Introduction

In Tanzania, VAT registration requirement is on the basis of annual or semi-annual turnover, nature of services being rendered and nature of the institution carrying out economic activity. A person with annual turnover equivalent to or exceeding TZS 100 Million or semi annual turnover equivalent to or exceeding TZS 50 Million is obliged to register for Value Added Tax (VAT).

Further, a person involved in provision of professional services in Mainland Tanzania through oneself or a member/ employee of such person and such person is licensed by requisite professional association to render such professional services, shall be obliged to register for VAT. A Government entity or institution carrying on economic activity shall also be required to register for VAT.

Conclusively, upon being eligible for VAT registration, such person shall lodge requisite application within thirty (30) days from the date of such eligibility. In the case of a non resident person eligible for VAT registration in accordance with the VAT Law, such application can be lodged by a local representative.

 

Background

A registered person will be obliged to impose, charge and pay VAT in accordance with the relevant provisions of the VAT Act. Further, supplies made by such registered person shall qualify as taxable supplies.

However, circumstances might arise prompting permanent cessation of availing taxable supplies by the registered person including but not limited to downturn in business activities leading to requisite turnover falling below the registration threshold or permanent cessation of availing professional services.

Such circumstances will render a registered person ineligible for imposing, charging and paying VAT in accordance with the relevant provisions of VAT law thus result in the need to de-register for VAT. This would also mean that the taxpayer would not be eligible to claim any input VAT suffered.

This article intends to shed light on the VAT de-registration process as elucidated below:

1. Mode of Application

Upon permanent cessation of making taxable supplies, a registered person will be required to lodge a  de-registration application through lodging a specific form (ITX246.02.E) to the TRA office where the person is registered. The form is accessible from the TRA website.

In submitting such de-registration form to the TRA office, it is imperative all relevant details are provided and these include but not limited to Value Added Tax Reference Number (VRN), physical address, directors information, nature of the economic activity performed and circumstances giving rise to de-registration.

2. Timeframe

The Applicant should logde a de-registration application to the TRA office where he/she is registered within fourteen (14) days after the date of permanent cessation of availing taxable supplies.

It is of utmost importance to ensure compliance with the timeframe requirement as failure to comply with such requirement might lead to imposition of fine ranging from 50 to 200 currency points (1 currency point equals TZS 15,000) i.e. TZS 750,000 to 3,000,000 on the basis of whether such contravention was intentional or not.

3. De-Registration Notice

Once the Commissioner General is satisfied that the Applicant is no longer required to avail taxable supplies, he will notify such applicant through a written notice of the de-registration approval.

It is vital to make physical follow ups with TRA once the application is submitted to ensure such written approval on de-registration request is availed timely and accurately. Further, if the applicant has been registered for a period of less than twelve months, the CG will only issue his approval upon being satisfied it is appropriate to do so. Until such time the de-registration process is not fully completed, the registered person will be obliged to comply and file the VAT returns.

4. Alternative De-Registration

Powers have been vested on the Commissioner General (CG) to de-register a prior registered person vide de-registration notice if satisfied such person’s registration was obtained vide provision of incorrect or misleading information, the person is not carrying on an economic activity, the person has ceased to produce taxable supplies or the person’s taxable turnover falls below the registration threshold.

One shall address the below posed questions on a regular basis before instituting requisite actions if relevant ;

  • whether or not the taxable turnover is still on par with the requisite registration threshold;
  • whether or not there is expected permanent cessation of producing taxable supplies;
  • whether or not the activity carried out by such person still qualifies as an economic activity.
  • whether or not incorrect/false/misleading information was availed to the taxman during the registration procedures; and

5. Post De-registration obligations

Certain obligations are imposed on de-registered person upon finalisation  and approval of de-registration request as depicted below:

  • such person should immediately cease to be a registered person meaning he/she should no longer avail taxable supplies for VAT purposes;
  • such person would be required to issue a fiscal receipt without charging vat or stating the VRN number;
  • such person should immediately surrender original copy of VAT registration certificate; and
  • such person should file a final VAT return and pay all outstanding VAT liabilities within thirty (30) days after the confirmation of his/her registration cancellation.

 

Conclusion

In practice, TRA will conduct a VAT audit of the applicant prior to granting the de-registration request. The rationale being to ascertain accurate declaration of sales in submitted VAT returns, accurate claim of input tax credit claim on purchases and timely and accurate remittance of VAT payable. In that regard, it is imperative to plan for regular VAT health checks for the sake of identifying potential exposures as well as amicable solutions to such exposures.