THE EMPLOYER’S GUIDE TO “PAY AS YOU EARN”

TANZANIA REVENUE AUTHORITY

ISO 9001:2008 Certified

THE EMPLOYER'S GUIDE TO "PAY AS YOU EARN"

Issued by, SeptemTbaexrp,a2y0e1rs5 Services and Education Department

July 2017

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EMPLOYER'S GUIDE TO P.A.Y.E CONTENTS

PART I...............................................................................................................1 1.0 PRELIMINARY INTERPRETATION.............................................................1

1.1 PURPOSE OF EMPLOYER'S GUIDE...................................................1 1.2 ASSISTANCE FROM TANZANIA REVENUE

AUTHORITY OFFICES..........................................................................1 1.3 APPLICABILITY OF "PAY AS YOU EARN" ...........................................1 1.4 OBLIGATION OF THE EMPLOYER TO WITHHOLD TAX ...................2 1.5 OBLIGATION OF THE EMPLOYER TO WITHHOLD TAX FROM

SECONDARY EMPLOYMENT PAYMENTS .........................................3 1.6 EMPLOYER'S OBLIGATION TO FILE A STATEMENT OF TAX

WITHHELD ..........................................................................................4 1.7 EMPLOYER'S OBLIGATION TO PROVIDE A WITHHOLDING

CERTIFICATE ......................................................................................4 1.8 OBLIGATION TO MAINTAIN DOCUMENTS .......................................5

PART II .............................................................................................................6 2.0 DEFINITIONS OF TERMS USED ..............................................................6

2.1 EMPLOYMENT, EMPLOYEE AND EMPLOYER .................................6

PART III ............................................................................................................7 3.0 CALCULATION OF AMOUNTS TO BE INCLUDED IN CALCULATING .

EMPLOYMENT INCOME ..........................................................................7 3.1 CALCULATION OF MONTHLY PAY .....................................................7 3.2 LUMP-SUM PAYMENTS AND PAYMENTS RELATING TO MONTHS .

OR YEARS OTHER THAN MONTHS OR YEARS OF PAYMENTS .....7 3.3 RETIREMENT CONTRIBUTIONS .......................................................8 3.4 RETIREMENT PAYMENTS ..................................................................8 3.5 BENEFITS IN KIND .............................................................................9

PART IV ..........................................................................................................12 4.0 FORMS .....................................................................................................12

4.1LIST OF FORMS USED BY EMPLOYER AND EMPLOYEES ............12 4.2 USE AND COMPLETION OF FORMS ...............................................12

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PART V ...........................................................................................................14 5.0 ASSESSMENT OF TAX ...................................................................................................14

5.1 CALCULATION OF EMPLOYEE'S MONTHLY PAY ...........................14 5.2 WITHHOLDING OF TAX FROM EMPLOYEE'S MONTHLY PAY ........16 5.3 THE NECESSARY ADJUSTMENTS ..................................................17 5.4 END OF THE MONTH ADJUSTMENTS ...........................................18 5.5 END OF THE YEAR ADJUSTMENTS ..............................................19 5.6 EXAMPLES ........................................................................................20 PART VI ..........................................................................................................28 6.0 WITHHOLDING AND REMITTANCE OF TAX ...........................................28 6.1 GENERAL ..........................................................................................28 6.2 REMITTANCE OF TAX .......................................................................28 6.3 SPECIAL CONCESSION FOR REMOTE AREAS .............................28 PART VII .........................................................................................................29 7.0 SPECIAL EMPLOYMENT AND PAYMENTS ..........................................29 7.1 PRIMARY AND SECONDARY EMPLOYMENT .................................29 7.2 IRREGULAR PAYMENTS ..................................................................29 7.3 NON-RESIDENT EMPLOYEES PAYMENTS ....................................30 7.4 FULL TIME SERVICE DIRECTOR FEES ..........................................30 PART VIII ........................................................................................................31 8.0 REGISTRATION, DOCUMENTATION AND FILING OF INFORMATION.31 8.1 REGISTRATION AND DOCUMENTATION .........................................31 8.2 END OF THE MONTH PROCEDURE ...............................................31 8.3 EACH SIX MONTHS END PROCEDURE .........................................31 8.4 WITHHOLDING CERTIFICATE PROCEDURE .................................32 8.5 AUDIT PROCEDURE .........................................................................32 PART IX ..........................................................................................................33 9.0 CONTINUITY OF EMPLOYMENT ...........................................................33 9.1DEATH OF EMPLOYER .....................................................................33 9.2 CHANGES IN EMPLOYER ................................................................33 9.3 CESSATION OF BUSINESS OF THE EMPLOYER ...........................33 PART X ...........................................................................................................34 APPENDICES ................................................................................................34 Name of Employer: .........................................................................................34

1 PART I

1.0 PRELIMINARY INTERPRETATION

1.1 PURPOSE OF EMPLOYER'S GUIDE 1.1.1 The purpose of this guide is to assist employers in the operation of the PAYE withholding tax system and deals in detail on matters concerning the system as a whole.

1.1.2 The Employer's Guide is a guide only and provides ready assistance on the operation of the system. However, it in no way substitutes or modifies the Income Tax Act, 2004, Tax Administration Act, 2015 or the Income Tax Regulations. For the authoritative and comprehensive rules you should consult the respective tax laws. The PAYE withholding tax legislation is contained in Subdivision A of Division II of Part VII of the Income Tax Act, 2004.

1.2 ASSISTANCE FROM TANZANIA REVENUE AUTHORITY OFFICES

The guide is not exhaustive in every detail. If the guide does not answer some particular issue the employer should contact any Tanzania Revenue Authority Office or Call Centre for advice.

1.3 APPLICABILITY OF "PAY AS YOU EARN"

1.3.1 The withholding tax system in respect of income from employment under the Income Tax Act is described as Pay As You Earn, in short PAYE. A resident employer or a non-resident employer with a permanent establishment in Tanzania, who makes a payment that is included in calculating chargeable income of the employee with respect to the employment is obliged to withhold income tax from the payment at the rate prescribed in the Income Tax Act. For this purpose "employment" includes any position of an individual entitling the individual periodic remuneration in respect of services provided for whatever period other than payments made in respect of the individual conducting a business.

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