VALUE ADDED TAX

BAF III – BAF 306 Public Finance & Taxation II (Nov, 2023)
4.0 VAT payable or refundable
 Input tax and input tax credit
(partial and full),
 Timing of input tax credit,
 calculation and payment of net
VAT payable/refundable,
 value added tax return
Procedures For Calculating And Payment Of Net
Amount (VAT Payable Or Refundable)
• VAT on a taxable supply of goods or services shall be payable
by a taxable person at the end each calendar month and
submitted 20 days after end of calendar month to TRA shall
be determined as follows:
Output VAT XXX
Less: Deductible Input Tax (XX)
VAT Payable XXX
• The Output VAT is the VAT charged on taxable supplies
(sales). Not to be related to exempt supplies.
• The Deductible Input VAT involves VAT incurred on both
purchases and importation of goods or services as well as
on business expenses and capital goods.
 Value Added Tax Return
 Value Added Tax Return as per VAT Act S.66(1) A
taxable person shall lodge a value added tax return in
the form and manner prescribed by the Minister on the
20th day of a month after the end of the tax period to
which it relates, whether or not that person has a net
amount of value added tax payable for that period.
 VAT Act S.66(7) For purposes of subsection (1), where the
20th day falls on a Saturday, Sunday or a public
holiday, the value added tax return shall be lodged on
the first working day following a Saturday, Sunday or
public holiday.
Note: Read the whole S.66
 Calculation And Payment Of Net VAT
 Calculation and payment of net amount as per VAT Act
S.67(1) The net amount of value added tax payable by a
taxable person in relation to a tax period shall be calculated by-
a) adding all output tax that becomes payable by the person in
that tax period;
b) subtracting all input tax credits allowed in that tax period;
and
c) adjusting the resulting amount by-
i. adding all increasing adjustments required to be made in
that tax period; and
ii. subtracting all decreasing adjustments allowed in that
tax period.
Note: Read the whole S.67
 Credit For Input Tax
The “input tax” is claimed by deducting it from the “output tax”
in the VAT return.
The general rules for input tax deduction is that:
a) All input tax directly attributable to taxable supplies is
allowed (except on non creditable purchases)
b) Input tax directly attributable to exempt supplies is not
allowed
c) Where the input tax that is not directly attributable to
either taxable or exempt supplies, an apportionment
must be done for each tax period, to determine the
allowable amount of that input tax.
 Credit For Input Tax
Credit For Input Tax as per VAT Act S. 68(1) A taxable person
shall be allowed a credit for an amount of input tax incurred by
the person if-
a) the goods, services, or immovable property on which the
input tax was incurred were acquired or imported into
Mainland Tanzania by the person in the course of the person’s
economic activity and for the purpose of making taxable
supplies;
b) in the case of a supply, the person paid, or is liable to pay,
the consideration for the supply; and
c) in the case of an import, the person paid, or is liable to pay,
the value added tax imposed on the import under this Act
or input tax paid under the value added tax law applicable in
Tanzania Zanzibar, where the respective goods are transferred
to Mainland Tanzania.
 Credit For Input Tax
Credit For Input Tax for Imported Service as per VAT Act
S. 68(2) states, The value added tax payable by the
purchaser of a taxable supply of imported services shall
be output tax and input tax of that person, and the
purchaser shall not be allowed an input tax credit for that
supply unless he has accounted for the output tax in the same
value added tax return in which the input tax credit is claimed.
 Credit For Input Tax
Credit For Input Tax for Imported Service as per VAT Act S. 68(3)
states, A taxable person shall not be allowed an input tax credit for-
a) an acquisition of goods, services, or immovable property, to the
extent that it is used to provide entertainment, unless the
person’s economic activity involves providing entertainment in
the ordinary course of the person’s economic activity;
b) an acquisition of a membership or right of entry for any person
in a club, association, or society of a sporting, social, or recreational
nature;
c) an acquisition or import of a passenger vehicle, or of spare
parts or repair and maintenance services for a passenger
vehicle, unless the person’s economic activity involves dealing
in, hiring out, or providing transport services in passenger
vehicles and the vehicle was acquired for that purpose
Note: Read the whole S.68
 Partial Input Tax Credit
Partial input tax credit as per VAT Act S.70 (2) states, The amount of the
credit allowed for input tax to which this section relates shall be calculated
according to the
following formula: [ I x (T/A)], Where as
 I: is the total amount of input tax to which this subsection relates and for
which a credit is sought in the tax period;
 T: is the value of all the taxable supplies made by the taxable person
during the tax period; and
 A: is the value of all the supplies made by the taxable person during the
tax period.
