Tanzania
Answer ... Taxes: There is no specific direct or indirect tax legislation for oil and gas. The general laws for direct and indirect tax – some of which contain specific rules on the taxation of oil and gas – are applicable.
Oil and gas operators are subject to 30% corporate income tax on their taxable profits and must also withhold tax when making payments in relation to:
- dividends at 10%;
- payment of interest at 10%;
- service fees provided by non-residents at 15%; and
- local professional and consultancy services at 5%.
The value added tax (VAT) rate is 18%.
There is also a city service levy, which is a local government tax levied at a rate of 0.3% on the gross turnover of business entities operating within the territorial boundaries of a specific municipality.
Royalties: In addition to taxes, royalties are payable to the government for the gross volume of petroleum production. The prescribed amount is 12.5% for onshore areas and 7.5% for offshore areas. In case of failure to comply with the payment of royalties, the Petroleum Upstream Regulatory Authority may prohibit any dealings with the licence holder.
Other charges: Capital gains tax is applicable to both resident and non-resident companies and applies to land, buildings, shares and or securities at a rate of 30%. Farm-out arrangements are treated as disposals of investments assets and as such, any losses thereon are not deductible against ‘business income’, the definition of which would include petroleum operations.
Tanzania
Answer ... There are no tax holidays available for new projects in the oil and gas sector, and there is no reduced corporate tax rate with regard to new investments in the oil and gas sector. However, any company may benefit from a reduced corporate tax rate of 25% for three consecutive years if:
- it is listed on the Dar es Salaam Stock Exchange; and
- more than 30% of its equity is issued to the public.
There are no tax benefits which are specific to companies involved in the oil and gas sector; instead, they can benefit from all other benefits that are available to other companies in other sectors. However, imported goods for use in petroleum operations are free from import duty, subject to meeting several conditions; and specific petroleum products are exempt from VAT.
Tanzania
Answer ... Oil and gas operators should ensure that additional tax incentives conferred through production sharing agreements or certificates of incentive from the Tanzania Investment Centre are published in the Government Gazette in order to legalise them. Publication also helps to shield the investor’s interest when dealing with the Tanzania Revenue Authority and mitigates the risk of the incentives becoming latent, particularly if they relate to income tax.
Tanzania
Answer ... There have been no recent changes to the applicable taxation rates for the oil and gas industry in general. However, specific reliefs and/exemptions have been given to the East African Crude Oil Pipeline project.