The upgraded electronic system effectively became operational on 1 March 2022, to this effect all VAT registered persons whose VAT returns are due for submission by 20 April 2022 will be required to submit their VAT returns through the upgraded system.
Benefits of the Upgraded System
- A taxpayer is capable of using the same e-filing account to file other tax returns like Pay As You Earn (PAYE), Skills and Development Levy (SDL) and income tax returns.
- A taxpayer will only be required to provide the Verification Code for the purchase made contrary to the previous system which required the taxpayer to provide more details like Supplier’s Name, Tax Identification Number (“TIN”), VAT Registration Number (“VRN), Tax Invoice, amounts of purchase etc.
- It allows taxpayers to effect adjustments resulting from occurrence of adjusting events as provided in the tax law. The previous practice required a taxpayer to write a letter to the Commissioner to notify occurrence of the adjusting events.
- It enables automatic apportionment of input tax for eligible taxpayers.
- It Issues an acknowledgment of receipt of the return submitted and an assessment of taxpayer immediately upon accomplishment of filing process.
- It enhances voluntary compliance for taxpayers to submit VAT returns given its simplicity.
Issues to be Observed Before Starting to Use the Upgraded System
- All traders with a Negative Net Amount (Repayment Position) for the return of the month of February 2022 are required to apply for a VAT refund (for those eligible) or notify the respective TRA offices of their positions for Audit or verification of that position before the same is allowed to be carried forward to the tax returns that to be submitted by 20 April 2022.
- In addition, all traders should upgrade their EFD machines to Protocol 2.1 to issue receipts and invoices with verification codes. Receipts issued by EFD machines not upgraded to protocol 2.1 shall not be allowed to claim input tax. The receipt verification code (QR CODE) will be directly linked to the TRA system and in case incorrect details are filed, or the receipt is claimed twice in the VAT return, it will be rejected.
Issues to be Observed When Using the Upgraded System
- The system is accessed through the TRA website (www.tra.go.tz) using the same e-filing account used for other tax returns like Pay As You Earn (PAYE), Skills and Development Levy (SDL) and Corporate Income Tax (CIT).
- The system shall only accept EFD receipts or invoices with verification code for input tax claim. Receipts without verification code shall automatically be rejected effective from the return of the month of March 2022.
- The system shall only accept tax claims on imports that are supported by valid Tanzania Single Administrative Document (TANSAD).
- The system shall automatically make verification of validity of receipts/invoices or TANSAD. Therefore, taxpayers will easily be aware of verified receipts/invoices or TANSAD since the system will comprise such information.
- The system shall not automatically carry forward the Negative Net Amount (Repayment position) for February 2022 VAT return unless the repayment amount is verified by TRA and subsequently allowed to be accounted for in March 2022 VAT return in the new system.
- Traders should avoid using invalid receipts/invoices or TANSAD to avoid any consequences and inconveniences that may arise during and after filing process.
- In making VAT payments, taxpayers must use the Tax Debit Numbers from the tax assessments issued by the upgraded system obtained from a taxpayer’s respective account.
While the upgraded system is expected to increase taxpayers’ efficiency in filing VAT returns, there may be emerging issues relating to its implementation that may require further clarification from the TRA to ensure seamless operation. We expect that further guidance will be provided on an ongoing basis on these issues in the coming days.
We will keep you updated and informed on these issues in the coming days.
Should you have any questions regarding the information in this legal alert, please do not hesitate to contact Geofrey Dimoso or Daniel Ngumy.