TRA starts to apply refined rules in cross-border transactions
The Tanzania Revenue Authority (TRA) has set up new tax determination guidelines aimed at providing consistency in tax administration on both domestic and cross-border transactions.
The new system –“Transfer Pricing Regulation” will also provide taxpayers with insights on the procedures followed in determination of income tax, duty and levies in various types of business transactions.
The guidelines provide practical guidance on issues and factors considered in arriving at an acceptable arms length price.
Speaking with reporters in Dar es Salaam in a one day seminar with large taxpayers on transfer pricing, Acting Commissioner General Salehe Mshoro said the main goal was to update large taxpayers on the progress of the regulation from initial drafting to the final formulation.
This measure was prompted by the recently gazetted transfer pricing regulations approved by the Minister for Finance, enabling the publication of income tax dues thereof, back in February.
Critical challenges encountered by the TRA in addressing transfers pricing in two party transactions include inadequate transfer pricing legislation and rules, limited knowledge and skills, and limitation on information for comparables.
Given these serious drawbacks to a large extent the tax authority has no other option but to accept profit or value levels declared by companies operating in a sector on which tax assessment is made, he stated.
TRA has taken several initiatives to address challenges encountered, like setting up an international taxation unit, improve of legal frame work through preparation of transfer pricing regulation and guidelines which are now in place.
Neema Mrema, the Commissioner for Large Taxpayers, said that the seminar will provide clarity to the application of relevant provisions of the income Tax Act, ending misunderstandings on the proper application of these provisions.
“The document has come at the right time in addressing the challenges posed by transfer pricing,” she stated.
“The problem emerges in practice because international fiscal cooperation is subjected to so many rules that these rules can at times become constraints upon the principle of cooperation,” she said, elaborating that the availability of these tools will reduce existing challenges in the administration of cross-border transactions.
“This tool is of paramount importance in enhancing TRA efforts in collecting taxes to a more effective and efficient way. Stakeholders need to collectively support TRA efforts in the taxation of cross-border transactions so as to increase country’s revenues,” she added.
