Press Release – VAT on International Transport and Ancillary services Rendered on Transit goods

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Press Release – VAT on International Transport and Ancillary services Rendered on Transit goods

PRESS RELEASE

CLARIFICATION OF VAT ON INTERNATIONAL TRANSPORT AND ANCILLARY SERVICES RENDERED ON TRANSIT GOODS THROUGH THE UNITED REPUBLIC OF TANZANIA

All Stakeholders and Public at large are hereby informed that since the inception of VAT Act 2014 Cap. 148 in July, 2015, TRA have been conducting various meetings on different occasions with representatives from Tanzania Truck Owners Association (TATOA), Tanzania Association of Freight Forwarders (TAFFA) and Tanzania Shipping Agents Association (TASAA) to deliberate on VAT implications on transport and ancillary services rendered or supplied to goods on transit through the United Republic of Tanzania. Following these meetings, TRA would like to revert back to the Stakeholders and the Public that:

  1. VAT on Ancillary Transport Services

The VAT Act 2014, Cap. 148, (“the Act”) charges VAT at the rate of zero, supply of services involving international transport of goods. Therefore, the transportation of goods to/from outside the United Republic of Tanzania is zero rated. However, this does not apply to ancillary services rendered on transit goods. The Act defines ancillary services to mean stevedoring, lashing and securing, cargo inspection, preparation of customs documentation, container handling and storage of transported goods or goods to be transported. VAT on these ancillary services is applicable at the current rate of 18%.

TRA examined thoroughly various submissions by the above mentioned organizations aimed at indicating VAT implications on cost of services rendered on transit goods through Dar es Salaam and Mombasa ports to/from countries such as Rwanda, Burundi, Zambia and DR Congo.  TRA also took into account the organizations submissions that VAT does not apply in Kenya (Mombasa port) on similar services hence rendering Dar es Salaam port non-competitive. Using their submissions as well as their own comparative figures provided for Rwanda and the fact that under the VAT Act 2014 Cap. 148 there is no VAT on international transport services, TRA established the impact on the total cost of such services as shown in the table below:

Scenario 1: Cost of services on Transit Goods excluding VAT (“USD”)

 

Cost Item

20 FT CONTAINER 40 FT CONTAINER
DAR PORT MOMBASA PORT DAR PORT MOMBASA PORT
Delivery order fees 38.14 60.00 38.14 60.00
Cleaning fees 10.00 15.00 20.00 20.00
Stevedoring 80.00 99.00 120.00 148.00
Handling 65.00 85.00 145.00 125.00
Wharfage 105.00 30.00 140.00 45.00
Agency fees 100.00 100.00 150.00 150.00
ISPS 0.00 6.00 0.00 6.00
Transport 3,700.00 4,070.00 3,400 3,787.00
Total 4,098.14 4,465.00 4,013.14 4,341.00


 

Scenario 2: Cost of services on Transit Goods including VAT (“USD”)

 

Cost Item

20 FT CONTAINER 40 FT CONTAINER
DAR PORT MOMBASA PORT DAR PORT MOMBASA PORT
Delivery order fees 45.01 60.00 45.01 60.00
Cleaning fees 11.80 15.00 23.60 20.00
Stevedoring 94.40 99.00 141.60 148.00
Handling 76.70 85.00 171.10 125.00
Wharfage 123.90 30.00 165.20 45.00
Agency fees 118.00 100.00 177.00 150.00
ISPS 0.00 6.00 0.00 6.00
Transport 3,700.00 4,070.00 3,400.00 3,787.00
Total 4,169.81 4,465.00 3,981.91 4,341.00

 

From the above, the cost of services on 20ft container of transit goods to/from Rwanda is USD 4,169.81 in Dar es Salaam port (VAT inclusive) as against USD 4,465.00 in Mombasa port (VAT exclusive). Also, the total cost of services on 40ft container of transit goods to/from Rwanda is USD 3,981.91 in Dar es Salaam port (VAT inclusive) as against USD 4,341.00 in Mombasa port (VAT exclusive). TRA therefore, confirms that VAT on ancillary services as defined by the law is not a factor that renders Dar es Salaam port non-competitive.

 

  1. Sub-contracting of Transport services on Transit Goods

TRA noted from the discussions that transportation of transit goods, in some cases involve sub-contracting of transport services from one taxable person to another taxable person (both resident in the United Republic of Tanzania) and therefore, VAT charged from one taxable person to another taxable person is ultimately charged to the foreign customer thus affecting the total cost of the services.

 

TRA’s interpretation of the Act is that the supply of international transport services has been zero rated regardless who is a supplier. Accordingly, sub-contracting in any case does not change the substance that the services rendered is that of an international transport and hence zero rated.

In view of this, TRA hereby states the conditions/evidence which must be fulfilled/obtained in order for the transporter of transit goods to zero rate the service when performing it even if sub-contracting takes place.

  • The transporter must be in possession of road consignment note of the respective goods;
  • Copies of customs documents in relation to the goods in transit (Bill of lading, transit travel document etc.);
  • Truck Movement sheet;
  • Exit note from country of destination; and,
  • Copy of the invoice from the transporter (service provider) to the foreign customer.

Once the transporter is in possession of the above mentioned documents, the service shall be zero rated regardless of the address of service provider.

 

“Together We Build Our Nation”

  1. J. Kidata

COMMISSIONER GENERAL

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