The Transfer Pricing Guidelines 2020 (the Guidelines) have been issued by the Tanzania Revenue Authority (TRA) only to serve as a guide to all direct stakeholders involved in transactions.
Transfer Pricing Definition:
According to Tax Administration (Transfer Pricing) Regulations, 2018, transfer pricing can be interpreted as the inter-party transaction of goods, services and intangible properties with clear distinction of the applicability of tax administrative laws between business associated transactions and inter-person transactions.
This distinction is pertinent in understanding the difference between the associated parties involved the transaction as independent market forces can shape the commercial pricing of goods, services and intangibles transacted between individuals , as to where business transactions between associates may not always reflect the dynamics of market forces.
These guidelines do not intend to be prescriptive or exhaustive of every transfer pricing issue that may arise. The Guideline does not take precedence over tax legislations. Therefore, the Guidelines are meant to guide on the application of the Tax Administration (Transfer Pricing) Regulations of 2018.
As a guiding tool, the Guidance attempts to address challenges faced by tax officers, taxpayers and their advisers in various transactions. The Guideline will be amended or revised from time to time as the need arises. An updated version must be used on such instance.
Structure of the Guidelines
The guidelines are documented across 18 sections across a definitive structure; introduction, objective of the guidelines , scope, position of the law, the arm’s length principle, functional analysis, methods of determining an arm’s length price, the comparability analysis, factors determining comparability, documentation, application of the OECD or UN documents, special considerations for intra group services, special consideration for intra group financing, special considerations for intangible property, special consideration for commodity transactions, advance pricing arrangement (apa), corresponding adjustment, and adjustment by the commissioner.
Tanzania Revenue Authority (“TRA” or “the Authority”) is mandated under the Tanzania Revenue Act, CAP. 339 to, among others, increase revenue collection in a cost-effective way, achieve the highest possible degree of voluntary tax compliance, and combat tax avoidance and fiscal evasion. Other functions include to monitor, oversee and coordinate effective administration of revenue laws for the union government of Tanzania. The authority is also mandated to advise the Ministry of Finance and relevant organs on all matters pertaining to fiscal policy, and to implement corrective measure to improve the standard of service given to Taxpayers towards maximizing revenue collection.
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