A GUIDE TO TANZANIA TAXATION

SYSTEM
The taxation system in Tanzania is classified into two main categories, which are Direct and Indirect
Taxes.
Direct Taxes are the type of taxes that are imposed on the company’s or individual‘s income. These
include corporate taxes, individual income tax, capital gain tax, and withholding tax.
Indirect Taxes are the type of taxes that are added to the price of goods and services and they are
collected when people spend their income on goods or services. They include Value Added Tax (VAT),
excise duty, and customs duty.

1. DIRECT TAXES that have perpetual unrelieved tax losses for the
current and preceding two income years. The tax
a. Individual Income Tax rate applicable is 0.5% to the sales turnover of
Individual Income Tax is levied on an individual’s the companies.
earnings or profits. The individuals in this category d. Capital Gain Tax (CGT)
fall into two categories, namely,
(i) presumptive tax system and Capital Gain Tax is a tax imposed on capital gain
(ii) individuals who prepare audited accounts. or the profits that a person makes from selling
Under the presumptive tax system, tax payable is assets (e.g. shares, interest in land and buildings).
established based on annual turnover shown by The capital gain tax is charged only on the gain
individual records. The second category includes between the value of an asset it had at the time
individuals whose annual turnover is above TZS of its sale, and the value it had on its purchase. A
100,000,000 and they are taxed based on their person who derives a gain (profit) from the selling
profits. Individuals under this category are required of an asset is required by the law to pay capital
to prepare audited accounts/ financial statements gain tax by way of a single installment. The rates
in respect of their business. for capital gain tax are 10% and 20% of the gain
for residents and non-residents respectively.
b. Corporate Tax
e. Withholding Tax (WHT)
Corporate Tax is levied on taxable income (profit)
of limited companies, institutions, or organizations Withholding Taxes are taxes deducted at source
such as associations, clubs, societies, trusts, from the sources of income such as dividends,
charitable organizations, cooperatives, and other royalties, interest, rent, natural resources
unincorporated bodies. The corporate tax rate is payments, employee payments from employment
30% and 25% for the companies listed on the Dar (PAYE), commission, service fees payments, and
es Salam Stock Exchange (DSE). Also, there is an pensions. Withholding tax is retained by one person
additional tax rate of 10% on repatriated income (withholding agent) when making payments to
of branches of foreign companies. another person (withholdee) in respect of goods
supplied or services rendered by the payee.
c. Alternative Minimum Tax (AMT) Different withholding tax rates apply to different
Alternative Minimum Tax is imposed on companies sources of income.

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 A Guide To Tanzania Taxation System

2. INDIRECT TAXES c. Custom (Import) Duty

a. Value Added Tax (VAT) Customs duty is a tax imposed on goods and
services imported into Tanzania. Tanzania is a
VAT stands for Value Added Tax. VAT is charged member of the East African Customs Union (EAC)
on all taxable goods and services supplied in, or which implements the East African Customs
imported into the United Republic of Tanzania. The Union Protocol. The protocol provides amongst
VAT rates are 18% for standard-rated supplies and others the common external tariffs (CET) that
0% for exports of goods and services in mainland are imposed on goods from non - EAC countries.
Tanzania. For Tanzania Zanzibar, the VAT rate The tariffs range from 0% for raw materials to
applicable is 15%. 10% for semi-finished goods and 25% for finished
b. Excise Duties consumer goods. The goods from EAC countries
Excise Duties are indirect taxes charged on are not subject to custom (import) duty, provided
specific goods and services manufactured locally they conform to the rules of origin adopted under
or imported. The Excise duty is charged in both the customs union treaty ratified by all members.
specific and ad valorem rates. Items charged d. Railway Development Levy (RDL)
under specific rates include; wine, spirits beer, The Railway Development Levy is charged based
soft drinks, mineral water, fruit juices, etc. Items on customs value on the importation of goods
charged under ad-valorem rates includes; money entering for home consumption in Mainland
transfer services, electronic communication Tanzania. The RDL rate applicable is 1.5% on the
services, pay to view television services, imported customs value. RDL is not levied on exemptions
furniture, motor vehicles and the rates are; 0%, 5%, provided under the East African Community
10%, 17%, 15%, 20%, 25%, 30% and 50%. Customs Management Act, 2004 (EACCMA, 2004).

