Taxman now targets TZ’s online entrepreneurs

“IN this world nothing can be said to be certain, except death and taxes.” This timeless quote by Benjamin Franklin (one of the most influential figures in American history) remains profoundly relevant in today’s digital age. While technology continues to revolutionise trade, one certainty remains to be taxation.

This is particularly important for Tanzania’s growing number of online traders who engage in the sale of physical goods through digital platforms.

The message is clear now and that is e-commerce in tangible goods is no longer operating in a regulatory grey zone. With the enactment of the Finance Act, 2022, which amended both the Income Tax Act [Cap 332 RE 2019] and the Value Added Tax Act [Cap 148 RE 2019], the Tanzania Revenue Authority (TRA) has intensified its efforts to bring online businesses into the tax net.

These amendments and subsequent administrative initiatives target individuals and companies conducting online sales of goods, regardless of whether those goods are imported or locally sourced.

The concept of a “digital nexus” introduced through these reforms is a pivotal turning point. Under this principle, a business is deemed to have a taxable presence in Tanzania if it derives income through digital transactions targeted at Tanzanian consumers even without a physical shop, office, or warehouse in the country.

This means that any person or business resident or non-resident who sells physical goods online to Tanzanians is considered to be carrying out a business within the jurisdiction of Tanzania and is therefore liable for tax. Today, Tanzanian online commerce includes a wide variety of goods-based businesses.

These range from individual sellers offering imported clothing and electronics via Instagram, to established SMEs managing their inventory on platforms like Jumia, WhatsApp Business, or self-managed websites. What all these sellers have in common is that they are subject to Tanzanian tax laws if their business activities meet certain thresholds or criteria.

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One of the most significant legal obligations for these traders is tax registration. Anyone selling goods online with the intent to generate profit must register with the TRA and obtain a Taxpayer Identification Number (TIN). If their annual turnover exceeds 200m/-, they must also register for Value Added Tax (VAT).

Those whose turnover is below the VAT threshold are still subject to income tax, either under the regular regime or the presumptive tax system, depending on their level of turnover and business structure. Importantly, most online sellers in Tanzania deal in imported goods—often sourced from markets like Dubai, China, or Turkey.

These sellers are required to comply with the East African Community Customs Management Act (EACCMA), 2004, which governs import duties, customs procedures and offences such as smuggling and under-declaration. Traders who bring goods into Tanzania must ensure that each consignment is properly declared to the TRA, relevant duties and VAT are paid and all cargo tracking documentation is in order.

Failure to comply with customs requirements does not only expose traders to fines and seizures at the point of entry; it can also lead to post-clearance audits.

TRA has sophisticated ways of tracking undeclared shipments, especially as the import and sale of goods is often visible on social media or e-commerce platforms. Any mismatch between import records and sales activity may raise red flags during TRA audits. For compliance, online sellers must also issue proper fiscal documentation for their sales.

This includes using Electronic Fiscal Devices (EFDs) or issuing e-receipts via approved TRA systems. Online sales that occur over social media or messaging apps like WhatsApp are not exempt from this requirement.

In fact, TRA increasingly uses digital surveillance to monitor such transactions, tracing them through mobile money, bank records and advertisements. A major area of risk in goods-based online trade arises from traders who source their inventory informally or from undeclared supply chains.

These are often resellers or commissionbased agents who do not own the stock but market goods on behalf of others. Many such resellers, especially youth and women-led informal businesses, operate as dropshippers or act as intermediaries using platforms like TikTok or Facebook.

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While they may not import the goods themselves, these resellers are still liable for tax on any profit or commission they earn. Moreover, they face potential legal exposure if the goods they sell turn out to be undeclared or smuggled. Without formal contracts or documentation to establish that they are merely agents of another party, resellers may find themselves legally responsible for violations committed by their suppliers.

In the eyes of the law, they may be deemed to possess uncustomed goods or to have aided and abetted smuggling, especially under Section 200 of the EACCMA. The legal framework guiding online sales of goods is rooted in several pieces of legislation.

The Income Tax Act [Cap 332] imposes obligations on individuals and entities deriving income from business, including trading physical goods online. Section 6 of the Act is particularly important as it provides the nexus rule that attributes income tax liability to nonresidents engaging Tanzanian consumers through digital means.

The VAT Act [Cap 148] requires VAT registration for those exceeding the threshold and mandates correct application of VAT on taxable supplies, including goods sold through digital platforms. The Tax Administration Act [Cap 438] governs registration, record-keeping, return filing and penalties.

The EACCMA, 2004, regulates imports and prohibits smuggling and non-declaration. Consequences for noncompliance are becoming more severe as TRA modernises its enforcement systems. Traders who fail to register, understate their income, or import goods without proper declaration may face financial penalties, interest, business closure and even criminal charges.

TRA has also launched targeted enforcement campaigns to track undeclared imports and match them with social media sales activity, e-wallet payments and influencer marketing. But compliance is not merely about avoiding penalties. Formalisation has real benefits.

Registered online sellers become eligible for access to government tenders, legal protections, business financing and partnerships with major e-commerce platforms.

More importantly, formalisation builds credibility with customers, enhancing trust in a crowded digital marketplace. To support transition to compliance, TRA must strengthen taxpayer education and outreach.

Many small-scale online traders particularly youth, women and university students, enter e-commerce without understanding their legal responsibilities. They may not be aware of the thresholds, documentation requirements, or procedures for importing goods legally.

There is a clear need for TRA to simplify the online registration process, launch digital learning modules, offer compliance grace periods and establish support desks targeting informal ecommerce.

As Tanzania’s online market for goods continues to grow rapidly, tax compliance will only become more important. With increased visibility of online businesses, enforcement is not a matter of “if” but “when.” The smart choice is to formalise early, register, declare income, issue receipts and import goods lawfully.

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These steps are not just about compliance; they are the foundation for sustainable business growth. Benjamin Franklin’s words hold true centuries later. Taxes are a certainty, but they need not be a burden. For Tanzanian online traders dealing in physical goods, embracing tax compliance is the key to building lasting, lawful and profitable digital enterprises.

The writer is a registered public practising tax consultant, reachable via 0714 01 96 26.