The Tanzanian finance Act.

Overview

The Finance Act, 2025, introduces a series of comprehensive fiscal reforms aimed at strengthening Tanzania’s public revenue framework and improving compliance mechanisms. These amendments impact key tax legislation, including the Income Tax Act, the Value Added Tax Act, the Excise (Management and Tariff) Act, and the Tax Administration Act. The Act seeks to align the tax regime with current economic realities, encourage investment, and enhance administrative efficiency.

This Article gives an in-depth analysis of the amendments.

1. THE INCOME TAX ACT, CAP 332

1.1 Introduction of section 33A

The amendment empowers the Commissioner General of the Tanzania Revenue Authority (TRA) to deem thirty percent (30%) of a corporation’s retained earnings as distributed dividends where the corporation has not declared any dividends within twelve (12) months following the end of the relevant year of income.

Before the coming into force of the Finance Act, 2025, there was no specific legal provision empowering the Commissioner General to deem retained earnings as distributed dividends. The introduction of Section 33A seeks to curb tax avoidance practices arising from indefinite profit retention, thereby promoting transparency and equity in corporate taxation.

1.2 Amendment of Paragraph 3 of the First Schedule

The Schedule has been revised to introduce changes in corporate income tax rates applicable to certain entities. The amendment provides that companies listed on the Dar es Salaam Stock Exchange (DSE) shall now be eligible to pay corporate income tax at a reduced rate of 25% for a period of three consecutive years from the date of listing, provided that at least 25% of their equity ownership is held by the public.

Before the amendment, the incentive was available only to companies with a minimum of 30% public equity ownership, thereby limiting the number of qualifying entities.

In addition, the amendment has increased the Alternative Minimum Tax (AMT) rate from 0.5% to 1% for corporations that have incurred perpetual unrelieved losses for three consecutive years.

1.3 Amendment of Sections 75, 80, and 84

• Section 75(4) now provides that licensees conducting mineral processing, smelting, or refining may utilize only 60% of their previous year’s unrelieved losses against their chargeable income. The remaining 40% of chargeable income will be subject to the standard 30% corporate tax rate. Before this amendment, the ratio for loss utilization was 70%/30%, allowing greater offset against chargeable income.
• Section 80(1)(c) has been similarly amended for petroleum operations, restricting the utilization of previous year unrelieved losses to 60% of chargeable income, with the remaining 40% taxable at the standard 30% rate. Previously, companies could offset 70% of chargeable income using prior losses.
• Section 84(4) applies the same limitation to midstream and downstream activities, ensuring only 60% of the previous year’s unrelieved losses may be used against current chargeable income, while 40% remains subject to normal corporate tax.

1.4 Amendments of Paragraph 4 of the First Schedule on Withholding Tax Rates

The schedule has introduced changes in the withholding tax rates applicable to various sectors and transactions.

• An increase in the withholding tax rate from 5% to 10% on payments made to resident management or technical service providers operating within the extractive sector, namely mining, oil, and gas industries.
• An increase in the withholding tax rate from 5% to 10% on insurance premiums paid to a non-resident insurance provider.
• The introduction of a 10% withholding tax on commission payments related to gaming advertisements or promotions.
• The introduction of a 2% withholding tax on payments for salt produced by Primary License holders or artisanal miners.

Before the enactment of the new amendments, the withholding tax rate for payments to resident management or technical service providers in the extractive sector stood at 5%, and no withholding tax was specifically imposed on gaming advertisement commissions or salt production by small-scale miners.

1.5 Amendment of Section 117

Under the new amendments, Section 117(3) of the  Act has been revised to introduce a requirement that Individuals with an annual turnover exceeding TZS 500 million and Corporations with gross income exceeding TZS 100 million must have their tax returns prepared or certified by a Certified Public Accountant (CPA) in public practice.

Before the coming into force of this amendment, the law required taxpayers to submit annual returns of income but did not mandate certification by a CPA, regardless of the taxpayer’s income level. This sometimes resulted in inaccurate or incomplete tax declarations, especially among high-turnover taxpayers.Top of FormBottom of Form

1.6 Amendment of Section 115

The new Finance Act revises the income tax rate on capital gains derived by non-resident persons from the realization of land, buildings, shares, petroleum rights, or mineral rights. The amendment increases the tax rate from 20% to 30%, payable as a single installment at the time of realization or receipt of the gain.

This amendment is aimed at enhancing revenue mobilization and ensuring tax equity between resident and non-resident taxpayers engaged in high-value asset transfers. The new rate aligns Tanzania’s capital gains taxation framework with global and regional standards, discouraging speculative transactions by foreign investors and promoting fair contribution to the national revenue.