3. OTHER TAXES c. Digital Service Tax

a. Stamp Duty The Finance Act, of 2022 introduced taxation of

Stamp Duty Tax is imposed on instruments
executed in Mainland Tanzania or on the
instruments executed outside Tanzania that relate
to any property or any matter or thing performed or
done in Tanzania. Such instruments include among
others, leases, shares transfers, conveyances,
affidavits, letters of credit, etc. The applicable
stamp duty rate for most of these instruments is
1% of the consideration.
b. Skills Development Levy (SDL)
Skills Development Levy is charged on the gross
emoluments of all payments made by the employer
to the employees at a particular time (month).
The gross emoluments include salaries, wages,
payments in lieu, fees, commission, bonuses,
gratuity, etc. The SDL is payable by the employer
who employs ten or more employees. The rate
applicable for SDL is 4% of the total emoluments
paid to all employees during the month.
digital market services rendered by non-residents
to resident individuals at the rate of 2% which took
effect on 1 July 2022. A “digital marketplace” has
been defined to mean a platform that enables
direct interaction between buyers and sellers of
goods and services through electronic means.
This means that transactions such as websites,
webhosting, software and updating, self-education
packages, and broadcast television will now be
subject to taxation in Tanzania.
d. Gaming Tax
Gaming Tax is charged on gaming activities such
as casinos, sports betting, SMS lottery, national
lottery, slots (route) operations, and forty machines
site. The law has provided different gaming tax
rates on gaming activities, specifically, on gross
gaming revenue and net winnings. Gaming
activities do not include games played with cards
in private homes or residences in which a person
does not make money for operating such games.

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 A Guide To Tanzania Taxation System

e. Property Tax i. The Airport Services Charges

Property Tax is an annual tax payable by owners The Airport Services charges are charged on every
of urban residential and commercial buildings. passenger embarking/ boarding an aircraft at an
Property tax is collected through the purchase airport within the United Republic, who intends to
of electricity tokens (LUKU machines). The rates travel to a destination within the United Republic.
applicable are TZS 1,000 per month on ordinary The rate applicable is TZS 10,000. Further, a
buildings and TZS 5,000 per month for every passenger who intends to travel to a destination
storey building or apartment with one meter. The outside the United Republic is required by the
rate applicable for apartments regardless of the law to pay the airport services charges of USD
number of floors is TZS 60,000. 40 applicable to both residents and non-residents.
f. City Service Levy (Municipal Levy) j. The Motor Vehicles Registration Taxes
City Service Levy is charged to corporate entities The Motor Vehicles Registration Taxes are taxes
or persons conducting business. The Local charged on the first registration of any motor
Government Authorities impose a city service levy vehicle or upon transfer of the motor vehicle to
at the rate of 0.3% based on business turnover. a person. The law has provided rates applicable
for first registration and on transfer. The transfer
g. Hotel Levy
tax is payable by the transferee to the licensing
The Hotel Levy is charged to every owner of a hotel authority upon the completion of the transfer of
or guest house. A levy of 20% is charged on each of the vehicle. The law has provided individuals and
the hotel charges on each guest. The hotel charges persons who are exempted from payment of motor
include payments received by the hotel or guest- vehicle registration taxes.
house owners such as hotel accommodation and
breakfast charges served to guests. Any person or
body of persons registered for VAT is exempted
from the hotel levy.
h. The Port Services Charges
The Port Services charges are charged on every
passenger embarking /boarding a ship or a ferry,
at a port in Mainland Tanzania, for a journey to a
destination within or outside the United Republic of
Tanzania. The rate applicable for a resident person
is TZS 1,000 and for the non-resident person is
USD 10 or its equivalent in convertible currency.

We understand navigating the taxation system in Tanzania is quite challenging, considering the tax
laws are amended regularly. Kindly contact us if you need further guidance. We are happy to assist
you in navigating and complying with the tax laws.

About Eternal - Attorneys at law

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, Real Estate, Intellectual
Property, Employment, Immigration, Family, Competition, Succession Law, and Estate Planning.

info@eternal.co.tz +255 752 741 608

www.eternal.co.tz @eternal_attorneys