Executive summary

On 30 June 2026, the President of the United Republic of Tanzania assented the Finance Bill into law, which took effect from 1 July 2026 as Finance Act 2026 (the Act). This Alert provides a comprehensive review of the key amendments introduced by the Act, highlighting their implications for various stakeholders and the overall economic landscape.

All changes are effective from 1 July 2026 unless specified otherwise.

Detailed discussion

Recognition of tax Incentives under mining Framework Agreements

The Act introduces a coordinated framework across various tax laws to recognize tax incentives granted under agreements entered into between the Government and holders of mining licenses or special mining licenses in which the Government has an ownership interest (Framework Agreements). The amendments generally provide that specified tax exemptions and relief will apply during the construction phase of the mining project and cease immediately upon commencement of production. Petroleum products remain excluded from the relief.

• Income tax exemption — The exemption applies during the construction phase and ceases upon commencement of production. This provides statutory backing for incentives negotiated under Framework Agreements.
• Value-added tax (VAT) exemption — The exemption applies to goods and services imported or supplied exclusively for the construction of mining projects and ceases immediately upon commencement of production. The amendment is intended to provide greater certainty regarding the availability of VAT relief under Framework Agreements and is intended to reduce the upfront cost of developing capital-intensive mining projects.
• Remission of excise duty — The amendment empowers the Minister for Finance (the Minister), with Cabinet approval, to remit excise duty on specified goods imported or purchased for use in the construction of qualifying mining projects. This amendment is intended to extend fiscal support to mining investors by lowering the cost of acquiring goods required during the development phase of a project. Petroleum products are excluded from the reliefs.
• Tax administration — The amendments to the Tax Administration Act complement the above changes by providing administrative recognition and enforcement mechanisms for tax incentives granted under Framework Agreements. Together with the amendments to the VAT Act, Income Tax Act and Excise Duty legislation, the changes establish a more comprehensive legal framework for the administration of tax incentives applicable to mining projects in which the Government has an ownership interest.

The implementation of the exemptions may give rise to a number of practical considerations, including:

• The applicability of the income tax exemption is unclear as construction activities are generally not income-generating.
• Uncertainty may also arise if construction and production activities occur simultaneously, making it unclear whether the exemptions continue to apply during this period particularly where both phases overlap.
• The practical implementation of the exemptions may largely depend on the conditions imposed by the Minister and the regulations to be issued under the new framework.
• It is unclear whether the above exemptions would cover framework agreements executed prior to 1 July 2026.

Income Tax Act

Reduction of deemed distributed income

The proportion of profits that the Commissioner General (CG) may deem distributed has been reduced from 30% to 15%. In addition, the requirement for deemed distribution now excludes certain entities such as companies listed in the "Dar es Salaam Stock Exchange" of Tanzania, financial institutions, insurance companies and mining companies with framework agreements with the Government.

The amendment is expected to reduce the tax burden on retained earnings and encourage reinvestment of profits, particularly in capital intensive sectors. But the Act has not clarified the uncertainties following the introduction of this requirement, including whether a partial distribution would exclude the taxpayer from a deemed distribution. In addition, the law excludes the deemed-distribution requirement from applying to foreign-owned resident entities that are considered controlled foreign corporations. However, how this provision will be interpreted in practice remains uncertain.

Subsequent transfer to a third party of assets acquired from associates or for no consideration

The Act clarifies how to determine the cost base for subsequent transfer of assets acquired from associates or for no consideration to the third party. If the asset is subsequently transferred to the third party, the cost base for calculating gains or losses will be the original acquisition cost of the asset, together with any subsequent costs incurred, rather than the transfer value used between the related parties.

The amendment seeks to preserve the original tax cost of assets and prevent the potential use of exempt intra-group transfers to alter the tax outcome on a subsequent disposal.

Taxpayers will need to maintain adequate records of the original acquisition cost and any capital improvements or additional costs incurred throughout the life of the asset.

Practical challenges may arise if historical cost records are unavailable or difficult to substantiate, particularly for long-held assets that have undergone multiple transfers between related parties.

Increase in tax rate for nonresident digital service providers

The income tax rate applicable to payments made to nonresident digital service providers has been increased from 2% to 3%. While the amendment may raise Government revenue from the digital economy, it could also increase the tax cost for nonresident digital service providers and potentially raise the cost of digital services for end customers.

