THE government has instructed all banks and financial institutions in the country to stop charging their customers 18 per cent Value Added Tax (VAT) on fee based financial services imposed by the VAT Tax Act of 2014 amended recently.
Tanzania Revenue Authority (TRA)
Commissioner General, Mr Alphayo Kidata, said the implication of the
amendment was to impose the 18 per cent VAT on all fees raised by the
bank or any financial institution on services offered by the same.
“There is circulating information on the
social media that customer deposits will also be charged VAT at 18 per
cent resulting from these amendments. I want the public to understand
that this is incorrect as VAT is only levied on charges received by the
bank or financial institution after rendering services to their
customers,” Mr Kidata told a news conference in Dar es Salaam yesterday.
He added that all the banks and
financial institutions involved in circulating the misleading
information are urged to correct their notification to the public
immediately.” Mr Kidata further said: If we assume the fees on a
financial service was 1,000/-, VAT thereon would be 152.50/- and the
bank will remain with 847.50/-.
The VAT amount of 152.50 will be
collected by the bank or financial institution supplying the service and
shall follow normal rules of VAT accounting as per Act.
Furthermore, he said they have been
informed that one of the banks operating in the country has instructed
its customers to pay the expected VAT in cash over the counter if the
customer does not have an account with the bank and the respective
transaction did not pass through it.
“TRA insists that VAT shall be charged
and collected in a normal way as fees on financial services are
currently collected,” he noted.
Expounding further, he said the
authority will shortly issue directives regarding operationalisation of
the VAT mechanism and in particular, how fiscal receipts on the above
should be issued and VAT returns submission by the industry players.
The commissioner said the banks,
financial institutions or any other persons are hereby urged to refrain
from issuing to the public misleading statements aimed at bringing
turmoil in tax compliance.
The Parliament has passed the amendments
to the VAT Tax Act of 2014 that has the effect of imposing a VAT fee
basing on financial services by deleting item 13 of the exemption
schedule to the Act.
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