Amendments to the National Payments Systems Act of Tanzania
In July 2021, mobile money transfer levies were introduced by the Tanzanian government as a new revenue collection strategy with the aim of raising approximately TZS 1.254 trillion for the financial year 2021/2022. These measures were implemented through the amendment of the National Payments Systems Act No. 4 of 2015 (the NPS Act) and the enactment of GN Regulation No. 496A of 2021 on National Payments Systems (electronic mobile money transfer and levy on withdrawal transactions). Levy Regulations 2021).
Taxes on mobile money transfers
The 2021 Levy Regulations were later amended to reduce levy rates in response to strong opposition from the general public. The reduced rates were implemented by National Payment Systems (Mobile Money Electronic Transfer and Withdrawal Levy) (Amendment) Regulations GN No. 642A of 2021. Regulations modifying the 2021 direct debits).
Tax on electronic money transactions – New regulation
Further changes to the mobile money levy regime have since been introduced in fiscal year 2022/2023. Parliament amended Section 46A of the NPS Act through Finance Act No. 5 of 2022 and enacted the National Payment Systems (Electronic Money Transactions Levy) Regulations GN No. 478V of 2022 (the New rules).
Section 46A now reads as follows:
“(1) There is hereby established a tax to be levied on mobile money transfer transactions at a rate ranging from 10 to 4,000 Tanzanian shillings.
(2) The Minister [for Finance] takes, after consulting the minister in charge of communication, a regulation prescribing the methods according to which the royalty on the operations of transfer of mobile money can be perceived and accounted for.
(3) The provisions of this article do not apply to transactions involving the payment of wages by employers.
These amendments came into force on July 1, 2022 and repeal the 2021 Levy Regulations. The new regulations are part of a solidarity finance scheme which aims to accumulate nearly TZS 30 trillion to finance various national development projects.
Main changes to the fee
Section 46A of the NPS Act has been amended to reduce the maximum amount of tax, which was initially set at TZS 10,000 by Finance Act No. 3 of 2021 and subsequently amended to TZS 7,000 by 2021 regulation modifying the tax. now reduced to TZS 4,000 for an e-money transaction of TZS 3,000,000 and above1, a 43% reduction from the latter. It also excludes from the levy transactions involving the payment of wages by employers.
Under the new regulations, direct debits are due by e-money “users” and collected by the bank, financial institution or e-money issuer concerned. A “user” is defined as a person who “transfers » Where “withdraws” money electronically or at a counter other than the government, merchant or business.
The New Regulations have redefined the terms ‘transfer’, ‘user’ and ‘withdrawal’ from the Direct Debit Regulations 2021 to clearly define the scope of the direct debit.
Rule 3 of the new regulations defines “transfer” as transactions from:
- a user’s mobile money account to a user’s mobile money account;
- a user’s mobile money account to a user’s bank account;
- a user’s bank account to a user’s bank account; Where
- a user’s bank account to a user’s mobile money account.
Previously, in the Levy Regulations 2021, a “transfer” only included transactions referred to in paragraphs (a) to (c) above. Now, it extends to transactions between a user’s bank account and a user’s mobile money account.
In addition, the new regulations now exclude government, merchants and businesses from the definition of “user”, meaning that these entities are exempt from the imposition of the mobile e-money tax. This was not the case under the Levies Regulations 2021. “Company” is defined as a business by a person engaged by a collector for the collection or disbursement of payments or fund distribution services and “merchant” as a special account designated by a collector and operated by a person through which payment is received from a user for the sale[s] goods or services. Please note that the new regulations have not defined float distribution services.
“Withdrawal” was defined as the withdrawing cash from a user’s mobile money account or bank account at a collector, collection agent or ATM. Prior to the enactment of the new regulations, only the withdrawal of cash from a collection agent was subject to the electronic mobile money tax and not withdrawals through the Collector or an ATM ( ATM).
Transactions in Zanzibar
In addition, Rule 7(2) of the new regulations now imposes an obligation on mainland Tanzania collectors to remit tax collected on e-money transactions made in Tanzania to Zanzibar to the Zanzibar Revenue Board within seven (7) days of the month following the month in which the direct debit was collected.
Reaction to the new regulations
The new regulations were not well received by the general public when they were promulgated. In response to the backlash against levies on electronic money transactions, the finance minister said the government had appointed a team of experts to thoroughly analyze the controversial levies. In the meantime, the government will continue to levy wire transfer levies and other taxes. However, it was stated that changes will be implemented taking into account the recommendations and interests of Tanzanians.