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Changes of 18% VAT in Tanzania

The Tanzanian government has thrown the safari industry into a state of confusion by introducing a value-added tax (VAT) of 18% to many tourist services previously exempt from VAT. The changes became applicable as at 1 July 2016.

The major problem is that tour operators were given only a few short weeks to implement the changes. This small window of time has created a multitude of issues – for example, most camping and Kilimanjaro operators are not even VAT-registered because their services were previously VAT exempt. They are therefore unable to issue VAT receipts to their clients.

Tourists who have booked and paid for their safaris (usually done months in advance) are being asked by operators to pay extra.

Many tourist services (although not accommodation) were previously exempt from VAT, but this has now changed, and as a result, tours with accommodation are 5% to 10% more expensive and most camping and Kilimanjaro tours are 18% more expensive.

This change in VAT laws could potentially damage an industry which Tanzania relies heavily on for generating foreign exchange. Tourism is one of the main revenue sources for the country and a substantial part of the country’s gross domestic product. Neighbouring Kenya offers substantially cheaper safaris and many great safari destinations, so a real fear is the long-term damage this could do to the industry in Tanzania.

The Tanzania Association of Tour Operators (TATO) has said that due to an assortment of taxes, the country already charges 7% more than other safari countries in the region. The new VAT would mean a 25% difference in Tanzanian safaris compared with safari countries that have exempted these tourist services from VAT.

What is VAT?
VAT is a form of taxation paid by the end consumer. Essentially businesses collect VAT by adding it on top of their rates, but also pay VAT on products and services they purchase. If a business collects more VAT than it has paid, then it has to pay the difference to the government. And, if a business has paid more VAT than it has collected, it can reclaim the difference from the government.

Tour operators in Tanzania should be able to reclaim VAT from the government (if they pay more than they collect) but they have expressed serious doubts as to whether they will ever see a refund come their way. For example Ngorongoro Conservation Area Authority has not been issuing VAT receipts, while the Tanzania National Parks Authority is issuing receipts, but they’re missing the VAT registration numbers, which allow operators to reclaim the VAT.

Our Advice for Tour Operators
Our general advice to tour operators is the following:

  • explain the VAT changes to your clients clearly
  • ask your clients to pay the VAT for new trips and for trips which have already been booked and paid for in full
  • the VAT changes include ground transportation and guiding fees, park fees, and camping fees (if applicable)
  • VAT does not constitute an extra 18% on the whole trip (for example, VAT on accommodations should already have been included in the price)
  • provide a clear breakdown of the price clients have paid and to which sections the VAT applies
  • emphasise to your client that these changes in VAT are made by the government, and are not in the control of tour operators.

Our Advice to Safari-Goers
Our general advice to safari tourists is the following:

  • if you have already paid for a safari in Tanzania, it is likely that your tour operator will ask for an additional payment, due to recently introduced changes to Tanzania’s VAT laws. This isn’t the fault of your tour operator – these changes were imposed by the Tanzanian government.
  • the 18% VAT is now added to ground transportation, guiding fees, park fees, and camping fees (if applicable). Besides road transfers, water-based safaris and hot-air balloon landing fees also fall under ‘ground transportation’. Birdwatching falls under ‘guiding fees’, and ‘camping fees’ include both the normal camping fees and special camping fees that apply to tented camps. VAT also now applies to wildlife viewing packages offered by accommodations.
  • VAT is already charged on accommodation (hotels/lodges/camps), which normally make up a big part of your trip (meaning that it should have already been included in your original payment for your safari)
  • the VAT changes should not mean that you are going to be charged an additional 18% on your full trip price, unless you are going on a camping or Kilimanjaro tour
  • if you are asked to pay extra be sure and request a full breakdown on where and what you are paying. The additional cost may include the 18% VAT on park fees, transportations, guiding service and camping fees. It should not include other safari services.
  • please note that simultaneous to the introduction of new VAT charges, the Ngorongoro park fee was also increased $10 per person and an additional $50 per vehicle. Government imposed park fee increases are generally not included in the price that you’ve paid for your safari.

The short notice the Tanzanian government gave to the safari industry of its intended changes to VAT has shocked hundreds of tour operators. Thousands of clients have been hit with unexpected charges and park authorities haven’t had enough time to implement these changes and provide proper VAT receipts.

The main issue is not the introduction of new VAT charges, but the short notice the Tanzanian government gave ahead of the changes. If tour operators had been given 6 to 12 months’ notice that the government intended to make changes to the VAT, then the industry would have had sufficient time to adapt and increase their rates accordingly. This in turn would have given clients the opportunity to understand the full cost of their safari before booking.

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