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VAT on M-Pawa - Frequently Asked Questions

1) What is VAT?
VAT stands for Value Added Tax. It is a consumption tax charged on taxable goods and services whenever value is added at each stage of production and at the final stage of sale.

2) What is the VAT Act?
This is the Act that details a legal framework on the application and collection of, administration and management of the value added tax.

3) When did the law take effect?
This law took effect on 1st July, 2016.

4) What is the Applicable VAT rate?
The Applicable VAT rate in Tanzania is 18%.

5) Which government body has dictated compliance with the VAT Act?
The Tanzania Revenue Authority that is charged with the responsibility of managing the assessment, collection and accounting of all central government revenue has mandated all Financial Services to comply with the new Act on VAT payments on collected fees.

6) Does this law apply to M-Pawa Services?
Yes. M-Pawa charges a fee of 9% on all Loan Requests. This fee is subject to VAT charge that is required to be remitted to TRA. There is no change to the Savings feature.

7) What will change about the Loan Request process on M-Pawa due to this Act?
In compliance with TRA regulations, VAT will be levied on all facility fees charged on M-Pawa loans with effect from DD/MM/YY. This means that the loan amount transferred to your M-Pesa will be less Facility Fees and VAT, with the VAT amount on the service consumed remitted to TRA.

8) What will be the Loan amount to repay after 30 days?
The amount you will repay on or before day 30 will be the amount you requested as a loan.

9) What happens to my existing Loan?
VAT will not be applied on any existing loan.

10) Will I be notified about the amount that will be deducted as Fees and VAT?
Before confirmation of a loan request, you will receive a confirmation message that will summarise how much will be deducted from the Loan amount.

You will also receive an SMS notification after your loan request is successful that will detail how much has been deducted and how much should be repaid within 30 days.

Loan Request Example:

Loan Request Amount

TZS 1,000

Facility Fee (9% of Loan Amount)

TZS 90

VAT (18% of Facility Fee)

TZS 16.20

Disbursed Amount to M-Pesa

TZS 893.80

Loan Repayment Amount

TZSĀ 1,000