Tanzania: Tax Refund As a Business Investment Climate Issue

Business environment and investment climate are among the major factors for attracting and retaining business and investments in a country. There are several components of business environment and investment climate.

Broadly speaking, they include legal, policy and regulatory frameworks and infrastructure among others. In the fiscal space they include a number of tax issues including value-added tax (VAT) refunds. This article highlights VAT refund issues that constitute bad business environment and investment climate.

VAT refund

VAT refund is money paid back by the tax authority to entitled tax payers. This is done in a particular prescribed accounting period when tax liabilities are not exhausted by allowable deductions.

It is also done where a tax payer’s returns for prescribed accounting periods regularly result in excess credits. Application for refund is made where a person has overpaid a net amount payable for a tax period.

In Tanzania, the tax authority shall make decision on the application and inform the applicant on the amount to be refunded and the period upon which such a refund shall be made.

This has to be done within ninety days. VAT refund can be offset against other taxes, penalties and interest owing to Tanzania Revenue Authority.

Refund is supposed to be made within 30 days after the due date for its lodging or the date of receipt of the return, whichever is later. Where the refund is not made within this period, interest is supposed to be paid to the taxable person at the commercial bank lending rate determined by the central bank. This is what is supposed to be the case. Reality on the ground however is different in some cases.