1.7 Introduction of a New Section 116A

The amendments provide for the payment of income tax by way of a single instalment tax on the sale of forest produce. Under this provision, any resident individual selling forest produce is required to pay a single instalment tax at the rate of 2% of the gross payment.

Before the introduction of this new section, there was no specific mechanism governing tax collection on the sale of forest produce, resulting in challenges for effective taxation and revenue monitoring in the forestry sector, particularly among small-scale sellers.

After the amendment, effective 1 January 2026, individuals (excluding corporations) engaged in the sale of forest produce will be required to comply with this 2% single instalment tax rate.

1.8 Amendment of Paragraph 1(1)(o) of the Second Schedule

The principal Act is amended in paragraph 1(1) of the Second Schedule by deleting the proviso to subparagraph (o), which deals with income tax exemptions for investors. Under the amendment, the income tax exemption for the initial ten-year period shall no longer apply to investors operating in Export Processing Zones (EPZ) or Special Economic Zones (SEZ) who produce goods for domestic sale.

Previously, investors in EPZs and SEZs were eligible for a full ten-year income tax exemption, regardless of whether their products were destined for export or domestic markets. The law did not differentiate between domestic and export-oriented production, allowing investors producing for the local market to enjoy the same tax incentives as exporters.

2. THE VALUE ADDED TAX ACT (VAT), CAP 148

2.1 Introduction of New Definitions under Section 2 of the Act

The recent amendments to the VAT Act have introduced new definitions under Section 2, namely Assisted Government Entity and Withholding Agent.

• Assisted Government Entity is defined as a government entity in respect of which the Commissioner General is empowered to collect considerations for a taxable supply payable to such entity.
• Withholding Agent is defined to include: The Ministry responsible for finance; A Government entity which retains all or part of its collected revenue; and a registered person as may be appointed by the Commissioner General by notice.

Before this amendment, the VAT Act did not specifically define these terms, creating potential ambiguities regarding which entities were responsible for collecting or remitting VAT on behalf of the government.

The inclusion of these definitions provides clarity and legal certainty, ensuring that all relevant parties understand their obligations in VAT collection and remittance processes. This change enhances compliance, strengthens tax administration, and aligns with best practices in revenue management.

2.2 Introduction of a New Section 27A

The newly introduced Section 27A provides for VAT payable to an assisted Government entity. While the general VAT provisions govern the payment and collection of VAT for standard transactions, Section 27A specifically stipulates that VAT collected by the Commissioner General on considerations for supplies made by an assisted Government entity shall be treated as advance VAT paid by such entity to the Tanzania Revenue Authority (TRA).

Before the amendment, the law did not explicitly address the treatment of VAT in transactions involving assisted Government entities, leading to potential uncertainties in accounting and compliance. After the insertion of Section 27A, the collected VAT is formally recognized as an advance VAT payment by the assisted Government entity, streamlining tax administration and ensuring proper crediting against the entity’s VAT obligations.

2.3 Amendment of Section 51

The recent amendments have introduced changes to Section 51(2) of the VAT Act, specifically addressing the scope of electronic services supplied to an unregistered person in Mainland Tanzania. While Section 51 previously covered certain electronic services, the newly amended provision broadens this scope by explicitly including online intermediary services or platforms, extending it to cover online accommodation marketplaces and payment services platforms.

Before the amendment, Section 51(2) applied to a limited range of electronic services provided to unregistered persons, which left certain digital transactions outside the VAT net and created compliance gaps.

2.4 Amendment of Sections 56 and 57

Under the new amendments, Section 56 and Section 57 have been revised to extend the periods for zero rating of fertilizer and locally manufactured garments made from locally grown cotton. Section 56 now provides that fertilizers will remain zero rated from 1 July 2025 to 30 June 2028, while Section 57 extends the zero rating of locally manufactured cotton garments from 1 July 2025 to 30 June 2025.

Before the amendments, the law provided for zero rating only for limited periods, which restricted the benefits to importers, distributors, farmers, and local garment manufacturers.