Single installment tax by individuals on sale of forest produce

The Act modifies the requirements for payment of single installment tax by an individual on the sale of forest produce, in part by extending the scope to include timber, logs, mirunda, poles and natural varnish including latex, resin, sap or gums. Previously, the requirement only covered timber, logs, mirunda and poles.

The single installment tax on the sale of forest produce is a final tax (satisfies the installment payer's income tax liability with respect to the payment).

The tax is payable at a rate of 2% of gross payment when one the following events occurs (whichever comes first):

• Payment for the forest produce is received in whole or in part
• The forest produce begins to be transported
• The owner parts with possession, use or control of the forest resources or produce
• Payment of the forest cess (i.e., tax, levy, duty) is made under the Local Government Finance Act

The "gross payment" subject to the tax has been clarified as the greater of farm gate price, purchasing price, or value of the forest produce as determined by the Tanzania Forest Service Agency. A farm gate price on the other hand is defined as the fair market value that forest produce would fetch on a sale in the open market in the respective local government authority in the ordinary course of business between an independent buyer and seller.

The CG is required to issue a single installment tax certificate once the tax is paid or no tax is payable.

A resident individual who has paid the single installment tax on the sale of forest produce shall not be required to file a return of income.

The amendments to the single installment tax regime clarify the applicable requirements, simplify compliance for forestry sector taxpayers through a final tax mechanism and broaden the tax base.

Presumptive tax regime

The Act makes the following changes to the presumptive tax regime:

• Increases a turnover threshold for the presumptive tax regime from 100 million Tanzanian shillings (TZS 100m) to TZS 200m
• Provides a one-year tax holiday for individuals under the presumptive regime that have a new business within turnover ranging from TZS 4m to TZS 200m
• The tax payable shall be nil for the first year from the date of obtaining the taxpayer identification number (TIN) subject to the approval of the CG. A practical challenge may however arise from requiring that an applicant fulfill the specified conditions "or such other conditions as may be prescribed in the regulations." Because the Regulations have not yet been issued, there is uncertainty regarding the additional eligibility criteria and the practical application of the relief.
• Increases the tax rate from 3.5% to 4.0% for taxpayers with turnover exceeding TZS 11m but not exceeding TZS 200m

The Act expands the scope of the presumptive tax regime by introducing a fixed annual income tax liability of TZS 120,000 for resident individuals engaged in the transportation of passengers using three-wheelers. Therefore, the operators of three-wheelers will now be eligible to be taxed under the presumptive tax regime at the prescribed fixed amount.

The amendment intends to enhance equity in the tax system by providing relief to individuals with new businesses falling within the presumptive tax regime. Further, the amendment aims to formalize the informal sector and expand the tax base by bringing more businesses and individuals into the tax net.

Value-Added Tax Act

Withholding VAT

The Act clarifies the applicable rates on withholding VAT to be 3% for supply of goods and 6% for supply of service, which the withholding agent must remit to the Government. Therefore, the supplier must still report and pay the remaining VAT amount due (15% for goods and 12% for service) through its VAT return.

If a transaction comprises both goods and services that cannot be easily split between the two categories, the portion of the taxable value subject to withholding VAT must be apportioned between the two elements using a prescribed ratio of 3:2 for goods and services respectively.

A withholding agent is required to pay to the CG any VAT withheld within 10 days after the end of each tax period and file a withholding VAT statement within 10 days of the month following the relevant tax period, in the prescribed form and manner. Previously, the withholding agent was required to account for the VAT withheld by the due date of filing the VAT return, i.e., 20th day of the month after the end of the tax period.

The amendments aim at strengthening VAT compliance and ensure that VAT already withheld by withholding agents is accurately reflected in taxpayers' VAT returns. However, the amendments will not ease uncertainties or practical challenges if a withholding VAT agent fails to withhold and remit VAT or delays issuing the withholding VAT certificate to the supplier. In such cases, it is unclear whether the supplier should account for the full VAT liability pending receipt of the certificate or await recognition of the withheld amount. Further uncertainty arises for suppliers in a VAT refund position, as the legislation does not clarify whether withholding VAT agents should continue to withhold and remit VAT despite the supplier being entitled to a refund. This may result in cash flow challenges and potential disputes over the timing of VAT credit recognition.

