Tanzania Tax Update: Finance Act 2025 highlights

Thin capitalisation: The definition of ‘equity’ now encompasses positive retained earnings. 

Taxation of retained earnings: If an entity does not distribute its after-tax earnings within 12 months following the end of its tax year, the Commissioner General (CG) for Tanzania Revenue Authority may deem 30% of the profit of the entity as having been distributed on a date 12 months post the completion of the tax year. A 10% withholding tax will be imposed on the deemed distribution. 

If an entity subsequently makes a dividend distribution, it shall not be obligated to withhold income tax on the amount deemed distributed. 

Withholding tax on hired motor vehicles: Withholding tax is levied at a rate of 10% on payments made by a resident person to another for the rental of motor vehicles.

Preparation or certification of returns of income by Certified Public Accountants: Corporations with gross annual income exceeding Tanzania Shillings (TZS) 100m and individuals with an annual turnover exceeding TZS 500m are required to have their income returns prepared or certified by a certified public accountant in public practice.

Taxation of sale of forest produce: Effective 1 January 2026, a resident person receiving payment for the sale of forest produce (timber, logs, mirunda and poles) must remit income tax in a single instalment amounting to 2% of the gross payment prior to the transportation of the forest produce. “Gross payment” means the farm gate price, purchasing price or value of the forest produce as determined by Tanzania Forest Service Agency, whichever is greater.

Alternative Minimum Tax (AMT): The AMT rate has increased from 0.5% to 1% of turnover, applied to corporations with perpetual unrelieved tax losses for the current and preceding two tax years. 

Reduced public stake in companies newly listed on the Dar es Salaam Stock Exchange (DSE): A company that is listed on the DSE with a minimum of 25% (previously, 30%) of its shares owned by the public benefits from a 25% corporate income tax rate for the initial three years following its listing.

Restriction of income tax exemption for operators in export processing zones (EPZ) and special economic zones (SEZ): Income generated by investors in the EPZ and SEZ, who manufacture for sale or distribute products in the domestic market, is not exempted from income tax.

Increased / new withholding tax rates:

• Service fees for technical or management services paid by a resident person in the extractive sector to a resident person – 10%, up from 5%
• Insurance premiums – 10%, up from 5%
• Commission for gaming advertisement or promotion – 10%

VAT withholding agent: A “withholding agent” means-

1. The Ministry responsible for Finance;
2. A Government entity which retains whole or part of its collected revenue; and
3. A registered person as may be appointed by the CG by notice

Withholding of VAT on taxable supplies: When a taxable supply at a standard rate of 18% is provided to a withholding agent, the agent is required to withhold 3% of the VAT due for goods and 6% for services.

Lower VAT rate for electronically paid supplies: Effective 1 September 2025, when a taxable supply at a standard rate is made to a person in Mainland Tanzania who is not VAT registered, and payment is rendered through a bank or an electronic payment system approved by the CG, the applicable standard VAT rate shall be 16% rather than 18%. 

The CG shall specify the persons eligible and the manner of implementation of the lower VAT rate. 

The supplier shall submit proof of bank or electronic payment, demonstrating that the consideration for the supply was made electronically or via bank, through the system or any manner directed by the CG.

Notification by intending traders: VAT registered intending traders must notify the CG if they do not begin making taxable supplies by the date specified in their VAT registration application. 

Notification must occur within 90 days following the end of the stated period, accompanied by justifications for non-compliance. Failure to notify The CG may either grant or deny an extension for the commencement of taxable supplies. There is a deemed VAT deregistration if the CG declines to grant an extension.

Expansion of the definition of electronic services: The term “online intermediation services” included under the definition of “electronic services” now encompasses an online accommodation marketplace and payment services platform. 

Accounting for withheld VAT: A withholding agent is required to account for and remit the withheld VAT by the due date of the VAT return, which is the 20th day of the subsequent month, or in a manner as may be directed by the CG. 

VAT withholding certificate: A withholding agent who is liable to pay VAT shall, not later than the day on which VAT becomes payable on the supply (earlier of the date of invoicing, payment, or time of supply), issue to the supplier a VAT withholding certificate generated by the system approved by the Commissioner General. 

The withholding certificate shall be issued in the form prescribed by the Minister for Finance and shall include the date of issue, taxpayer identification number (TIN) and value-added tax registration number (VRN) of both the supplier and the withholding agent, supply description, total consideration and the VAT amount. 

A withholding certificate that fails to meet these criteria cannot be utilised by a supplier to claim a credit for the withheld output tax.

Credit for withheld output VAT: The supplier, in arriving at the VAT payable position, is allowed to subtract the VAT withheld (similar to input tax) provided they hold a valid VAT withholding certificate at the time of filing the VAT return for the relevant tax period. 

Due date for filing VAT returns: The deadline for submitting monthly VAT returns is the 20th of the subsequent month, regardless of whether this date coincides with a weekend or public holiday.

Extension of zero-rating of supplies: 

• A supply of locally manufactured fertilizer shall continue to be zero-rated up to 30 June 2028
• A supply of locally manufactured garments made from locally grown cotton shall continue to be zero-rated up to 30 June 2026

New exemption:

• A supply of piped natural gas specifically for being converted to Compressed Natural Gas (CNG) to be used exclusively for fuelling motor vehicle from 1 July 2025 to 30 June 2028
• An import of carbonization furnace for exclusive use in manufacturing of briquettes

Amended exemptions:

• Unprocessed sisal fibre
• Newspapers printed and published locally by a licenced person under the Media Services Act
• Liquified petroleum gas
• Compressed natural gas for motor vehicles
• Supply of solar panels, modules, solar charger controllers, solar inverter, vacuum tube solar collectors and solar battery specifically designed for exclusive use in storage of solar power
• Aircraft and aircraft maintenance to a local operator of air transportation.
• Aircraft engine to a local manufacturer or assembler of aircraft or to a local operator of air transportation
• An import of CNG plants equipment including CNG Compressors, CNG metering equipment, CNG storage cascades, CNG special transportation vehicles and CNG dispenser by a natural gas distributor

Abolished exemption: 

• Locally supplied forks, rakes, axes, dam liner
• Locally supplied new pneumatic tyres used in agricultural and forest vehicles
• Bitumen
• Liquified natural gas
• Compressed petroleum gas
• Compressed or liquified gas cylinders for natural gas for cooking

A licence for the manufacture of excisable goods will expire 12 months from the date of issuing. The licence previously expired on December 31 of each year.

