The 2025/2026 budget theme is "Inclusive Economic Transformation through
Domestic Resource Mobilization and Resilient Strategic Investment for Job Creation and
Improved Livelihoods". Below are the proposed tax measures we consider most relevant to
businesses operating in Tanzania, the reasons given for them and our commentary on each.
Proposals become law once enacted through the Finance Act. The detail of several
measures depends on regulations that had not been issued at the time of writing. Where that
is the case we have said so.
Value Added Tax Act, CAP 148
Proposed changes and Ark commentary
Proposed change
Reason for the change
Ark commentary
To exempt VAT on re-insurance transactions between insurance companies and re-insurance companies.
The measure is intended to increase the competitiveness of local companies.
This is a positive change. Additional coverage to include all types of insurance services will be welcome.
To impose a reduced VAT rate of 16% instead of 18% on the purchase of goods where payment is made online (B2C) and the consumer confirms that the payment invoice issued contains the correct amount of the transaction.
The measure aims to encourage the use of online payment systems, reduce the use of hard cash and simplify tax administration by making information on purchase transactions available.
Good news for consumers given the wide use of mobile and debit card payments in retail outlets. We await implementation, particularly the practicalities of a VAT system with two rates.
To establish a VAT collection agency system on payments made to a registered seller through approved Government institutions as well as taxpayers registered to collect VAT, as will be specified in the VAT Collection Agency Regulations.
The objective of this measure is to increase efficiency in the collection of revenue arising from VAT.
A strategic move which should assist VAT collections. How it works in practice remains to be seen.
Income Tax Act, CAP 332
Proposed changes and Ark commentary
Proposed change
Reason for the change
Ark commentary
To amend Section 12 of the Income Tax Act to include retained earnings in the definition of repatriated income.
This measure intends to stimulate the flow of capital into economic activities and enhance transparency.
Likely to affect investment positively, considering the change in the Finance Act 2022 that removed this requirement.
To increase the withholding tax rate on payments for professional and management services provided to the extractive sector from 5% to 10%.
This measure intends to broaden the tax base and align with global economic changes.
A strategic move to increase government revenue, but it may add cost for extractive sector service providers through cash flow pressure.
To increase the Alternative Minimum Tax rate paid by companies incurring losses for three consecutive years from 0.5% to 1%.
This measure intends to enhance government revenue and curb tax avoidance.
This increases the tax burden on taxpayers who incur genuine tax losses during the early years of an investment.
To reduce the limit ratio of carried forward losses from previous years that can be deducted when calculating income tax for businesses in mining, petroleum, oil and gas activities operating at a loss, from 70% to 60%.
The aim of this measure is to enable the Government to collect revenue earlier from the relevant sectors.
Loss corporation rules now apply to exploration. The impact is minimal in practice because of the lack of income in early phases.
Tax Administration Act, CAP 438
Proposed changes and Ark commentary
Proposed change
Reason for the change
Ark commentary
To require a person to interface the system used to issue electronic receipts with the system operated by the Tanzania Revenue Authority.
Intended to enhance voluntary tax compliance and facilitate tax administration.
A strategic move to improve compliance and transparency.
To waive the requirement to pay the amount of tax which is not in dispute, or one third of the assessed tax decision, whichever is greater, within fifteen days from the date of receipt of the tax decision.
This measure is intended to give the taxpayer sufficient time to apply for a waiver.
More clarity is needed, although it aligns better with the thirty day window for submitting an objection.
Local Government Finance Act, CAP 290
Proposed changes and Ark commentary
Proposed change
Reason for the change
Ark commentary
City service levy reduced from 0.3% of gross revenue to a fixed rate of 0.25% of gross revenue.
This measure is intended to reduce the cost of doing business and investment in the country.
A good move to reduce the cost of doing business in Tanzania and to unify levies.
To reduce the hotel levy from 10% to 2%.
This measure intends to reduce the cost of doing business and investment in the country.
Significant for the hospitality sector. It should reduce cost and encourage investment.
What businesses should do next
Review pricing and invoicing systems if you sell to consumers online, in light of the proposed reduced VAT rate
Check the electronic receipting system you use, given the proposed requirement to interface with the TRA system
Reassess forecasts if you are in the extractive sector or carry forward tax losses
Revisit budgets in hospitality where the hotel levy applies
