J.4 Work Permit & Residence Permit Tips.pdf

TAX, IMPORTS, WORK/RESIDENCE PERMIT, AND MOUs

TAXES

The United States Government (USG) funding for foreign assistance is exempted from all Tanzanian taxes, under the bilateral agreement signed between the Government of Tanzania (GOT) and the USG in 1968.

Imports For USAID Funded activities, all imports are exempted from taxation. In Tanzania, there are four major taxes that are charged when importing items, in which the Implementing Partner (IP) has to request the exemption. Those taxes are:

(i) Excise duty,

(ii) Railway Development Levy (RDL),

(iii) Value Added Tax (VAT), and

(iv) Import duty.

Excise duty exemption Excise duty is imposed on a particular list of products that are imported that need to be regulated by the government as a countermeasure for the importation of these items, which include certain types of motor vehicles and aged motor vehicles. These items are called excisable items. Medicines are not excisable. The Excise (Management and Tariff) Act, Cap 17 provides a list of items that are excisable.

Excise duty exemption is granted by the Minister of Finance and Planning through a Government Notice (GN). If the exemption is granted, the exempted items will be listed in a schedule to the GN. The IP is advised to plan and submit a request for excise duty exemption listing all excisable items the IP intends to procure for six months or one year.

To obtain excise duty exemption the applicant submits the application letter to the Ministry of Finance and Planning. Listing excisable items to be exempted. The letter will include attachments to justify the request such as:

(i) Introduction letter from the line ministry to the Ministry of Finance and Planning,

(ii) 1968 Economic and Technical Cooperation Agreement between GOT and USG

(the 1968 Bilateral Agreement),

(iii) Strategic Assistance Agreement between USG and GOT (STAAG) with amendments, and

(iv) Agreement between USAID and the applicant to implement USAID funded activity.

VAT

VAT exemption is granted by the TRA Commissioner General. VAT exemption involves two steps:

1. Obtaining VAT exemption certificate (60 days at the TRA Commissioner General’s

Office); and

2. Utilizing the granted tax exemption (7 days at the TRA Commissioner General’s

Office).

Obtaining VAT exemption certificate

To obtain VAT exemption, the IP will submit the application to the Permanent Secretary of the line ministry. The application package will include the following documents:

(i) Form ITX264.01.E

(ii) Agreement between USAID and the applicant to implement USAID funded activity,

(iii) The 1968 bilateral agreement,

(iv) STAAG with amendment,

(v) Introduction letter from USAID,

(vi) Letter from USAID to TRA providing the list of IPs and activities they implement,

(vii) Memorandum of Understand (MOU) between IP and line ministry. For activities implemented in any region outside of Dar es Salaam, the IP also needs to submit an MOU with PO-RALG,

(viii) Shipping documents for items to be imported,

(ix) quotations, bill of quantities, and list of goods and services to be exempted for the items to be imported

The Permanent Secretary will verify, approve, and forward the application to the Commissioner General, accompanied with the declaration that the items applied for exemption are solely for use in the project.

Commissioner General may request additional information or documents from the applicant or respective ministry or Government entity when reviewing the application.

The Commissioner General will issue a VAT exemption certificate in Form No. ITX 281.01.E, if he/she approves the application. If Commissioner General rejects the application, he/she will give reasons thereof to the Permanent Secretary of the line ministry.

Utilization of the granted tax exemption After the Commissioner General has issued the VAT exemption certificate, the IP will process utilization of the granted tax exemption by filing Form No. ITX265.01.E and submit the form to the respective TRA’s Department or Regional office. The Form will be accompanied by:

(i) a copy of the Exemption Certificate

(ii) final invoice, packing list, bill of lading, and any other relevant importation document.

Within seven days from the date of receipt of the application, the Commissioner General will verify the application and communicate his decision to the applicant.

RDL

Anything exempted from excise duty is also exempted from RDL, and anything not exempted from excise duty is also not exempted from RDL. The IP does not need to fill any form specific for RDL.

Import Duty The import duty is automatically applied to USAID-funded activities, as the Customs (Management and Tariffs) Act, Cap 403 read together with the East African Community Customs Management Act of 2004, provide for an exemption for aid-funded projects regardless of who is the implementer. Therefore, upon filling Form ITX265.01.E for utilization of VAT granted exemption, the applicant will also be granted import duty exemption.