The definition of financial institutions now encompasses microfinance service providers classified as Tier 1 under the Microfinance Act, permitting the imposition of a 10% excise duty on fees and charges paid to these providers.

The excise duty rate for pay-per-view television services delivered via cable, terrestrial infrastructure, satellite, or other technologies is 7%, up from 5%.

The deadline for delaying payment of excise tax and submitting excise duty returns is now the 25th day of the month subsequent to the month in which the duty or return is due. Previously, the deadline was the last day of the subsequent month.

Imported second-hand tableware, kitchenware, utensils, cutlery, and other related articles are subject to an excise charge of 20%.

New excise duty rates:

• Imported margarine – TZS 50 per kg
• Potatoes – TZS 50 per kg for locally produced and TZS 100 per kg for imported
• Ice cream, whether or not containing cocoa – 5% for locally produced and 10% for imported, per kg
• Beer made from malt – TZS 630 per litre / TZS 928 per litre/ TZS 937.90 per litre
• Wine with domestic grapes content exceeding 75% - TZS 215 per litre
• Cider – TZS 2,974.74 per litre
• Opaque beer – TZS 555 per litre / TZS 978 per litre
• Vodka, whiskies, and rum – TZS 4,003 per litre/ TZS 4,411.06 per litre/ TZS 4,411.06 per litre
• Fireworks – 25%
• Soap – 10%
• Cufflinks and studs – 10%
• Imported seats – 25%

Private ruling relating to tax residence: A private ruling concerning tax residence status shall be accompanied by a tax residency certificate from the Commissioner General.

Disclosure of subcontractors: Entities in the construction and extractive sectors are required to inform the CG about their subcontractors within 30 days from the date of commencement of subcontracted activities. The disclosure must encompass the name of the subcontractor, contract value, nature of the subcontracted works, and the timeframe for executing the works.

Deemed admission of an objection: An objection to a tax assessment or liability is deemed accepted if filed within the statutory timeframe (30 days from receipt of the tax assessment) or on the date of payment of the tax deposit for validation of the objection (including the date when a lesser amount agreed upon by the CG is paid).

Failure to respond to objection settlement proposal within deadline: If an objector does not respond to a settlement proposal from the CG regarding a notice of objection within the legal timeframe (within 30 days from receipt of the proposal), the proposal of the CG will be deemed an objection decision, and the objector may appeal to the Tax Revenue Appeals Board.

Penalties for transfer pricing adjustments for loss-making entities: A person engaging in controlled transactions who does not ascertain the income and expenditure arising from such transactions in accordance with the arm's length principle is subject to a penalty equal to 30% of the adjusted loss. Previously, penalties applied only to profit-making entities (100% of tax shortfall). 

5. Gaming Tax

• Land-based – 13%, up from 12%
• Sports betting – 12%, up from 10%

7. Airport Service Charge

Domestic flights – TZS 11,000 per passenger, up from TZS 10,000. 

International flights – USD 40.4 per passenger, up from USD 40, applicable to both Tanzanian residents and non-residents.

The following imports are liable to an industrial development levy calculated on the cost, insurance, and goods (CIF) value:

• Starch – 5%
• Liquid glucose – 5%
• Pasta – 15%
• Laundry or bar soap – 15%
• Unbleached paper – 10%
• Wire rod – 10%
• Beer, energy drinks, non-alcoholic beer – 5%
• Wine – 10%
• Organic surface-active agents – 10%
• Portland cement – 10%
• Nails, tacks, drawing pins, corrugated nails, staples – 5%
• Road tractor for semi-trailers – 10%
• Furniture – 10%
• Ceramic tiles – 5%
• Bars and rods – 10%
• Flat rolled products – 5%
• Prefabricated buildings – 10%
• Kitchenware and tableware, other household articles, of plastics – 10% 
• Cast glass and rolled glass in sheets or profile – 5%
• Drawn glass and blown glass in sheets or profile – 5%
• Float glass – 5%
• Glass, bent, edge worked, engraved or otherwise worked – 5%
• Toughened (tempered) safety glass and laminated safety glass – 5%
• Multiple-walled insulating units of glass – 5%
• Framed and unframed glass – 5%
• Optical fibre cables – 10%

Note: Levy on starch, pasta, and optical fibre cables shall commence on 1 January 2026

A foreign national entering Mainland Tanzania via land, seaport, or airport must, upon arrival, acquire an inbound travel insurance coverage at a premium equivalent to 44 United States Dollars in Tanzanian Shillings. 

The inbound travel insurance is to offer emergency assistance to foreign nationals for a maximum duration of 92 days from the date of arrival, in cases of: (a) medical emergencies; (b) loss of luggage; (c) emergency medical evacuation or repatriation.

Mandatory insurance is not applicable to residents of the East African Community Partner States or the Southern African Development Community Partner States.

The fuel levy rate on diesel and petroleum is TZS 523 per litre, up from TZS 513.

Fuel levy on kerosene is TZS 10 per litre. Previously, there was no levy.