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Tanzania

Country Name: United Republic of Tanzania
Currency: Tanzanian Shilling (TZS)
Primary Tax Authority: Tanzania Revenue Authority (TRA)
Key Legislation:

  • Income Tax Act of 2004
  • Value Added Tax (VAT) Act
  • Customs and Excise Act
  • Investment Act
  • Tax Administration Act

Fiscal Authority Allocation

Centralized Fiscal System:
Tanzania operates a centralized tax system. The Tanzania Revenue Authority (TRA) administers and collects taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties. Local governments also impose some taxes, particularly property and business license taxes.

Corporate Income Tax (CIT)

Standard Rate: 30%
Tanzania imposes a flat corporate income tax rate of 30% on resident companies and permanent establishments of non-resident companies.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Tanzania-sourced income.

Exemptions and Incentives:

  • Investment Incentives: Tanzania offers tax holidays, CIT reductions, and customs duty exemptions for companies investing in priority sectors, such as agriculture, infrastructure, manufacturing, mining, and tourism. Eligible investments are typically governed by the Tanzania Investment Center (TIC).
  • Special Economic Zones (SEZs): Companies operating in SEZs benefit from CIT holidays for up to 10 years, VAT exemptions, and reduced customs duties.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 18%
Tanzania imposes VAT at a standard rate of 18% on most goods and services. VAT applies to domestic production and imports.

Exemptions:
Certain goods and services, including healthcare, education, and basic food products, are VAT-exempt. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used in producing export goods.

Personal Income Tax (PIT)

Progressive Rates:
Tanzania applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Tanzania-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to TZS 3,240,000: 0%
  • TZS 3,240,001 to TZS 6,240,000: 9%
  • TZS 6,240,001 to TZS 9,120,000: 20%
  • TZS 9,120,001 to TZS 12,000,000: 25%
  • Above TZS 12,000,000: 30%

Non-Resident Tax Rate:
Non-residents are subject to a flat 15% withholding tax on Tanzania-sourced income.

Deductions and Allowances:
Taxpayers can deduct contributions to pension funds, medical expenses, and charitable donations.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to Tanzania’s social security system, which provides pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 10% of gross salary.
  • Employee Contribution: 10% of gross salary.

Withholding Taxes

  • Dividends: 10% for residents, 15% for non-residents
  • Interest: 10% for residents, 15% for non-residents
  • Royalties: 15% for both residents and non-residents
    Tanzania imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under Tanzania’s double taxation agreements (DTAs).

Transfer Pricing Rules

Tanzania follows the arm’s-length principle for related-party transactions. Companies must ensure that cross-border transactions between related entities are conducted at market value. Transfer pricing documentation is required for companies engaging in significant related-party transactions.

Special Tax Regimes

  • Special Economic Zones (SEZs): Companies operating in Tanzania’s SEZs benefit from tax holidays on CIT, customs duty exemptions, and VAT deferrals for up to 10 years. These zones aim to promote investment in sectors such as manufacturing, logistics, and export-oriented industries.
  • Mining Sector: Tanzania has specific tax rules for companies involved in mining, including royalties on mineral sales and exemptions on import duties for mining equipment.

Other Taxes

  • Customs Duties: As a member of the East African Community (EAC), Tanzania applies customs duties based on the EAC Common External Tariff. Rates vary between 0% and 25%, depending on the type of goods. Essential goods, such as food and medical supplies, may benefit from lower or zero rates.
  • Excise Taxes: Excise taxes are levied on goods such as alcohol, tobacco, fuel, and luxury products.
  • Property Tax: Tanzania imposes property taxes on land and buildings, which are generally collected by local governments.

Double Taxation Agreements (DTAs)

Tanzania has signed several double taxation agreements (DTAs) with countries such as South Africa, India, Canada, and Germany. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Tanzania and other jurisdictions.

Local Taxes

Local governments in Tanzania may impose property taxes, business license fees, and service levies. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Tanzania Revenue Authority (TRA).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by six months after the end of the company’s financial year. Personal income tax returns are generally due by June 30th. VAT returns are filed monthly or quarterly, depending on the business’s turnover.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. Interest is generally charged at 1% per month on overdue tax amounts, with additional penalties for tax evasion or underreporting income.

Recent Developments

Focus on Renewable Energy:
Tanzania is promoting investment in renewable energy projects, particularly in hydropower, solar, and wind energy. Tax incentives, including CIT holidays and VAT exemptions, are available for companies investing in renewable energy infrastructure.

Digital Economy and E-Commerce Taxation:
Tanzania is introducing measures to regulate the taxation of e-commerce and digital services. The government is exploring how to tax digital platforms and online transactions to increase revenue and improve tax compliance in the digital economy.

Infrastructure Development:
To boost economic growth, Tanzania is offering tax incentives to companies involved in infrastructure projects, such as roads, railways, and ports. These projects are seen as crucial to improving connectivity and facilitating trade.

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