Individuals are categorized in two groups, small individual traders who are not required to maintain audited accounts and the medium individual traders who are required to maintain audited accounts. Small traders are taxed by presumptive tax system, whereas medium are taxed based on the annual profit determined from the audited accounts.
- a)Presumptive tax system
This is a tax system where individuals are taxed based on their annual turnover. The Taxpayers under this system are not obligated to prepare and submit audited accounts to the TRA. However, he may opt not to apply the system and prepare audited accounts and pay tax based on profits.
Conditions which qualify to be in Presumptive tax system.
- the Taxpayer must be a resident individual
- the annual turnover of the business does not exceed the threshold of TSHS 20 million.
- he must conduct business only for the year of income hence not be engaged in any other activities such as employment or investments. Under the presumptive tax system, individual’s income must be derived solely from business sources. If income is derived from other sources such as employment and/or investment the presumptive scheme cannot be used.
- the individual’s income for any year must consist exclusively of income from business with sources in the United Republic of Tanzania.