TAX UPDATE | 16TH JULY 2026
HIGHLIGHTS OF TANZANIA FINANCE ACT,2026.
- Recognition of tax exemptions granted in the Framework Agreements.
- Introduction of a new offence for abuse of tax exemptions
- Reduction of taxable profits deemed to have been distributed from 30% to 15%.
- Mandatory electronic disclosure by persons engaged in construction and extractive industries.
- Extension of VAT deferment on capital goods.
- Transfer pricing penalties strengthened.
- Revision of excise duty rates for imported used motor vehicles.
- Increased presumptive tax threshold from TZS 100 Million to TZS 200 Million.
The Government of Tanzania publishes a Finance Act annually to amend various laws, including tax laws. On 20th June 2026, the President assented to the Finance Act, 2026 (the Act). The amendments in the Act came into effect on 1st July 2026 and introduced significant changes to the existing laws and regulatory framework, intending to broaden the tax base and enhance compliance.
This newsletter summarises the key changes introduced by the Finance Act of 2026.
1. Tax Administration Act, Cap 438
- Empowerment of the Minister of Finance to recognise a Framework Agreement for tax purposes (agreed tax incentives) by notice published in the Gazette.
- Introduction of a new offence for abuse of tax exemption or remission granted under the recognised Framework Agreements. The penalty is a fine equal to 100% of the amount of tax exempted, and any tax exemption or remission granted becomes due and payable as if such exemption or remission were not granted.
- Revision of the penalty for non-compliance with the arm’s length principle in related transactions to the greater of 30% of the adjustment amount or 100% of the resulting tax shortfall.
- Mandatory disclosure of contractors and subcontractors to the Commissioner General by persons engaged in the construction and extractive industries within 30 days of executing the contract. The disclosure includes the submission of prescribed electronic forms with required information on the contractor/subcontractor name, address, TIN, value, duration, scope of contract, and expected withholding tax obligations.
- Empowerment of the Commissioner General (CG) to dispose of perishable goods seized by public auction or private treaty upon giving notice to the taxpayer.
- Mandatory requirement for persons commencing employment, business, or investment to apply for a Taxpayer Identification Number (TIN) within fifteen (15) days of commencing the activity.
2. Corporate Income Tax Act, Cap 332.
- Increased presumptive tax threshold from TZS 100 Million to TZS 200 Million. An individual with annual turnover exceeding TZS 11 million but not exceeding TZS 200 million will pay presumptive tax at the rate of 4% of turnover, up from the previous rate of 3.5%.
- Introduction of a one (1) year tax exemption to newly registered taxpayers operating exclusively under the presumptive tax regime. The newly registered businesses are required to apply to the Commissioner to utilize the one (1) year tax exemption.
- Recognition of tax exemptions granted in the Framework Agreements signed between the Government of Tanzania and Mining Investors. The tax exemptions will be granted during the construction phase of the mining project and cease upon commencing of production.
- Increased income tax rate on payments made by consumers to non-resident digital service providers from 2% to 3% of the gross payments received.
- The cost base for the transfer of assets between associates and the subsequent disposal to a third person includes the original acquisition cost (by the first acquirer) and subsequent costs incurred before the transfer to a third person.
- Extension of the definition of the term “forest produce” to include natural varnish, resin, sap, latex, and gums in attracting the existing 2% single installment tax in gross produce value on sale of these commodities.
3. Withholding Tax
- Reduction of taxable profits deemed to have been distributed from 30% to 15% for imposition of withholding tax (WHT) at a rate of 10%. The reduction applies to all entities except for financial institutions, insurance companies, companies listed on the Dar es Salaam Stock Exchange Market (DSE) and mining companies operating under Framework Agreements with the Government.
- Increase of withholding tax rate from 5% to 10% on royalty payments made to resident sports institutions or the Tanzania Football Federation.
- Imposition of withholding tax rate at 1% on payments made by a resident corporation for agricultural and fishery products.
4. Value Added Tax (VAT) Act, Cap 148
- Empowerment of Commissioner General, upon application, to grant VAT exemption on imports and supplies made to holders of mining licences or special mining licences operating under a Framework Agreement.
- Extension of VAT deferment on capital goods beyond the deadline of 30th June 2026, allowing investors to acquire essential equipment at an affordable price.
- Mandatory requirement for applicants applying for VAT deferment on capital goods to comply with any further requirements that may be prescribed by the Minister through an order to be published in the Gazette.