Further, section 70 states that :-
i. If the ratio of T/A is greater than 0.90 (90%), the taxpayer may claim all
input tax incurred for the period.
ii. If the ratio of T/A is less than 0.10 (10%) the taxpayer shall not be allowed
to claim all input tax incurred for the period
Note: Read the whole S.70
 Timing Of Input Tax Credits
Timing of input tax credits as per VAT Act S. 69 states,
1. Where a taxable person is allowed an input tax credit, the tax
period in which the credit may be included in the calculations
pursuant to section 70 shall be the latter of:
a) the tax period in which the value added tax became
payable under this Act on the supply or import to which the
input tax relates; or
b) if the person did not claim the input tax credit in that period,
any one of the six succeeding tax periods
2. The input tax shall not be deducted or credited after a
period of six months from the date of tax invoice, fiscal
receipt or other evidence referred under subsection
Example
Kilimani Ltd is a cooking oil processing company located in Ushirika, Kilimanjaro
region, and is registered for value added tax (VAT). Kilimani Ltd entered into the
following transactions in the month of Sept 2023:
1. Sold taxable supplies to customers as follows: Sales to VAT registered
customers Tshs 11,800,000 (VAT inclusive) and Tshs 1,000,000 to
unregistered customers.
2. Bought a brand new Car from Toyota at Tshs 5,000,000.
3. Bought stationery worth Tshs 500,000 from suppliers.
4. Bought Groundnutsat a cost of Tshs 10,500,000.
5. Paid for electricity and telephone at Tshs 100,000 and Tshs 50,000,
respectively.
6. A consultant on production processes was hired from South Africa. The
consultant has no local office; as a result he is not registered for VAT. He
invoiced Tshs 1,000,000 for the work done
Unless specifically stated, all the above persons are registered for VAT and the
transactions are stated exclusive of VAT.
Required: Calculate the VAT payable or any excess carried forward for the
period
 Example
The following are transactions of Mr. Jacob (a taxable trader) during the month of Oct
2023. Assume, where relevant, the figures are inclusive of VAT.
(i) Received rent from a rented house TZS.2,375,000, where he runs a renting
business. (ii) Received commission from a taxable trader TZS.1,850,000 (iii)
Consultation fee received from a taxable trader TZS.1,870,000 (iv) Cash sales of
packing material for wheat flour TZS.2,100,000 (v) Sales of canned soya beans
TZS.1,250,000 (vi) Sold wheat flour TZS.3,000,000 (vii) Sold canned milk
TZS.810,000 (viii) Sold oil cake from soya beans TZS.1,890,000 (ix) Sold rice
bran TZS.1,650,000 (x) Received insurance claim settlement in respect of a car
which got accident last month TZS.3,200,000
Expenditures were as follows:
(i) Paid for office utilities TZS.2,158,000 (ii) Paid salaries to his employees
TZS.4,100,000 (iii) Purchased packing material for wheat flour TZS.2,630,000 (iv)
Purchased wheat flour TZS.3,500,000 (v) Purchased water packing containers
(jerry cans) TZS.980,000 (vi) Purchased rice bran TZS.3,000,000 (vii) Purchased
bitumen TZS.2,670,000 (viii) Purchased office chairs TZS.1,170,000
REQUIRED: Compute VAT to be paid to TRA and state the due date for that
 Example
AZIMIO Shopping Centre Ltd is the Value Added Tax (VAT) registered trader carried on the
business of shop on cash/credit basis. The company’s Income Statement for the month of
November 2023 is as follows:
Note that: All figures under Income Statement are VAT exclusive TZS. TZS.
Taxable goods 168,000,000
Exempted goods 30,000,000
198,000,000
Opening stock 300,000,000
Purchase for cash and credit
General goods 120,000,000
Printed Books 20,000,000
440,000,000
Closing stock 280,000,000 160,000,000
Gross profit 38,000,000
Expenditure
Advertising 2,000,000
Rent of premise 5,000,000
Storage Taxable goods 18,000,000
Other expenses (subject to V.A.T) 6,000,000 31,000,000
Profit for the month 7,000,000
REQUIRED:
According to VAT Act, Cap.148, compute output tax and deductible input taxes for
the month of November 2023 for AZIMIO Shopping Centre Ltd.
 Example
In the year 2023, a business entity encountered a significant problem with their Value
Added Tax (VAT) returns due to the departure of their company accountant. The
accountant cited a poor working environment as the reason for leaving, leading to a
failure in filing VAT returns for six months from June to November. During this time,
the company had various sales transactions and issued sales invoices, but the VAT
returns were not filed as required by the tax authorities until 1st December 2023 when
all was submitted and tax paid.The sales and purchases (all standard rated) for the
months were as follows:
Months/Period Sales (TZS.) Purchases (TZS.)
June 1,479,063,209.00 1,083,250,567.20
July 1,261,667,414.00 1,387,834,155.40
August 1,059,121,360.00 847,297,088.00
September 4,250,512,593.00 3,400,410,074.40
October 1,925,787,391.00 1,540,629,912.80
November 237,331,999.00 189,865,599.20
REQUIRED:
Calculate VAT amount payable in respect of each month. All figures are VAT inclusive
THANYOU
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