VAT deferment

The Act removes the sunset clause for VAT deferment on imported capital goods, which was previously scheduled to expire on 30 June 2026.

Introduction of additional requirements for taxpayers seeking to benefit from VAT deferment on imported or locally manufactured capital goods. Specifically, in addition to the existing statutory conditions, a taxpayer must also satisfy such further requirements as may be prescribed by the Minister through an Order published in the Government Gazette.

The stated objective of the amendment is to promote investment by making the VAT deferment scheme for capital goods available on a permanent basis, while enhancing the Government's oversight of the regime through the introduction of additional eligibility requirements that may be prescribed by the Minister.

Although removing the sunset clause enhances long-term certainty for investors by making the VAT deferment scheme permanent, introducing additional eligibility requirements to be prescribed by the Minister could create uncertainty regarding continued access to the incentive. Businesses that structured their investments before the legislative changes may require assurances that the forthcoming conditions will not adversely affect their eligibility. As such, the effectiveness of the amendment in promoting investment sustainability and predictability will largely depend on the nature of the additional requirements and the extent to which they protect legitimate investor expectations.

Electronic services

The Act amends the VAT treatment of electronic services supplied through digital intermediaries, online intermediation platforms, or digital marketplaces to an unregistered person in mainland Tanzania. This amendment is particularly important for transactions involving non-VAT-registered customers (i.e., business-to-consumer or business-to-business transactions involving non-VAT-registered businesses). As such, these customers cannot claim the input VAT, and the amendment may increase the overall tax cost of the services supplied to Tanzania customers.

A digital intermediary is defined as an electronic interface, including website, internet portal, application, online store or digital marketplace that allows recipients and persons offering services through the electronic interface to makes sales through that electronic interface.

Additionally, the scope of electronic services has been widely extended to any other service of a similar nature delivered through the internet or telecommunication network. This is to assist any other electronic services that were not listed in the VAT Act.

The objective of the amendment is to strengthen VAT compliance and administration in the digital sector. However, digital platform operators may face increased tax burdens and compliance requirements.

Abolishment of VAT exemptions

The VAT exemption applicable to the preparations of a kind used in animal feed has been revised to exclude dog or cat food sold at retail under HS Code 2309.10.00.

The amendment excludes from the VAT exemption previously available to animal feeding products dog and cat food put up for retail sale (HS Code 2309.10.00). As a result, dog and cat food sold in retail packaging will now be subject to VAT, potentially increasing the cost of such products to consumers.

Changes to existing exemptions

The VAT exemption on fishing nets has been restricted to locally manufactured fishing nets with HS Code 5608.11.00.

The VAT exemption on the supply of double-refined edible oil from locally grown seeds by a local manufacturer has been extended until 30 July 2027.

The VAT exemption on the supply of aircraft engines has been expanded to include new pneumatic rubber tires of a kind used on aircraft ( HS Code 4011.30.00), turbojets, turbo-propellers and other gas turbines (Heading 84.11).

New VAT exemptions

The Act provides these new VAT exemptions:

• Polyester fishing yarn used exclusively for manufacture of fishing net with HS Code 5402.20.00
• Dairy packaging materials with HS Code 3920.30.90 and HS Code 3923.30.00
• Supply of locally manufactured garments made from locally grown cotton until 30 June 2027. (previously, this was a zero-rated supply)
• Importation of paper for printing boarding passes
• Importation of Liquefied Petroleum Gas Smart Meters of HS Code 9028.10.00 by a distributor of liquefied petroleum gas
• Importation of electric vehicle charging station of H.S Code 8504.40.00 by licensed electric vehicle charging service provider

Excise (Management and Tariff) Act

Excise duty rate adjustment circle

The Act has replaced the existing three-year excise duty rate adjustment cycle with annual adjustments. Under the new framework, specific excise duty rates will be revised each year based on the actual inflation rate plus an additional 2%.

This amendment is intended to preserve the real value of excise duty collections by ensuring that tax rates keep pace with inflation while generating incremental revenue growth for the Government. Consequently, businesses dealing in excisable goods should anticipate more frequent rate changes and factor these annual adjustments into their pricing and budgeting processes.

