Is an NGO a taxable entity?

An NGO is a taxable entity in Tanzania. However NGOs that are recognized as a charitable organization enjoys some favorable tax incentives under section 64 of the income tax act.

Mere registration of an NGO does not give you an automatic status of a charitable organization for tax purposes. Only NGOs which are recognized as charitable organizations enjoys favorable tax incentive.

What kind of NGOs are eligible?

You must meet the following two conditions in order to qualify for a status of charitable organization.

The first condition concerns the nature of the activities you provide. Only NGOs established to pursue the following objectives will be eligible:

i. Relieving poverty or distress of the public;
ii. Advancing education;
iii. Providing of general public health, education, water or road construction or maintenance

The second condition is to obtain a private ruling from the commissioner general of TRA. The private ruling is a decision or authorization provided by the commissioner general recognizing you as a charitable organization.

How do you earn a status of charitable organization?

If you meet the requirements provided you should apply to the commissioner general of TRA for a private ruling. Before you apply for the private ruling you need to operate for at least three years. The commissioner general needs to have the necessary information in order to make the decision. Make sure that you have a clear tax record.

Among the documents which might be required to accompany your application includes:

• Audited financial statements for three previous years;
• Previous project report;
• Introduction letter from the district commissioner explaining about activities you performed;
• Dully stamped lease agreement and evidence of payment of withholding tax for rent where applicable;
• Filled and signed application form for private or class ruling;
• Constitution;
• Certificate of registration.

What are tax benefits of been recognized as a charitable organization?

Here are some of the benefits you can obtain if your NGO is recognized as a charitable organization for tax purpose.

• Wide net of deductions

  Take note that the funds received by an NGO through donation or gifts are considered as its income. From the generated income (funds received through donation or gifts) the following will be deducted in calculating the income to charge:

  i. 25% of the funds received from donors are also deducted;
  ii. The all amount spent in pursuit of the charitable objective.

• You’re allowed to save money for future projects

  Also if you have excess funds and you wish to save the funds for a future project, it might not be accounted for taxation – provided the commissioner general of TRA approves the saving. The project you intend to save for must be detailed and in line with the allowed objectives, and it must provide reasonable benefits to residents.

• You’re not required to pay SDL

  Furthermore a charitable organization is relieved from paying the skills and development levy.