TMU07408 – TAXATION II, BAC2

TUTORIAL QUESTIONS

1. Recite the historical background of Value Added Tax (VAT). Identify the reasons for
introducing Value Added Tax (VAT) in Tanzania.
2. Define Value Added Tax (VAT). Explore the classification of Value Added Tax (VAT),
with their relevant examples.
3. a) Clarify how Value Added Tax (VAT) operates?

b) Tabulate the pros and cons of Value Added Tax (VAT).

4. Give the meaning of the following terminologies as stipulated in the Value Added Tax
Act, 2014;
i. Supply
ii. Outside the scope supply
iii. Taxable supply
iv. Exempt supply
v. Zero-rated supply
vi. Progressive or periodic supply
vii. Taxable person
viii. Tax fraction
ix. Tax period
x. Time of supply
5. Examine the imposition and exemptions of Value Added Tax (VAT) in Tanzania as per
Value Added Tax Act, 2014.
6. Value Added Tax (VAT) is imposed on taxable imports and payable by the importer, and
in case of supply of imported services the purchaser is liable to pay the Value Added Tax
(VAT) therein. Breakdown the imposition of Value Added Tax (VAT) on imports.

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 Registration for VAT purposes is a mandatory obligation by any eligible person in the
United Republic of Tanzania, as required under the Value Added Tax Act, 2014
(Section 28 – 43). And failure to notify the Commissioner General on the attainment of
Registration Status is punishable under the tax laws.
Required;
7. Describe the types of VAT registration for all categories of persons, and the necessary
conditions that a person may be deregistered for VAT purposes.
8. Write short notes on the following;
i. VAT registration threshold
ii. Intending trader
iii. Partially-exempted trader
iv. VAT single registration
v. Registered person
9. Chejo commenced trading on 1st January 2015. His sales (taxable supplies) figures in Tshs
(VAT exclusive) were as follows;
January 2015 7,500,000
February 9,735,000
March 8,000,000
April 8,800,000
May 9,550,000
June 9,660,000
July 9,000,000
August 10,100,000
September 8,500,000
October 8,500,000
November 9,950,000
December 11,000,000
i. When did Chejo become liable for compulsory VAT registration?
ii. What will be the date for Chejo to notify the Commissioner for his registration?
iii. After his successful registration, what will be his first due date for filing VAT
return?

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 10. Retail trader sells mixture merchandise to general public. The retailer needs professional
expert from professional tax consultants to compute output tax for seven months. The
following information is made available to you (VAT Inclusive).
Month Purchases in Tshs Sales in Tshs
Exempt Taxable Exempt Taxable
January 4,000,000 8,000,000 10,000,000 20,000,000
February 3,000,000 7,000,000 8,000,000 16,000,000
March 6,000,000 12,000,000 7,000,000 12,000,000
April 7,000,000 14,000,000 10,000,000 25,000,000
May 3,000,000 5,000,000 6,000,000 18,000,000
June 1,000,000 1,000,000 8,000,000 12,000,000
July 8,000,000 20,000,000 12,000,000 8,000,000
Required;
Compute output tax using VAT fraction.
11. Manga Ltd is a taxable person whose last month VAT Return showed Tshs. 30,000,000
VAT payable. Her taxable standard rated purchase was Tshs. 9,600,000 including VAT.
Required;
Calculate the total taxable sales (VAT exclusive) made in that month. Assume she sells
only taxable supplies.
12. a) Explain three types of non-creditable input tax
b) What are the conditions required for the VAT registered trader to claim for excess
credit?

13. The Value Added Tax Act, 2014 gives the Commissioner the power to require a taxable
person to keep any records that may be required in order to verify that the correct amounts,
output tax and input tax have been recorded in the VAT return of any accounting period.

Required;

i. Differentiate Output tax from Input tax

ii. State the accounting records and books which the trader has to keep for VAT
purposes.

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 13. Mivinjeni Supermarket Ltd is a Value Added Tax registered operator and carries on the
business of supermarket on a cash basis. The company’s records show the following
income and expenditure for the month of December 2012;
Tshs Tshs
Cash Sales;
General goods 170,000,000
Maize meal and Sorghum for human consumption 28,000,000
198,000,000
Opening stock 300,000,000
Purchases for cash and on credit;
General goods 120,000,000
Maize meal and sorghum for human consumption 20,000,000
440,000,000
Closing stock 280,000,000 160,000,000
Gross profit 38,000,000
Expenditures;
Advertising 2,000,000
Rent of premises 5,000,000
Salaries 18,000,000
Other expenses (subject to VAT) 6,000,000 31,000,000
PROFIT for the month 7,000,000
a. Required;
i. Determine the VAT payable or VAT refund for the of December 2012 for
Mivinjeni Supermarket Ltd.
ii. State the due date for submission of the VAT return and payment of the VAT
due for December 2012.