Introduction of excise duty on nonresident electronic service providers

The Act introduces excise duty on excisable electronic services that nonresident persons provide through the internet or any other electronic form to a resident person who is not registered or required to file excise duty returns. The nonresident person required to pay excise duty shall be required to be registered, file return and pay excise duty to the CG.

The amendment is intended to promote a more level playing field between resident and nonresident providers of excisable electronic services.

Revision of excise duty rates

Changes have been made to adjust excise duty rates on a variety of goods and services, including the following.

Changes for imported motor vehicles based on their age:

An increase of 8% in excise duty on various goods, including the following goods:

An increase of 5% in excise duty on various goods, including the following:

New excise duty rates on various goods including the following:

Tax Administration Act (TAA)

Introduction of timeline for application of taxpayer identification number

A person who becomes potentially liable to pay tax as a result of employment, carrying on a business, or making an investment must apply for a TIN within 15 days from the date of commencement of such activity.

This amendment reinforces early tax registration by requiring individuals and entities that commence an economic activity (employment, business, or investment) to apply for a TIN within 15 days. The change is aimed at strengthening tax compliance and enabling the tax authorities to capture taxpayers at the earliest stage of their economic activities.

Electronic disclosure of contracts for contracted and subcontracted services

The Act imposes stricter reporting obligations on entities in the construction and extractive industries. These entities must electronically disclose to the CG, within 30 days of entering into a contract, details of all contractors and subcontractors.

The disclosure must include:

• Legal name, address, and TIN (if any)
• Nature of the contract, contract value, contract period and scope of works
• Withholding tax obligations expected to arise
• Other particulars as may be prescribed

This amendment enhances tax transparency and oversight in the construction and extractive sectors by giving the CG earlier visibility of contractors and subcontractors engaged in projects. The information is likely to assist the tax authorities in monitoring tax compliance across the supply chain and identifying unregistered or noncompliant contractors. Taxpayers operating in these sectors should review their onboarding and contract management processes to ensure that contractor and subcontractor details are captured accurately and reported within the prescribed 30-day period, as failure to comply may expose them to penalties and increased scrutiny from the tax authorities

Disposal of perishable goods

The CG may, either by auction or private treaty, dispose of perishable goods seized for a taxpayer's failure to pay tax on time. This amendment supports the efficient disposal of assets that may deteriorate quickly.

The amendment clarifies the CG's powers in relation to the disposal of perishable goods seized for non-payment of tax. Prior to this change, there was uncertainty as to whether such goods could only be disposed of through a public auction or whether alternative disposal methods were permissible. By expressly allowing disposal through either an auction or a private treaty, the amendment provides greater flexibility in dealing with assets that are susceptible to rapid deterioration. This is intended to facilitate timely disposal, preserve value, and maximize recovery of outstanding tax liabilities.

Transfer pricing penalty

The Act has revised the transfer pricing penalty to the higher of 30% of the transfer pricing adjustment or 100% of the tax shortfall arising from the adjustment.

A notable implication of this amendment is that, in practice, the penalty may often be driven by the 30% of the transfer pricing adjustment threshold rather than the 100% tax shortfall threshold. This is because the tax shortfall arising from a transfer pricing adjustment is generally unlikely to exceed 30% of the adjustment itself. Consequently, taxpayers may be exposed to substantial penalties even in situations in which there is no additional tax payable, for example if the taxpayer is in a tax receivable position or has carried-forward tax losses.

The amendment underscores the importance of maintaining robust transfer pricing policies and documentation.

Offense for abuse of exemption or remission under framework agreement

The Act introduces a new offense relating to the misuse of tax exemptions or remissions granted under a framework agreement with the Government. In this regard, a person commits an offense if they:

• Use exempted goods for purposes other than those for which the exemption was granted
• Transfer exempted goods without the Commissioner's prior approval
• Obtain the exemption through false or misleading statements

Upon conviction, the offender is liable to a fine equivalent to 100% of the tax exempted. In addition, the exemption or remission will be revoked, and the previously exempted taxes will become immediately due and payable as if no exemption had been granted.

This amendment significantly increases the consequences of noncompliance with the conditions attached to a tax exemption or remission. A taxpayer would not only face a penalty equal to 100% of the tax exempted but also lose the benefit of the exemption altogether, resulting in previously exempted taxes becoming immediately due and payable. Businesses benefiting from tax incentives should therefore ensure strict adherence to all applicable conditions and reporting requirements, as any breach could result in a substantial financial exposure.