Registration of motor vehicle to be issued with DFP plate number:

The IP will submit the following documents to the line ministry:

(i) Application letter of DFP registration number

(ii) Excise Duty exemption GN, and

(iii) Import duty and VAT Exemption letter from TRA.

The line ministry will instruct the Ministry of Work to issue a DFP number. Experience from some IPs shows that the process for registration takes about one week.

Unless otherwise permitted in writing by the CO, any motor vehicles procured with USG funds must be registered and titled solely in IP's name. Failure to comply with this requirement that results in any vehicles being registered and titled (or co-registered and co-titled) under any GOT institutions name and that cannot be disposed in accordance with USAID instructions at the end of award (or whenever the IP requests disposition or USAID instructs disposition), will result in the IP being held liable for the full purchase price of the vehicle. If the IP faces any obstacles registering its vehicles, The IP is advised to immediately alert the Contracting Officer / Agreement Officer Representative (COR/AOR) and the CO/AO to seek USAID's assistance and intervention.

Local purchases:

For local purchases, the IP pays for items and claims VAT refunds. To request VAT refunds the IP will fill TRA Form 262.01.E, attach original Electronic Fiscal Device (EFD) receipts or tax invoices and submit them to USAID, together with three copies and one electronic copy of this package. IPs are advised to submit bound copies of each package.

USAID will go through the package, endorse it, and return the package to the IP, who will then deliver the package to the relevant ministry, then to TRA.

The IP should track the submissions. Six months after the package has been delivered to TRA and the Partner has made a demonstrably diligent effort to obtain a refund, IP may request the (Contracting Officer/Agreement Officer (CO/AO) to consider the unreimbursed VAT an allowable cost.

De-minimis Exception: Payments of the VAT on purchases under $500 are allowable costs for USAID/Tanzania because the administrative burden of obtaining an exemption or refund for transactions under $500 outweighs the corresponding benefit accruing to the USG.

WORK AND RESIDENCE PERMITS

The non-Tanzanian staff of the IP will be granted a work permit and an exemption certificate.

● Class B work permit (for the prescribed profession including medical and health care professionals, experts in oil and gas, teachers and University Lecturers in Science and Mathematics), or

● Class C work permit (for people in possession of such other profession apart from those in category B), issued by the Labor Commissioner.

“Exemption Certificate” is issued by the Director-General of Immigration in lieu of a residence permit.

Application Process The application process is managed by the IP.

● USAID provides a letter of introduction to the line ministry.

● The IP submits the letter and other documents to the line ministry.

● If the line ministry supports the request, it will write a letter to the President’s

Office - Public Service Management (PO-PSM) requesting the issuance of a work permit and exemption certificate.

● PO-PSM will consider the request, and if it approves, it will write a letter to the Labor Commissioner instructing the Commissioner to issue a work permit and to forward the applicant’s name to the Commissioner-General of Immigration to issue an exemption certificate.

● The IP will collect a copy of this letter from PO-PSM and submit the request for a work permit and exemption certificate to the Labor Commissioner, accompanied by the letter from PO-PSM.

The IP is responsible for obtaining work permits and exemption certificates for their personnel.

There is no fee paid to obtain a work permit and an exemption certificate if the IP follows the process for donor-funded projects. Sometimes this process may fail. In the event, it fails the IP may consider using the normal payment process. Costs involved. If IP gets into that situation, the costs involved are allowable.

MEMORANDUM OF UNDERSTANDING (MOU)

USAID encourages the IP to enter into a Memorandum of Understanding (MOU) between the IP and a line ministry in the GOT and sometimes with PO-RALG for contracts that are implemented in the areas under the jurisdiction of PO-RALG. The MOU is a non-binding document that just states that there is an activity that you are implementing on behalf of USAID, it states the expective roles of the IP and the expective roles of the GOT. The MOU is important for tax exemptions and refunds, and work permit processes.

USAID has a short and simple model MOU. The IPs can use this model MOU to create their MOU. The IP is advised to share the draft MOU with USAID, before sending to the GOT. USAID will review the draft MOU to make sure that there is no any binding language and there is a language on tax exemption and refund, and work permits, in case the IP intends to employ non-Tanzanian staff. Then the IP will submit the draft MOU to the line ministry, and PO-RALG if applicable to get them to sign that MOU.