2.5 Amendment of Section 70

The recent amendments have introduced changes to Section 70 of the VAT Act, aimed at strengthening VAT compliance and clarifying filing requirements. The amendments insert several new subsections after Subsection 1:

• Subsection 2: A taxable person is prohibited from deducting withheld output tax unless it is supported by a valid VAT withholding certificate at the time of filing the VAT return.
• Subsection 3: A taxable person supplying goods or services to unregistered persons at a VAT rate of 16% must submit proof of payment showing that consideration for the supply was made electronically or through a bank. This proof must be submitted through the system or in any manner directed by the Commissioner.
• Subsection 4: An assisted Government entity is required to attach a valid certificate of advance VAT paid when filing a VAT return.
• Deletion of Subsection 7: The previous provision allowing a VAT return due date to roll forward if the 20^th day fell on a weekend or public holiday has been deleted. Now, a VAT return must be filed on or before the 20^th of the month following the month to which the return relates.

Before these amendments, Section 70 lacked clarity on the requirements for deducting withheld VAT, proof of payment for supplies to unregistered persons, advance VAT for government entities, and filing deadlines in relation to weekends and public holidays.

2.6 Introduction of VAT Exemptions on Certain Items under Part I of the Schedule

The recent amendments introduce VAT exemptions on specific items listed under Part I of the Schedule, including unprocessed sisal fiber, newspapers printed and published locally by a person licensed under the Media Services Act, re-insurance, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG) for motor vehicles, LPG tanks or cylinders for cooking, solar panels, solar modules, solar charger controllers, solar inverters, vacuum tube solar collectors, and solar batteries specifically designed for exclusive use in the storage of solar power.

Additionally, the VAT exemption period for double-refined edible oil from locally grown seeds by manufacturers has been extended from July 1, 2025, to June 30, 2026.

Before this amendment, VAT exemptions were limited in scope and time, leaving certain essential inputs, energy sources, and locally produced goods subject to VAT, which increased costs for manufacturers, service providers, and energy users.

2.7 Amendment of Section 5

The recent amendments to the VAT Act have introduced new provisions under Section 5, specifically addressing VAT obligations for certain transactions.

• Subsection 5 provides that a withholding agent paying for taxable supplies shall withhold 3% on goods supplied and 6% on services supplied in Mainland Tanzania.
• Subsection 6 specifies that a VAT rate of 16% shall apply on supplies made in Mainland Tanzania to an unregistered person paying through a bank or an electronic payment system approved by the Commissioner General.

Before the amendment, the VAT Act did not explicitly impose withholding obligations on agents for goods and services, nor did it provide a clear mechanism for VAT collection from unregistered persons making electronic or bank payments.

2.6 Introduction of New Sections 90A and 90B

The recent amendments to the VAT Act introduce Sections 90A and 90B, which provide for the issuance of certificates related to advance output tax and VAT withholding.

• Section 90A specifies that a day after the end of the tax period, the Commissioner General shall issue an assisted Government entity with a certificate of advance output tax. This certificate must include key details such as the Tax Identification Number (TIN) and VAT Registration Number (VRN) of the assisted Government entity, date of issuance, certificate number, consideration payable, and advance output tax paid.
• Section 90B stipulates that on the day VAT is due, the withholding agent shall issue the supplier with a VAT withholding certificate. This certificate must contain essential information, including the date, TIN, and VRN of the withholding agent, consideration payable, VAT rate, and amount of VAT withheld. Importantly, without this certificate, the supplier is not allowed to claim the output tax withheld.

Before the introduction of these sections, there was no formal mechanism for issuing certificates for advance output tax or VAT withholding, which created uncertainties for suppliers and Government entities regarding the documentation required to claim input or withheld taxes.

3. THE TAX ADMINISTRATION ACT, CAP 438

3.1 Repeal and Replacement of Section 23

Under the new amendments, Section 23 of the Tax Administration Act (TAA) has been repealed and replaced with new provisions aimed at recognizing and formalizing small-scale traders operating within the informal sector. The new section provides for the registration of such traders whose annual turnover is below the minimum taxable income threshold of TZS 4,000,000, provided that they possess a Taxpayer Identification Number (TIN).

Before the coming into force of the new amendment, the law did not expressly recognize or provide a framework for the registration and regulation of small-scale traders whose income fell below the taxable threshold. As a result, many informal traders remained outside the formal tax system, leading to challenges in tax administration, data collection, and economic inclusion.

3.2 Repeal and Replacement of Section 42

The newly substituted section empowers the Commissioner to establish a computerized electronic system for the filing, furnishing, storing, archiving, and accessing of electronic tax documents. Access to this system will be granted only to registered users, ensuring controlled and secure use of electronic tax services.

Before the amendment, the law did not provide a detailed framework for electronic management and authentication of tax documents, leading to reliance on manual filing processes that were often time-consuming and prone to administrative inefficiencies.

