Dar es Salaam — Ernst & Young (EY) on Wednesday met members of the business community with a goal of equipping them with the latest trends and fundamentals of Transfer Pricing (TP).
The move, according to the multinational professional services firm, aimed at ensuring that the business fraternity in the country comply with tax authorities requirements in TP.
TP is the price at which divisions of a company transact with each other, such as the trade of supplies or labour between departments.
The transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities.
"It is important that business communities comply fully with the transfer pricing regulations in the country as violations do not only attract a fine of up to Sh50 million, but also one may suffer a six month jail term as well," EY Tax Partner-Head of Tax Tanzania Tom Philibert said.
Mr Philibert, however, said that there was an improvement in Tanzanian taxpayers' understanding of TP since the country adopted its lawas in 2014.
Delivering a lecture, the Assistant Manager-International Taxation from Tanzania Revenue Authority (TRA), Mr Kayobyo Majogoro said the TP regulations came into existence following a change in the way of doing business, which has led to massive tax evasions.
He cited an example of online business and payments, saying such a model of doing business had often led to a number of multinational companies cheating the government when it comes to paying tax.
Mr Majogoro said despite assuming that multinational companies were paying taxes somewhere on cross border income, TRA was focusing on gaps and inadequacies in domestic laws, which multinational companies exploit.
He said the taxman often tries to capture some factors that have impacts on the country's taxes and was currently reviewing legislations on TP.
"We want both the tax body and taxpayers to cooperate and advise each other where necessary for the good of the country's economy," he said.
He also pointed out that the tax body was trying to come up with a good way of protecting local brands, by ensuring that all local brands registered in foreign nations pay tax.
According to him, any firm operating in a foreign country while registered under a local brand, say Kilimanjaro or Serengeti, would be required to pay tax.