taxpayers can apply for private or class rulings for TRA to provide clarity on the challenges. TRA can also consider issuance of a practice note to provide more guidance to taxpayers.

1.5 Illegal to transact in other currencies

Change:

Section 26 of the Bank of Tanzania Act has been amended to make transactions using any other currencies other than the legal tender issued by the Bank, illegal except as prescribed by the Minister in the regulations.

Implication:

This implies that all transactions within Tanzania must be done in Tanzania shillings. The regulations will provide more guidance.