The Minister for Finance and Planning (MoFP) on 8 June 2017, issued to the National Assembly the estimates of government revenue and expenditure for 2017. The government plans to organise and spend TZS 31,712.0 billion in the 2017/18 budget.
The Budget reflects priorities to speed up economic growth to achieve middle income status, keep back revenue leakage and resource wastage, develop infrastructure, and reform government bureaucracy to boost service delivery. The Budget Bill 2017 has been published, pending tabling before the National Assembly for debate and approval. It is assumed that this Bill will be enacted into law later in the year. It will be effective from 1st of July 2017 as specified in the Bill. The overview of tax proposals contained in Budget 2017 are given below:
- A 5% withholding tax (WHT) on payment made for specified minerals (minerals that a licenced dealer is authorized to deal with) or minerals supplied by a resident person.
- A reduction of the corporate income tax rate (from 30 per cent to 10 per cent) applicable for new plants to assemble vehicles, tractors and fishing boats or outboard engines for those who have a performance agreement with the Government for the first five years from commencement of operations.
- The bill provides for a rise in the threshold from TZS 15 million to TZS 30 million to apply for tax relief on non-commercial motor vehicles.
- A zero VAT rate is proposed for ancillary transport services in relation to goods in transit in Tanzania. This will reduce costs of transporting goods through Tanzania and will ultimately make Tanzanian ports more competitive.
- An extension of time to submit VAT returns to the first working day following a weekend or public holiday when the due date falls on a Saturday, Sunday or a public holiday.
- Tax exemption is proposed on machinery and plant used in textile, edible oil, leather and pharmaceutical (including veterinary) industries. It is geared towards promoting investments in small and medium scale industries.
- The Bill also includes some amendments to the Excise (Management and Tariff) Act. A 5% excise duty increase is proposed on specific non-petroleum products, including alcohol, soft drinks and tobacco (except locally produced water, fruit juices and spirits).
- A decrease of excise duty is proposed on locally produced fruit juices and wines.
- An increase in excise duty on petrol, diesel and kerosene by TZS 40 per litre.
- The Minister has proposed an increase of TZS 40 per litre in the excise duty on fuel.
- An increase of 5% or 3,481 per litre in excise duty is proposed for imported spirits.
The South African Revenue Service issued guidance on the value added tax (VAT) treatment of fees paid to non-executive directors. On 10 February 2017, SARS issued binding general ruling (BGR) 41 which confirms that a non-executive director (NED) who carries on an enterprise in or partly in South Africa is required to register and charge VAT in respect of any director’s fees earned for services rendered as an NED if the value of such fees exceeds R1 million in any consecutive 12-month period.
A NED is required to register and charge VAT on fees with effect from 1 June 2017. In addition, a NED may also choose to register for VAT on a voluntary basis where the fees earned are a minimum of R50 000 in a 12-month period. SARS has been receiving several operational queries regarding the VAT registration process and in particular, practical considerations for non-resident NEDs.
The Swiss Federal Department of Finance announced that during its meeting on 2 June 2017, it decided that the partial revision of the Value Added Tax Act adopted by the Parliament will come into force on 1st January 2018.
Under the new regime, to become VAT liable, worldwide turnover ought to be considered rather than recently Swiss turnover. Consequently, organizations whose worldwide turnover is no less than 100,000 CHF will be obligated to VAT from the principal franc of turnover in Switzerland. Previously, foreign companies could provide their services in Switzerland without VAT up to a turnover level of CHF 100,000.
The Federal Council will delay the execution of the reconsidered framework until January 1, 2019, for mail-arrange organizations, on the grounds that Swiss Posts needs more opportunity to actualize the specialized arrangements of the new law.
Accordance with this regime, the clients will no longer need to pay the taxes and fees imposed by customs upon importation, however it will be an obligation of the mail-order companies to bill clients for VAT if the mail-order annual turnover from small consignments is at least CHF 100,000.
On 1 June 2017, the Finance Minister Mr. Abul Maal Abdul Muhith presented the annual national budget of an outlay of TK 4 trillion for the fiscal year 2017-18. In the proposed budget, the finance minister has targeted a GDP growth rate of 7.4 per cent.
“GDP growth rate will be 7.4 percent in FY 2017-18 and inflation will come down to 5.5 percent by the end of the fiscal year,” Muhith told the parliament.
The government’s move to keep tax-free income threshold and the tax rates on individuals and firms unchanged in the next fiscal year is likely to affect many low and middle income people who would be new to income taxes.
