1. Definition and Purpose
Non-Governmental Organizations (NGOs) encompass various Civil Society Organizations (CSOs), including faith-based/religious organizations, trusts, associations, community-based organizations, cooperative societies, legal aid providers, and philanthropic entities.
These organizations are established to promote public good—often targeting the poor, women, children, and the elderly—with key focus areas including health, education, environment, and socio-political welfare. NGOs operate without a profit motive and are legally prohibited from distributing profits to individuals. Any surplus must be reinvested in the organization’s mission.
2. Tax Obligations of NGOs
Like any other taxpayer, NGOs are required to comply with tax laws. Their obligations include:
2.1. Acquisition of TIN
NGOs must obtain a Taxpayer Identification Number (TIN) immediately after their formation and commencement of operations, as per Section 22(1) of the Tax Administration Act, 2015.
2.2. VAT Registration
NGOs must register for VAT if:
- Their turnover from taxable supplies (excluding grants/donations) reaches TZS 50 million within six months or TZS 100 million within twelve months, as outlined in Sections 28 & 29 of the VAT Act, Cap 148 R.E. 2019 and Section 90 of the TAA 2015.
- They offer professional or consultancy services, such as training.
VAT-registered NGOs are required to:
- File monthly VAT returns by the 20th of each month, regardless of whether VAT is payable (Section 66 of VAT Act; Section 78 of TAA 2019).
2.3. Use of EFD Machines
NGOs engaged in economic activities with a turnover of TZS 14 million or more must acquire and use Electronic Fiscal Devices (EFDs) to issue fiscal receipts (Sections 36 and 86 of TAA, 2015).
2.4. Timely Payment of Taxes
Taxes must be paid as they become due to avoid interest, penalties, and fines (Sections 76, 78, and 83 of the TAA 2015).
2.5. Filing Tax Returns
All returns must be filed within prescribed timelines (Sections 37–41 of the TAA 2015).
2.6. Record Keeping
All tax-related records must be maintained for at least five years from the relevant date or until a final decision is made (Section 89(1) of the VAT Act 2014 and Section 35(3) of the TAA 2015).
2.7. Notification of Changes
NGOs must notify the Commissioner of any changes to key particulars (e.g., address, contact details, or constitutional amendments).
2.8. Disclosure of Business Activities
All matters related to business activities must be disclosed to the Commissioner.
3. Tax Obligations and Liabilities
NGOs are not automatically tax-exempt. Unless exempted by law, they are liable for various taxes, including:
- Corporate Income Tax
- Pay As You Earn (PAYE)
- Skills and Development Levy (SDL)
- Stamp Duty
- Value Added Tax (VAT)
- Customs Duty
- Withholding Tax on Rent and Services
- Withholding Tax on Investment Returns
4. Tax Relief and Charitable Status
4.1. Obtaining Charitable Status
NGOs may apply for charitable status by requesting a private ruling from the Commissioner General (Section 11, TAA), upon satisfaction of requirements under Section 64(8) of the Income Tax Act.
4.2. Criteria for Charitable Status
To qualify, the organization must be:
- Of a public character.
- Established solely for:
- Poverty relief,
- Educational advancement,
- Provision of public health, water, education, or infrastructure.
It must also:
- Have an open membership or serve a defined community group,
- Operate entirely for charitable purposes,
- Reinvest all profits into its objectives,
- Prohibit distribution of profits or assets.
5. Taxable Income Determination for Charities
Under Section 64(2) of the Income Tax Act:
- Income includes: all gifts, contributions, donations, and investments.
- Allowable deductions include:
- Expenditures for the organization’s functions benefiting residents,
- 25% of income from charitable business (before deducting functional expenses),
- Any other deductible amounts as per the Act.
6. VAT Exemptions and Reliefs
6.1. Eligibility
NGOs conducting health, water, education, or infrastructure projects may qualify for exemptions from:
- Import Duty
- Excise Duty
- VAT
6.2. Conditions for VAT Relief
Exemptions may apply to:
- Goods imported for free distribution (e.g., food, clothing, school supplies for special needs children or orphanages),
- Emergency relief goods,
- Religious organizations offering public health, education, or water services free or at nominal cost (not exceeding 50% of market value).
7. Application for Exemptions
Applications must be submitted before clearing goods through customs and should include:
- Application letter from the organization’s head
- Introduction letters from the District Commissioner (DC) and Ward Executive Officer (WEO)
- NGO registration certificate
- TIN certificate
- Commercial import documents (invoice, bill of lading, packing list)
- Annual procurement plan
- Utilization report on past exemptions (if any)
- Donation certificate (for donated goods)
- Distribution plan for imported goods
8. Conclusion
Tax reliefs do not exempt NGOs from full compliance with tax laws. NGOs must:
- File annual and other required returns,
- Ensure timely payments, and
- Adhere to record-keeping and reporting obligations.
Non-compliance may lead to penalties under the Tax Administration Act, 2015.
Disclaimer
This publication has been prepared on matters of interest only, and does not qualify as professional advice. Please do not act upon the information contained in this publication without attaining precise professional advice. No representation or warranty (express or implied) is given as to the accuracy or comprehensiveness of the information contained in this publication, and, to the extent permitted by law, KEMI Advocates, its members, employees and agents do not take any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.