WHY I USE EFD IN MY BUSINESS, AND WHY YOU SHOULD TOO.
There is a misconception among business owners that issuing an EFD receipt is increasing the tax liability one has to pay to the Tanzania Revenue Authority (TRA). This is not actually the case, EFD is the most reliable determinant of sales/revenue but does not necessarily increase the amount of tax liable because there are other determinants to be considered in the determination of a person’s tax liability to be payable. Before we go further into the subject first let’s understand these technical terms:
Electronic Fiscal Device (EFD)
This is a machine designed for use in business for efficient management controls in areas of sales analysis and stock control system and which conforms to the requirements specified by the laws.
Tax Liability
Tax liability is the total amount of tax owed in a given period by individuals and organizations, to state and local governments. For businesses, tax liabilities are short-term liabilities recorded on a balance sheet and paid within a year. For individuals, tax liabilities are covered by withholdings from wages or salaries or are paid out of pocket.
Therefore, EFD is a preferred reliable source of data for sales revenue due to the following:
- It has in-built Fiscal Memory which cannot be erased by mechanical, chemical, or electromagnetic interferences,
- Automatic self-enforcing issuing of daily “Z” report after every 24 hours,
- Transmits tax information to the TRA system automatically,
- It has an irreversible date mechanism,
- Issues fiscal receipts/invoice which is uniquely identifiable,
- It can be used as a stand-alone and configured into a network,
- It has at least 48 hours of power backup, and it can use an external battery in areas with no electricity supply,
- It saves configured data and records on permanent fiscal memory automatically,
- It has tax memory capacity that stores data for at least 5 years or 1800 day transactions,
- Avoids conflict during audit and assessment of tax.
- Simplifies and eases objection and appeals
However, there are other ways that could be used for the determination of tax liable which include the following:
Statement of estimated tax returns — these are tax estimates which are payable in quarterly installments.
Statement of tax returns — after closing the business year, also known as the year of income, business owners are required to submit financial statements for tax purposes which can be used to assess tax liability.
Cash flows & Bank account — when submitting returns to TRA, bank information is required so as to determine the number of funds available on the business account of the taxpayer in question and furthermore to ascertain the cash flows patterns of a taxpayer at a particular period of time.
VAT Filing Statement & Statement of Tax withheld — the information filed on these statements can also be used for comparative purposes in the process of ascertaining the tax liability of an individual or tax person.
THEREFORE: Taxpayers & business owners shall issue legal receipts as per the requirement of the law because the base that the TRA uses in the determination of tax liability is very wide and is harder to not issue a legal receipt and match the tax information on several bases that are there for the ascertainment of tax. Business owners should provide EFD receipts for every transaction and put emphasis on proper documentation of business expenses so as to reduce their tax liability.
Disclaimer — This publication contains general information only, and it is not a substitute for such professional advice, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
Prepared by; Carloss Mutoka — Tax & Accounting consultant
For Inquiry; mobile — 0755194548 email — carloskmutoka@gmail.com