Personal Income Tax
Minimum tax for Dhaka and Chittagong City Corporation is TK 5000; other City Corporation is 4000 and other areas TK 3000. Tax free income limit for women and more than 65 years citizen is TK 300,000, challenged persons TK 400,000 and wounded freedom fighters TK 425,000.
|Up to TK 250,000||No Tax|
|TK 250,001-TK 650,000||10%|
|TK 650,001- TK 1,150,000||15%|
|TK 1,150,001- TK 1,750,000||20%|
|TK 1,750,001- TK 4,750,000||25%|
|TK 4,750,001- Above||30%|
Readymade Garments: Readymade garments sector is playing a vital role in the economic development and employment generation in Bangladesh. Considering the contribution of this sector in the economic growth and employment generation government has been providing various incentives and tax benefits as withholding tax rate on readymade garments export is currently 0.70 percent and enjoying reduced corporate tax rate of 20%. According to current proposal this sector may enjoy further reduced corporate tax rate to 15% from 20%.
Tax benefit for green factory: In line with environment issues, government proposed to reduce the tax rate of a readymade garments company to 14 percent if the factory of such company has an internationally recognized green building certification.
Core Infrastructure: In order to attract investment in infrastructure, government proposed conditional tax exemption for infrastructure sector such as tolled national highways, expressways, flyovers, elevated and at-grade expressways, subway constructed under public-private partnership (PPP).
Other proposals: For facilitating growth and business and for ease of doing business government proposed to allow a branch office, liaison office or a subsidiary office (including a subsidiary thereof) of a foreign parent company to maintain an income year uniform to its parent company; grant tax exemption to alternative investment fund; and expand the tax exemption list of information and communication technology sector.
Surcharge: Government proposed to maintain minimum surcharge of Taka 3000 if the net wealth exceeds Taka 2 crore and 25 lakh and also proposed to impose a surcharge of 2.5 percent on the income from the business of producing cigarette, bidi, zarda, gul and other tobacco items.
The proposed tax rate for company taxpayers has been presented in the following table:
|Non listed Companies||35%|
|Listed Banks, Insurance and NBFIs||40%|
|Non listed Banks, Insurance and NBFIs||42.5%|
|Listed Mobile phone operators||40%|
|Non listed Mobile phone operators||45%|
Value Added Tax (VAT)
Effective Implementation of VAT Act: The revenue department is fully prepared to implement the Value Added Tax and Supplementary Duty Act, 2012 from 1st of July, 2017. Previously the implementation of this new Act was deferred twice for providing adequate time to the business community to prepare and acquaint themselves with the accounting and record keeping procedures under this new VAT Act.
VAT rate: Finance minister turned down business people’s demand for dropping the Value Added Tax (VAT) rate and declared in his budget speech keeping a single and uniform 15% VAT rate for the next 3 years.
Turnover Tax Exemption Threshold: Government proposed to raise the VAT free annual turnover ceiling from Tk 30 Lakh to Tk 36 Lakh. The firms with this annual turnover will be completely out of the scope of tax. This kind of benefit was not there in the 1991 VAT Act.
In addition, Government proposed to raise threshold for registration under VAT from Tk 80 Lakh to 1 crore 50 Lakh. In other words, businesses having a total yearly turnover up to Tk 1 crore 50 Lakh will be able to avail the opportunity to pay only 4% tax on their turnover.
VAT Exemption: Government proposed to provide VAT exemptions on 536 primary food items such as rice, lentils, fish, meat, vegetables, sugar, honey, puffed rice, maize, wheat, liquid milk, barley, salt etc. same as before. In addition, VAT exemptions are available to 93 items of life saving drugs. Public transport services, public health and medical services, education and training services will also enjoy VAT exemption. Government also proposed VAT exemption for 404 items of the agriculture; livestock and fisheries sector same as before. Furthermore, non commercial activities of charitable and cultural organizations will also enjoy VAT exemption facility.
Other Indirect Tax
Excise duty on Airline Tickets: Revision of existing excise duty on airline tickets as follows except for domestic travels and travel to the SAARC countries which is proposed to keep the same as present:
- Taka 2,000 Excise Duty on airline tickets instead of existing Taka 1,000 for travel to any Asian countries except the SAARC countries;
- Taka 3,000 Excise duty on airline tickets instead of existing Taka 1,500 for travel to Europe, USA and other countries of the world;
- In order to avoid any inconvenience of travelers, this Excise Duty will be collected at the time of purchasing air tickets.