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 b. The operation of VAT system depends very much on declaration made by VAT
registered person that is done on monthly basis. To ensure compliance from registered
taxpayers, the Value Added Tax Act 2014 does not provide for punitive measures for
the person who does not comply with the law.
Required;
What measures are taken against a person who fails to submit a return or to pay tax
within the time allowed under the law?
c. XYZ is a registered taxpayer that submitted a VAT return for June 2012 on 30 th
October 2012 with the payment of Tshs. 650,000 as VAT payable. The prevailing rate
of interest was 10%.
Required;
Compute Interest, Penalty and final tax liability from the above information.
14. Nyants General Supplies Ltd is a coconut oil processing company located at Kisarawe,
and is registered for Value Added Tax (VAT). The company entered into the following
transactions in the month of February 2017.
i. Sold taxable supplies to customers as follows: Sales to VAT registered customers
Tshs. 32,500,000 and Tshs. 6,750, to VAT unregistered customers.
ii. Bought a brand new passenger minibus (Hiace) from Toyota at a cost of Tshs.
32,500,000.
iii. Bought stationeries worth Tshs. 650,000 from suppliers who are not registered for
VAT.
iv. Entertain major customers at a local hotel at a cost of Tshs. 2,460,000
v. Bought coconuts from local farmers at a cost of Tshs. 12,500,000
vi. Paid for electricity and telephone at Tshs. 321,400 and Tshs. 441,000 respectively.
vii. A consultant on production process was hired from South Africa. The consultant
has no local office as a result he is not registered for VAT. He invoiced Tshs.
16,500,000 for the services offered. The consultant did not charge any VAT as the
supply falls outside the scope of South African VAT chargeability.
viii. Received a deposit on sale of taxable supplies to a customer amounting to Tshs.
4,650,000

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 Unless specifically stated, all the above persons are registered for VAT and transactions
are stated exclusive of VAT.

Required;

Calculate the VAT payable or any excess carried forward (refund) for the period ended on
28th February 2017.

15. Mzuka Company Ltd is a publishing and general trading enterprise. It sells books,
fertilizers, beverages and foodstuffs. The enterprise is also engaged in purification and
bottling of drinking water. The following information is made available to you for the four
months of 2017.
Purchases January February March April
Electricity 400,000 350,000 420,000 400,000
Unprocessed food (fish & fruits) 960,000 - - 1,000,000
Rent 500,000 500,000 500,000 500,000
Processed foodstuffs 1,650,000 2,000,000 1,900,000 -
Stationeries (for book publishing) 1,720,000 3,000,000 2,500,000 2,000,000
Fertilizers 800,000 1,000,000 900,000 1,500,000
Beverages 1,200,000 1,800,000 1,300,000 1,600,000
Water bills (no bottled) 300,000 200,000 100,000 300,000
Telephone bills 350,000 400,000 250,000 500,000

Sales
Processed foodstuffs 2,800,000 3,000,000 4,000,000 6,000,000
Beverages 7,000,000 3,000,000 4,000,000 6,500,000
Bottled water 500,000 1,200,000 800,000 2,000,000
Printed books 3,600,000 5,000,000 3,000,000 4,000,000
Fertilizers 1,120,000 2,050,000 900,000 1,500,000
Maize floor 1,350,000 1,600,000 890,000 1,300,000
Mzuka Company Ltd is a taxable person with effect from May 2014, and all figures are
VAT exclusive.

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 Required;

a) Compute for each month shown above the amount of;

i. Output tax
ii. Deductible input tax
iii. VAT payable by Mzuka Co. Ltd
b) Assuming that registration was cancelled at the end of April, what adjustments will
the company be required to make. Stocks of goods for resale as at 31st April 2017
were as follows;
Bottled water 2,000,000
Beverages 3,000,000
Fertilizer 7,000,000
16. The following information concerning the consignment of India khanga imported by
Dar-es-salaam based Tanzanian importer and dealer of India khanga. He submitted the
detailed invoice to Dar es salaam Customs Center for the purposes of computation of
customs duties and taxes. The direct payment made by importer to the Indian supplier was
USD 10,000. He also paid USD 5,000 to the third party to fulfill the instruction of the
supplier. The following costs were not included in the price actually paid or payable.
i. Selling commissions USD 200
ii. Buying commissions USD 100
iii. Cost of containers/parking USD 200
iv. Assist in the form of yarn USD 200
v. Cost of transport to Dar USD 1,200
vi. Cost associated with transport to Dar USD 200
vii. Insurance Cost to Dar USD 500