Tax Revenue Appeals Act

The Act extends the period for concluding an amicable settlement from 60 days to 90 days, thereby allowing parties more time to negotiate and reach a resolution on tax disputes.

The Tax Revenue Appeals Board (the Board) or the Tax Revenue Appeals Tribunal (the Tribunal) may only issue an order for the settlement process after both parties have expressly confirmed their acceptance to engage in it, ensuring that the process is based on mutual consent.

Additionally, the Act states that if the parties fail to finalize the settlement within the 90-days period, the Board or Tribunal may, upon application by a party and for good reasons, grant an extension of up to 30 days.

This amendment is beneficial, as it allows sufficient time for out-of-court settlement discussions. The extended settlement period of up to 120 days may support the amicable resolution of disputes, reduce litigation costs and help ease the backlog of cases before the Board and Tribunal.

Notwithstanding the above, the effectiveness of this amendment may be limited by the absence of detailed regulations or guidelines governing the conduct of out-of-court settlement process. In particular, uncertainty remains regarding the procedures to be followed, the factors that will be considered in approving settlements and the scope of matters that may be settled. Until such regulations or guidelines are issued, taxpayers may continue facing practical challenges in navigating the settlement process and achieving consistency in its application.

Electronic Transactions Act

The Act empowers the Minister for finance to prescribe, through a Gazette order, specific payments that must be made electronically. It further requires that proof of such electronic payments be mandatory for the approval of applications related to the transfer of assets, including land, buildings and motor vehicles.

The amendment reflects the Government's intention to reduce reliance on cash transactions and encourage the use of formal, traceable payment channels, including electronic non-cash payment methods

Export Tax Act

The Act introduces a new export tax on:

• Waste and scrap of paper or paperboard of heading 47.07 at a rate of 30% of the free-on-board (FOB) amount or TZS 200 per kg, whichever is higher
• Cotton cake, sunflower cake, wheat bran, rice bran and maize bran at a rate of TZS 50 per kg
• Quartz sands and feldspar at 10% of the FOB value or TZS 200 per kg, whichever is higher

Vocational Education and Training Act

The Act provides for a change to the exemption application for public institutions, requiring that they are wholly financed by government subvention. Previously, the exemption applied to public institutions wholly financed by the Government.

Stamp Duty Act

The definition of the term "lease" has been extended to include "movable property," thereby broadening the scope of transactions subject to stamp duty.

Other changes:

• Increase stamp duty on Bills of Sale (as collateral security) from TZS 1,000 to TZS 10,000 and increase the maximum stamp duty on bills of sale (security) from TZS 10,000 to TZS 100,000
• Redefine stamp duty on partnership capital by imposing TZS 5,000 on partnership deeds with capital up to TZS 1,000,000, and TZS 10,000 on partnership deeds with capital exceeding TZS 1,000,000
• Increase stamp duty on bank checks from TZS 100 to TZS 500
• Increase of stamp duty on surrender of lease from TZS 1,000 to TZS 2,000
• Impose a stamp duty of TZS 5,000 on any bill of exchange that is not a bond, bank note or currency note
• Impose an ad-valorem stamp duty of 0.5% on transfer documents for agricultural land (replacing the prior flat rate of TZS 500)

Local Government Authorities (Rating) Act

The Act redefines authority to mean urban and township authorities under the respective local government laws, designating every Council as the sole rating authority within its jurisdiction and granting exclusive powers to levy and manage property rates. The property rates should be paid at the time of paying for electricity, thereby improving efficiency in revenue collection.

The Act replaces reliance on penalties under the Tax Administration Act with specific penalties, including fines ranging from TZS 500,000 to TZS 2m, imprisonment for a term of three months to one year, or both.

The Act strengthens recovery mechanisms by granting local governments the authority to recover unpaid rates from persons receiving rent or profits from ratable property if the liable person is absent.

The Act allows local authorities to charge interest, not to exceed 1% per month, on rates that remain unpaid after at least 14 days from the due date. Furthermore, the Act imposes penalties on occupiers who fail or refuse to disclose the identity of property owners, including fines and additional daily penalties for continuing offenses.

Local Government Finance Act

The Act clarifies that local government authorities are responsible for the collection and accounting of property rates and advertisement fees related to billboards, posters and hoardings.

