Legal Alert | Property Tax Collection Reverts to the Local Government Authorities

Introduction
On 1 February 2021, the Minister of State in the President’s Office-Regional Administration and Local Government announced that the task of collecting property taxes has been decentralised, shifting it from the Tanzania Revenue Authority (TRA) back to the Local Government Authorities (LGAs). The decentralisation is aimed at improving revenue collection for the LGAs in a bid to fund various local government projects and promote economic growth.

Notably, before June 2016, the administration and collection of property taxes was carried out by the LGAs. During the Budget Speech for the year 2016/2017, the Minister of Finance, with the aim of increasing and strengthening domestic revenue collection, had then announced the transfer of the function to the TRA effective 1 July, 2016.

The decentralisation of the function is yet to be formalised, however, we expect amendments to be made to the Local Government Authorities (Rating) Act, Cap 289 R.E 2019 as well as corresponding guidelines to be issued in due course to effect this revenue collection change.

What is Property Tax?
Property tax is an annual tax payable by owners of urban residential and commercial buildings. In Tanzania, city Councils, Municipal Councils, Town Councils and District Councils have the mandate to declare an area within their jurisdiction as a “rateable” area. All properties within such rateable areas are subject to property tax, with a few exceptions such as public utility properties, properties owned by religious organisations, cemeteries and Government-owned properties.

What are the Applicable Rates?
The way properties are evaluated and assessed, and the applicable rates, is set out in the Local Government Finance Act, Cap 290 R.E 2019 and the Local Government Authorities (Rating Act), Cap 289 R.E 2019. The applicable property tax rates depend on the locality of the property as follows:

 DESCRIPTION PROPERTY TAX AMOUNT (TZS)
 Properties Within City Councils, Municipal Councils and Town Councils
  • A plot with a single building that is in actual occupation
10,000
  • A plot with more than one building which buildings are in actual occupation
10,000 for each building
  •  For each storey in a storey building
50,000
 Properties Within Districts
  • Ordinary buildings (excluding storey buildings, mud huts or houses, thatched houses, and other similar houses used for residential purposes
10,000
  • For plots with more than one building, all buildings in actual occupation
10,000
  • Storey buildings
20,000
  • Fraction of a building belonging to one or several co-owners (the buildings shall be treated separately and each charged separately)
10,000

How Is the Collection of Property Taxes Currently Effected and What Do We Expect Going Forward?
Currently, the TRA issues notice of assessments to property owners to make property tax payments. Payments are made online through the TRA online platform. For a taxpayer to be able to make the payment, they are required to register their property with the TRA and obtain a property registration number. In addition, payments can also be made through banks such or through mobile phone-based money transfer on certain networks.

With the collection of property taxes reverting to the LGAs, we expect that the LGAs will issue guidelines on the assessment procedures and the methods of making payments. To ease tax collection and enhance a transparent tax collection method, we hope that the LGAs will adopt an online system of collection and payment of property taxes, similar to the TRA’s online platform.


Shemane Amin
Partner
ALN Tanzania | A&K Tanzania
sda@tz.africalegalnetwork.com
Daniel Ngumy
Partner
ALN Kenya | Anjarwalla & Khanna
dng@africalegalnetwork.com

 


The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.

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