Procedures For The Processing of VAT Repayment Claims
As part of TRA's initiative of expediting VAT refund procedures to taxpayers as a response to providing high quality and customers service, the Authority reviewed its procedures relating to VAT repayments claims with effect from 1st October, 2004. As from 1st October, 2004 all VAT repayment claims are handled as follows:-
1. Classification of VAT Repayment Claims
All VAT repayment claims are classified into the three categories namely gold, silver, and non-gold-silver. It should be noted that repayment traders are mainly those engaged in zero rated supplies as well as those who supply to VAT special relieved persons.
(a) Regular Repayment Traders
Regular repayment traders who meet the qualifying criteria are paid within 30 days from the date of lodgement of their claims. A trader under this category should have a good history of tax compliance based on the criteria that during the past two (2) years, he has never been booked with any tax fraudulent offence. The standard documents which should be lodged by the claimant are:-
- Certificate of genuineness from an Auditor who is registered by both NBAA and TRA (as a Tax Consultant).
- Brief workings from the Auditor as to show how the claimed amount has been arrived at.
- Evidence of supplies to VAT special relieved persons i.e. forms VAT 220; VAT 222; VAT 224 or evidence pertaining to zero-rated supplies i.e Airway Bills, Bills of Lading or Road Consignment Notes (depending on the mode of transport) and Landing Certificates or similar evidence that the goods were received in the destination countries.
- However, traders under this category should be audited once a year and claims found with substantial irregularities upon audit will move to silver category.
(b) Occasional Repayment Traders
Two (2) consecutive VAT repayment claims from traders who are refunded on half year basis are regarded to belong to the gold category and are refunded within 30 days from the date they are received. However, a trader under this category should have a good history of tax compliance (criteria similar to that explained above) as well as submitting the necessary attachments as explained in (a) above. The third claim will not be paid until the trader is audited and in the event that substantial irregularities are discovered, the claimant will be shifted to the non-gold-silver category.
In the event that there are any additional details or information required from such traders, the payment process will continue and the trader will be informed (in writing) to produce them. The next claim will not be paid unless the trader has complied by furnishing the required details.
Regular repayment traders who have failed to meet the gold criteria by 30th September 2004 belong to this category. Their two (2) consecutive claims are paid within 30 days from the date of lodgement. Full scale audit must be conducted to the claimants before their third (3rd) claims are approved. However, the claims which are subject to
audit will be paid within 30 days from date of submission of documents for verification as per the requirement of section 35(2) of the Value Added Tax Act. In the event of a clean audit report, audit would be conducted after every 2 consecutive claims.
Three types of claims fall into this category.
(a) Claims originating from traders whose supplies are neither zero rated nor relate to VAT special relieved persons which are also regarded to be "highly risky claims".
(b) Occasional repayment traders who have failed to meet the gold criteria by 30th September 2004.
(c) Claimants under silver category who have been found with substantial irregularities in two consecutive audits.
The claimants under this category are thoroughly audited before effecting their refunds. If their claims are found to be genuine, they are paid within 30 days from the date of submission of documents for verification as per the requirement of section 35(2) of the Value Added Tax Act.
Claims were profiled before the end of September 2004 and were put into their proper categories ready for implementation by 1st October, 2004.
2. Evaluation of the System
The system will be reviewed annually to appraise the criteria set for each category and to update the list of claimants in each category.
3. Introduction of a Checklist for claimants of VAT repayments.
A checklist has been prepared for use by VAT Repayment claimants so as to ensure that they know what is required from them and what requirement they are required to fulfill. The said checklist has been in use with effect from 14th February, 2005. The checklist can be viewed at the TRA website: https://www.tra.go.tz or obtained from TRA offices or Dar es Salaam Taxpayers service centre.
4. Centralised refund system.
Tanzania Revenue Authority has introduced a new Centralized Tax Refund System with effect from 1st March, 2005. This system is intended to speed up the processing of all the taxpayer's refund claims and effect them electronically directly to the taxpayers bank accounts through the Tanzania Interbank Settlement System (TISS). This has replaced the old system of effecting refunds through cheques.