The Act requires local government authorities to allocate 15% from collection of their own sources of revenue, as follows:

• 10% for funding women, youth and persons with disabilities
• 5% for construction and renovation of markets, business or entrepreneurship centers, and related infrastructure.

Fair Competition Act

The Act introduces a requirement for regulatory authorities to contribute 0.5% of their gross revenue to fund the operations of the Fair Competition Tribunal. This amendment provides a sustainable funding mechanism for the Tribunal and enhance its operational capacity.

The Gaming Act

The Act requires that 7% of revenue collected from land-based casinos and 13% of revenue collected from sports betting be allocated to social welfare funds, with 70% of the allocated amount directed to the AIDS Trust Fund and 30% to the Universal Health Insurance Fund. This amendment establishes a defined share of revenue from the gaming sector for designated purposes under the law.

Imports Control Act

The Act exempts goods originating from East African Community (EAC) Partner States from the levy, provided they meet the EAC Rules of Origin. An import levy shall however apply to a Partner State that imposes trade barriers, including discriminatory duties, levies, charges, fees and taxes on goods or products originating from Tanzania.

Further, additional goods have been brought within the scope of Industrial Development Levy (IDL), including items such as exercise books, fishing nets, steel structures, aluminfum doors, windows and their frames and thresholds for doors as well as trailers.

Investment and Special Economic Zones Act.

The Act expands the list of goods that are not eligible for tax exemptions to include imported tractors under HS codes 8701.21.90, 8701.22.90, 8701.23.90, 8701.24.90 and 8701.29.90.

Land Act

The Act provides that all land rent collected will be deposited into the Consolidated Fund, after which 10% will be disbursed to the Ministry of Land to support land surveying activities, and another 10% will be allocated to local government authorities to facilitate land rent collection and recovery.

Mining Act

The Act establishes the Mineral Survey Fund, aimed at financing geoscientific surveys. The sources of revenue for the Fund shall be 10% of the revenue collected from royalties, fees and other charges prescribed under the Mining Act.

Motor Vehicle (Tax on Registration and Transfer) Act

The Act increases the registration fees for motorcycles from TZS 95,000 to TZS 150,000. The amendment is aimed at increasing Government revenue with minimal disruption to the transport sector.

National Planning Commission Act

The Act introduces a requirement that national development projects must undergo professional, financial, environmental and economic evaluation before being included in the Government budget. The amendment introduces a requirement to ensure efficient allocation of public resources and improve project implementation.

Railways Act

The Act revises the allocation of revenues from the Railway Development Levy, specifying distribution to the Railway Fund, Consolidated Fund and special accounts supporting infrastructure development of industrial parks, special economic zones and export processing zones. The amendment is intended to strengthen funding for railway infrastructure and ensure sustainable financing.

Road and Fuel Tolls Act

The Act introduces a framework for allocating road and fuel toll revenues to specified funds and infrastructure accounts, including those supporting special economic zones, export processing zones, water, health, HIV/AIDS and strategic government projects.

Road Traffic Act

The Act allows motor vehicles registered in Zanzibar to operate in Mainland Tanzania, provided that all applicable taxes and duties have been paid. However, vehicles or trailers temporarily transferred for use in mainland Tanzania for a period not exceeding three months will be exempt from this requirement, subject to prescribed procedures. The new requirement for Zanzibar-registered vehicles will take effect on 1 January 2027.

The amendment addresses operational challenges between Tanzania mainland and Zanzibar while safeguarding revenue collection.

Universal Health Insurance Act

The Act introduces additional funding sources for the Universal Health Insurance Fund, including levies on cigarettes and sugar. The amendment is aimed at strengthening the financial sustainability of the health insurance system.

Implications

Multinational enterprises operating in or supplying to Tanzania should assess the impact of the Finance Act 2026 on their local tax profile and compliance processes. Key areas to consider for review include the revised deemed-distribution rules, increased tax exposure for nonresident digital and electronic service providers, expanded VAT obligations for digital intermediaries, stricter withholding VAT timing and documentation requirements, enhanced transfer pricing penalties, and reporting obligations for construction and extractive-sector contracts. Groups benefiting from tax exemptions or investment incentives should also confirm that they continue to satisfy all applicable conditions, as misuse or noncompliance may result in revocation of the relief and significant penalties.