This document provides an overview of Tanzania’s approach to transfer pricing regulations. It explains how the Tanzanian regulatory framework aligns with OECD and UN guidelines while maintaining precedence for local regulations. It discusses key aspects such as the definition of related parties, transfer pricing documentation requirements, APAs, audit practices, and penalties.
Tanzania isn’t an OECD member, but it recognizes OECD Guidelines and the United Nations’ transfer pricing manual. However, if conflicts arise between Tanzanian regulations and international texts, the local rules take precedence.
Transfer pricing legislation in Tanzania is outlined in Section 33 of the Income Tax Act, Chapter 332. Specific transfer pricing regulations were introduced under Section 129 of the Act, with updates in 2014 and 2018. These regulations, to a large extent, align with the OECD and UN Transfer Pricing Guidelines and apply to controlled transactions, mainly those involving associates.
In Tanzania, a “controlled transaction” refers to a transaction between “Associates.” An “Associate” is defined in the Act as a person who, among other things, controls or benefits from 50% or more of the rights to capital, income, or voting power of another entity. Branches or permanent establishments are also considered “Associates.”
Tanzanian taxpayers must maintain contemporaneous transfer pricing documentation as outlined in the Regulations. This documentation should be prepared before the income tax return’s due date and submitted to the Commissioner within 30 days upon request.
Section 12 of the Regulations allows for APAs, which establish criteria for applying the arm’s length principle. The taxpayer’s APA request should include transaction descriptions, proposed transfer pricing methods, and other relevant information. The Commissioner can accept, reject, or modify the APA request.
Tanzania has specific considerations for intra-group services, intangible properties, and intra-group financing. These require proof that services provided an economic benefit and that charges were at arm’s length. Intra-group services may be disregarded if they involve shareholder activities or duplicative services, as per the OECD Transfer Pricing Guidelines.
Contemporaneous Transfer Pricing Documentation should include organizational structure, business and industry information, details of controlled transactions, strategies and assumptions, and more, as specified in the Regulations.
Tanzania follows the OECD Transfer Pricing Guidelines and employs five OECD transfer pricing methods, including the Comparable Uncontrolled Price Method, Cost Plus Method, and others. The method selected depends on the nature of the transaction and the parties involved.
Controlled transaction results are compared to uncontrolled transactions for the same basis year. Tanzanian authorities use various databases for benchmarking, with no particular preference.
Transfer Pricing Documentation must be in one of Tanzania’s official languages (English or Swahili), but English is commonly used in practice. Taxpayers must retain necessary documents for at least five years.
The Tanzanian Revenue Authority can penalize non-compliant taxpayers, including those violating transfer pricing regulations. Entities not adhering to the arm’s length principle may face a penalty equal to 100% of the underpaid tax. Non-compliance with documentation requirements is considered an offense and may lead to imprisonment or fines.
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