Excise Duty on Bank Account: Government proposed to impose Taka 800 Excise Duty instead of existing Taka 500 in cases where the balance, whether debit or credit exceeds Taka 1 Lakh but does not exceed the limit of Taka 10 Lakh at any point of time during a year. Similarly, Taka 2,500 will be imposed instead of existing Taka 1,500 in cases where the balance exceeds Taka 10 Lakh but does not exceed the limit of Taka 1 crore; Taka 12,000 will be imposed instead of existing Taka 7,500 in cases where the balance exceeds Taka 1 crore but does not exceed the limit of Taka 5 crore and Taka 25,000 will be imposed instead of existing Taka 15,000 in cases where the balance exceeds Taka 5 crore.
Duty and Tax on Cigarette and Bidi: Considering the present scenario, Government proposed to fix the price of the low segment for every 10 sticks of local brand cigarette at Tk. 27 from existing Tk. 23 and increase the Supplementary Duty rate to 52% from existing 50%. At the same time, fix the price of the low segment for every 10 sticks of international brand cigarette at Tk. 35 and the Supplementary Duty rate at 55%.
The existing Supplementary Duty rate for non-filter bidi and filter bidi will remain unchanged at 30% and 35% respectively. These rates will be effective from 1 June 2017.
Currently there is only 10 percent duty applicable on e-cigarette and on its refill pack. For this reason, Government proposed to introduce two separate H.S. Codes for these two items and impose 25% customs duty for both the items along with impose 100% Supplementary Duty on these two items.
Supplementary Duty on fast food: The Government had committed to impose additional taxes on fast food also known as “junk food” considering the health risk. For this reason, Government proposed to impose 10% Supplementary Duty at local supply stage on fast food in addition to applicable 15% VAT.
Non-resident businesses supplying services and digital products to Australian consumers and who meet the turnover threshold of A$75,000 will need to register for Australian GST by 1 July 2017.
There are two ways non-resident businesses can register for GST:
- Using the simplified online GST registration system from 26 June 2017;
- Using the standard system. An Australian business number (ABN) is required and it can take up to 28 days to process the GST registration.
Singapore: IRAS launches public consultation on draft GST guide on customer accounting for prescribed goods
The Inland Revenue Authority of Singapore (IRAS) is engaging in a public consultation on the draft Goods and Services Tax (GST) Guide on Customer Accounting for Prescribed Goods.
According to the existing GST rules, a GST-registered supplier will generally charge GST (output tax) on its local sale of goods, unless the goods are exempt. The GST-registered customer will then be able to claim the GST, which is paid as a pre-tax credit on local purchases and/or imports, subject to meeting the conditions for making the input tax claim.
Under the Draft Guide, from 1 January 2018, customer accounting will be implemented to better address non-compliance relating to transactions involving the prescribed goods (i.e., mobile phones, memory cards and off-the-shelf software). The responsibility for accounting for output tax on the sales of the prescribed goods will shift from the GST-registered supplier to the GST-registered customer. The supplier needs to issue a customer accounting tax invoice to the customer, indicating that the customer has to account for the output tax.
A GST-registered supplier will have to apply customer accounting on a local sale of the prescribed goods made to a GST-registered customer if the GST-exclusive value of the sale exceeds $5,000.
Comments are invited on the Draft Guide before the deadline of 2 June 2017. Electronic submission is encouraged. The comments are to be sent to the Goods and Services Tax Division on the IRAS. The IRAS will provide a summary of responses to the feedback received on the draft guide by 31 August 2017.
The Parliament has adopted a draft bill on 11th of April 2017, which contains some amendments on income tax code and VAT code. The Corporate Income Tax payment needs to be completed by six installments instead of eight. Note that, the first installment needs to be paid on the last working day of the month following the filing deadline and the rest of five installments must be paid by the last working day of the following five months. The first payment shouldn’t be paid during filing of the corporate tax return. Again, the individual income tax return has to be submitted by 30 June. The timeline has also been fixed on 12th of May 2017 for the farmers under the special farmers’ VAT regime who have to change to the standard VAT regime. So, late filing penalties will be cancelled or refunded to taxpayers. The provision applicable for 2016 regarding proportionate payment of road tax for vehicles has been extended to 2017. All these new provisions will effect from the 2016 financial year.