- Introduction of deeming operators of online intermediation services and digital marketplaces as suppliers of electronic services made to unregistered persons in Mainland Tanzania. The platform operators will now have responsibility for adhering to VAT compliance, including accounting for VAT.
- Introduction of the term “digital intermediary” to include websites, applications, internet portals, online stores and digital marketplaces that facilitate interactions and transactions between service providers and users.
- Extension of the term “electronic services” to include any other services of similar nature delivered through the internet or a telecommunication network. The extended definition aimed to capture new and evolving digital services within the VAT frameworks.
- Clarification on VAT withholding treatment for goods and services supplied to withholding agents. Previously, VAT was imposed at 18%, and withholding agents withheld VAT at a rate of 3% for goods and 6% for services, leaving a net VAT payable of 12% for services. The treatment of goods remained uncertain. The Finance Act, 2026, has retained the net VAT payable at 12% for services and introduced net VAT payable at 15% for goods.
- Introduction of the apportionment rule of ratio 3:2 on a taxable supply that comprises goods and services for VAT withholding purposes.
- Mandatory requirement of VAT withholding agent to pay any VAT withheld within ten (10) days after the end of each tax period (i.e., calendar month, starting on the first date and ending on the last day of that month).
- Mandatory requirement for withholding agents to file a withholding VAT statement in the prescribed form for each tax period within 10 days of the month following the relevant tax period.
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VAT Exemptions:
- Locally produced edible oil for one year, ending 30 June 2027.
- Locally manufactured fishing nets.
- Imported paper for printing boarding passes.
- Imported electric vehicle charging stations by licensed electric vehicle charging service providers.
5. Excise (Management and Tariff) Act, Cap 147
- Increased by 8% the excise duty rate on a wide range of products, including beverages, cement, alcoholic and non-alcoholic, tobacco products, petroleum products, confectionery, paints, lubricants, and other excisable goods.
- Imposition of excise duty on specified services provided by non-residents through the internet or other electronic means to end users in Tanzania. Non-resident suppliers are required to register, charge excise duty, file returns, and remit the tax to TRA.
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Revision of excise duty rates for imported used motor vehicles as highlighted below:
- 18% for imported vehicles aged more than 8 years but not more than 10 years.
- 35% for imported vehicles aged more than 10 years but not more than 20 years.
- 40% for imported vehicles aged more than 20 years.
6. Tax Revenue Appeals Act, CAP 408.
- Extension of the period for out-of-court settlement from sixty (60) to ninety (90) days from the date the Tax Revenue Appeals Board (TRAB) or Tax Revenue Appeals Tribunal (TRAT) issues an order to settle out of court.
- Empowerment of TRAB and TRAT to grant a further extension of thirty (30) days for parties to settle out of court.
OTHER CHANGES
7. The Tanzania Revenue Authority Act, Cap 399
- Expanding the laws administered by the Tanzania Revenue Authority (TRA) to include the Export Tax Act (Cap 196) and the Import Control Act (Cap 276).
- The Urban Authorities (Rating) Act (Cap 289) has been removed as one of the laws not administered by TRA
8. The Local Government Finance Act, Cap 290.
- The Local Government Authorities have an obligation to collect and account for property rates and advertisement fees for billboards, posters, and hoarding.
9. The Electronic Transactions Act, Cap 442.
- Empowerment of the Minister of Finance to prescribe specific payments that must be made through electronic means.
Final remarks
The Finance Act, 2026 brings significant changes to the existing laws and regulatory framework in broadening the tax base and enhancing compliance. Individuals and businesses need to stay informed and seek professional guidance where necessary to strengthen compliance with the law. Our team of legal experts assists in explaining further the various implications that the changes in the Finance Act 2026 can have on your business or investment in Tanzania. Feel free to reach out to us via info@eternal.co.tz or +255 749 668 866 for such an engagement.
To read the Finance Act, 2026 – Click Here.
Disclaimer
This publication is intended to give you a general overview and does not constitute professional legal advice. Eternal Attorneys, its associates, employees, or agents shall not be responsible for any loss in the event this email is relied upon without seeking professional advice first.
About Eternal - Attorneys
Eternal – Attorneys at Law is a specialized law firm based in Dar es Salaam, Tanzania, dedicated to providing legal and consultancy services to clients, locally and overseas. We specialize in Tax, Corporate and Commercial, Compliance and Advisory, Banking and Finance, Litigation, Mining, Oil & Gas, Real Estate, Intellectual Property, Employment, Immigration, Family, Competition, Succession Law, and Estate Planning.
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