On April 27, 2018,Government has published new Income Tax (Transfer Pricing) Regulations of 2018. The regulations have issued on November 2018, which replaces the Income Tax(Transfer Pricing) Regulations 2014. This provides extra requirements regarding transfer pricing methods, documentation obligation, documentation format, intra-group services, and comparability analysis. Some changes are described below:

Transfer Pricing Methods

Under Income Tax(Transfer Pricing) Regulations of 2018, any other method as prescribed by the commissioner is permitted in where Transactional net margin method (TNMM) and Profit split method cannot be reasonably applied.

Documentation

In accordance with new regulation, taxpayers with related party transactions exceeds TZS10 billion (i.e., approximately US$4.3 million) in a taxable year need to submit transfer pricing documentation along with the tax return. Transactions between related entities that do not exceed TZS 10 billion in a period are exempt from the documentation obligations. The transfer pricing documentation should be filed to the Revenue Authority (TRA) within 30 days upon commissioner’s request.

Comparability

This new Regulations list the factors that should be considered when determining whether transactions are comparable.

Intra-group services

The Regulations cover requirements regarding the acceptability of allocation keys used when non-directly allocable services are performed for various related parties. This is relevant for some specific service like, number of computers for IT, number of cars for vehicle fleet management, number of employees for HR.

Penalty for non-compliance 

New currency point system is announced to determine the penalty for taxpayers that fail to comply with the transfer pricing regulations.