The Bank of Tanzania (BOT) rate of exchange is as follows;

Buying rate 2,285 Tshs per USD

Selling rate 2,345 Tshs per USD

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 Required;

i. Determine the price actually paid or payable

ii. Determine the customs value according to transaction value method

17. a) Differentiate between prohibited goods and restricted goods as provided under
EACCMA, 2004; give five (5) examples on each.
c) Briefly explain any five (5) conditions for customs auction sales as provided under
EACCMA Regulations.
d) A taxable person may deduct from output tax any value added tax chargeable on
goods and services purchased in Tanzania or imported into Tanzania, used wholly,
exclusively and necessary in the course of business.
Required;
Explain any five (5) circumstances where input VAT is not claimable.
18. a) Briefly explain six customs valuation methods under Agreement on Customs Valuation
(ACV) Model.
b) Define the term smuggling and describe various powers vested to the proper officers
for the purpose of prevention of smuggling under EACCMA, 2004
c) Double taxation relief methods are normally applied where the country of residence
acts to prevent or reduce the extent to which its residents are taxed more than once. There
are many different systems in use for achieving this end.
Required;
Briefly explain three main methods by which country may give relief for double taxation.
19. Mr. Chino imported a motorcar from Japan on 12th June 2018. The cost of the car in Japan
was USD 2,500 and insurance paid on freight was USD 100 and freight charges paid
amounted to USD 1,800. The car arrived in the country on 12th August 2018. On 28th
August 2018, Mr. Chino paid all the taxes on importation. He also paid port charges
amounted to USD 215 being storage and handling charges.
Required;
Assuming the exchange rate was Tshs. 2,280/USD, Import Duty and Excise Duty rates
were 25% and 10% respectively.

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 a. State what is the Time of Supply of this importation?
b. Compute the Taxable Value of the car for VAT purpose.
c. Calculate the VAT paid on importation.
d. Determine the total Taxes and Duties paid on Importation of this car.
20. Bob Commission Agent is dealing with the importation of used vehicles from Japan and
selling at a commission of 20% of the total cost of the respective vehicle. Bob
Commission Agent imported a saloon car with 2,000cc on 1st January 2018; the car was
manufactured since 1st January 2003. This car is now selling at Tshs. 18,000,000.
The tax rates for this car at the time of importation were: Import Duty 25%, Excise Duty
due to age 15%, Excise Duty due to engine capacity (cc) 5% and VAT 18%. The
exchange rate at the time of importation was Tshs. 2,250/USD.
Other customs duties payable to Customs Department including wharfage charges which
is 50% of the CIF.
Required;
Determine all duties/taxes paid to Tanzania Revenue Authority with respective to this
vehicle at the time of importation.
21. Mr. Tosha imported Toyota VANGUARD SUV (2007) from Japan. The motorvehicle
(petrol engine) has an engine capacity of 3,500cc. The customs value was USD 5,767.00,
and Mr. Tosha paid the following duties/taxes; (Use Exchange rate - Tshs. 2,275.88/USD)
Import Duty USD 1,441.75
Excise Duty USD 720.88
Excise Duty due to age USD 2,162.63
VAT USD 1,881.90
Customs processing fee USD 34.60
Railway Development Levy USD 86.51
Vehicle Registration Fee Tshs. 550,000.00

Required;

a. Compute total import taxes paid (in Tanzanian Shillings)

b. Find the rates (in percentage) for each of the following: Import Duty, Excise Duty,
Excise Duty due to age, VAT and Railway Development Levy.

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 22. Tax avoidance is one of the approaches used by multinational companies to minimize or
eliminate their tax liabilities in country of source and country of residence of their entities.
“The techniques used in tax avoidance are highly sufficient and satisfactory for
multinational companies to achieve their target of eliminating their tax liability”. Discuss.
23. Lundamatwe Co. Ltd is a resident taxapayer of Tanzania. The company earned Tshs.
16,000,000 from Tanzania and Tshs. 4,000,000 from Kenya. The tax rate in Kenya was 25%
flat rate, while in Tanzania there were three tax rates. For the income above Tshs.
16,000,000 is 35%, for income between Tshs. 4,000,000 and Tshs. 16,000,000 is 30% and
income not exceeding Tshs. 4,000,000 was 25%.
Required;
i. Determine the tax burden of the company without any tax foreign tax relief.
iii. Determine the tax burden if the following relief methods are used;
a. Full exemption method is used
b. Exemption with progression approach is used
c. Full credit method is used
d. Ordinary credit method is used, assuming the tax rate applied in Kenya is 60%
iv. Determine the tax burden if deduction relief method is used.

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