• Amendment of Section 54(2)

The amended provision requires any person engaged in construction or extractive industry to disclose, within thirty (30) days from the commencement of subcontracted works, the names of the subcontractors, the value, nature, and duration of the subcontracted works.

Before the amendment, the law did not impose a specific disclosure timeline or comprehensive reporting obligation concerning subcontracted works, which limited the Tanzania Revenue Authority’s (TRA) ability to track transactions within these industries.

• Amendment of Section 62(8)

The amended Section 62(8) of the act introduces clearer timelines and conditions for when an objection to a tax decision shall be deemed admitted by the Commissioner of the TRA. Under the new provision, an objection is considered admitted on the following basis:

• Upon filing an objection and payment of the higher amount between the tax not in dispute or one-third of the assessed tax, or upon payment of an approved lesser deposit or waiver of the one-third deposit; or
• In any other circumstance, on the date of filing the objection with the Commissioner.

Before this amendment, there was ambiguity as to when an objection was officially recognized as admitted, leading to procedural uncertainties and administrative delays.

• Amendment of Section 63(4)

The amendment to Section 63(4) of the act provides that where an objector fails to make submissions on the Commissioner’s proposal to settle an objection within thirty (30) days of receiving the proposal, such failure shall be deemed to constitute a final objection decision. In such cases, the objector retains the right to appeal to the Tax Revenue Appeals Board (TRAB).

Before the amendment, the Act did not clearly define the consequences of an objector’s failure to respond within a specified period, leading to potential procedural stagnation in objection handling.

4. THE EXCISE (MANAGEMENT AND TARIFFS) ACT, CAP 147

4.1 Amendment of Section 10(5)

The amended section now provides that the license shall remain valid for a period of twelve (12) months from the date of issuance, rather than expiring on 31 December of each year as previously prescribed.

Before the amendment, all manufacturing licenses under the Excise Duty Act were uniformly set to expire on 31 December, regardless of the date of issuance. This often-created administrative inefficiencies, as manufacturers who obtained licenses later in the year were required to renew them within a short period, leading to potential business disruptions and compliance challenges.

4.2 Amendment of Section 126

The new Section 126(5)(a) has been repealed and replaced to redefine the scope of dutiable value. It now includes the use of a cable or mobile phone, either fixed or wireless, and the amount payable for electronic communication services or data supplied in connection with such usage. This amendment ensures that excise duty applies comprehensively to all forms of telecommunication services, reflecting technological advancements and modern usage patterns.

4.2.1 Section 126(6) has been amended to increase the excise duty rate on pay-to-view television services from 5% to 7%, aligning the rate with other entertainment and digital service sectors to enhance fiscal parity.

4.2.2 A new Section 126(12)(d) has been inserted, extending the excise duty base to cover any other service provider of money transfer and payment systems that employ independent platforms other than financial or telecommunication systems. This aims to capture revenue from emerging fintech and digital payment providers operating outside traditional networks.

4.2.3 The introduction of Section 126(16) imposes an excise duty of 20% on imported used tableware, kitchenware, utensils, cutlery, and related products falling under HS Codes 39.24, 44.19, 82.15, 7323.91.00–7323.99.00, 7418.10.00, 7615.10.10, and 7615.10.90.

Before these amendments, the Excise Duty Act provided limited coverage of certain modern communication and digital payment services, and did not specifically tax imported used household goods.

4.3 Amendment of Section 128

The section has been amended to specify the time frame for payment of excise duty. The revised provision now expressly requires that excise duty shall be paid by the 25^th day of the month following the month to which the return relates.

Before the amendment, the law did not clearly stipulate a uniform deadline for the payment of excise duty, resulting in varying interpretations and inconsistencies in compliance timelines among taxpayers.

4.4 Amendment of Section 129

Under the new amendments, Section 129 has been revised to provide the Commissioner with the discretion to permit the deferral of excise duty payments to a date not later than the 25^th day of the month following the month in which the duty becomes due.

Previously, the law required immediate or fixed-time payment of excise duty upon the occurrence of a taxable event, without granting flexibility for taxpayers to defer payment. This often placed a cash flow burden on manufacturers and traders, particularly those operating in industries with long production or distribution cycles.

Following the amendment, the Commissioner now has the authority to allow deferred payment arrangements, thereby providing taxpayers with additional time to settle their excise duty obligations.

Conclusion

The Finance Act 2025 marks a significant shift in Tanzania’s fiscal architecture. It tightens loopholes, strengthens enforcement, broadens revenue sources, and embeds social levies within key sectors while also nudging firms toward more transparency and formalization.