Dar es Salaam
EY
+255 (22) 292-7868, Mail address: +255 (22) 292-7871
P.O. Box 2475
Fax: +255 (22) 292-7872 Dar es Salaam Tanzania Street address: Tanhouse Tower, 4th Floor 34/1 Ursino South New Bagamoyo Road Dar es Salaam Tanzania
Global Compliance and Reporting – Corporate Tax
Silke Mattern
+255 (22) 292-7868
Mobile: +255 699-695-489 Email: silke.mattern@tz.ey.com
Grace Mulinge +255 (22) 292-7868 Mobile: +255 677-627-878 Email: grace.n.mulinge1@tz.ey.com
Beatrice Melkiory +255 (22) 292-7868 Mobile: +255 787-606-077 Email: beatrice.melkiory@tz.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
Silke Mattern
+255 (22) 292-7868 Mobile: +255 699-695-489 Email: silke.mattern@tz.ey.com
Eliya Nkerebuka +255 (22) 292-7875 Mobile: +255 653-670-907 Email: eliya.nkerebuka@tz.ey.com
Petro Francis +255 (22) 292-7875 Mobile: +255 716-333-062 Email: petro.francis@tz.ey.com
International Tax and Transaction Services – Transfer Pricing
Silke Mattern +255 (22) 292-7868 Mobile: +255 699-695-489 Email: silke.mattern@tz.ey.com
Chiaru Masonobo +255 (22) 292-7875 Mobile: +255 654-681-155 Email: chiaru.masonobo@tz.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Silke Mattern
+255 (22) 292-7868
Mobile: +255 699-695-489 Email: silke.mattern@tz.ey.com
Chiaru Masonobo +255 (22) 292-7875 Mobile: +255 654-681-155 Email: chiaru.masonobo@tz.ey.com
Indirect Tax
Silke Mattern
+255 (22) 292-7868 Mobile: +255 699-695-489 Email: silke.mattern@tz.ey.com
Beatrice Melkiory
A. At a glance
Corporate Income Tax Rate (%) 10/20/25/30 (a)
Capital Gains Tax Rate (%) 30 (b)
Branch Tax Rate (%) 30
Withholding Tax (%)
Dividends 5/10 (c)
Interest 10 (d)
Royalties 15 (e)
Management and Professional Fees (Service Fees) or Technical Services Fees
for Mining, Oil or Gas 5/15 (f)
Supply of Goods 2 (g)
Insurance Premiums 5 (h)
Rent 10 (e)
Money Transfer Commission 10 (i)
Other payments 15
Branch Remittance Tax 10 (j)
Net Operating Losses (Years)
Carryback 0
Carryforward Unlimited (k)
(a) The corporate income tax rate is 30%. The corporate income tax rate is reduced to 25% for companies newly listed on the Dar es Salaam Stock Exchange that issue at least 30% of their share capital to the public for three consecutive years from the date of listing. The corporate income tax rate is reduced from 30% to 10% for five consecutive years from the year of com mencement of production for companies that have a newly established plant for assembling motor vehicles, tractors, fishing boats or outboard motors for boats and that have a performance agreement with the government of Tanzania. The corporate income tax rate is reduced from 30% to 25% for companies that are engaged in the manufacturing of sanitary pads and have a performance agreement with the government of Tanzania for two consecutive years from 1 July 2019 to 30 June 2021. The corporate income tax rate is reduced from 30% to 20% for five consecutive years from the year of com mencement of production for newly established entities that are engaged in the manufacturing of pharmaceuticals or leather products and that have a performance agreement with the government of Tanzania. Companies report ing tax losses for three consecutive years must pay an alternative minimum tax at a rate of 0.5% on the annual turnover in the third loss year.
(b) Capital gains are treated as business income for companies and are taxed at the regular corporate income tax rate of 30%.
(c) The 10% rate applies to dividends paid by unlisted companies to residents and nonresidents. The 5% rate applies to dividends paid by companies listed on the Dar es Salaam Stock Exchange and for dividends paid by a resident com pany to a resident company owning 25% or more of the shares in the payer of the dividends.
(d) This withholding tax applies to residents and nonresidents. Resident compa nies may credit the withholding tax against their annual corporate income tax. Interest paid by strategic investors to nonresident banks and resident financial institutions is exempt from withholding tax.
(e) This withholding tax applies to both residents and nonresidents.
(f) The 5% rate applies to residents, while the 15% rate applies to nonresidents. The withholding tax on management and professional fees (services fees) for resident persons is an advance tax creditable against the final income tax. The withholding tax on technical services provided to mining, oil or gas compa nies is a final tax. Also, see Section B.
(g) This withholding tax applies to all supplies of goods to the government.
(h) This withholding tax applies to nonresidents only.
(i) This withholding tax applies to residents who pay a money transfer commis sion to a money transfer agent.
(j) This withholding tax applies to branches of foreign companies. Tax is levied on an annual deemed profit repatriation basis. Special rules apply to the cal culation of the base.
(k) For limitations on the use of loss carryforwards, see for Relief for tax losses in Section C.
B. Taxes on corporate income and gains
Corporate income tax. A company is considered resident for tax purposes if it satisfies either of the following conditions:
• It is incorporated or formed under the laws of Tanzania.
• Its management and control of its affairs is exercised in Tanzania at any time during the year of income.
Resident companies are subject to income tax on their worldwide income.
A company is also subject to income tax in Tanzania as a resident company if such company is an agent of a nonresident “person” or a beneficial owner through which such nonresident “person” receives any business or investment income, whether directly or indirectly, that accrues or is deemed to accrue in Tanzania. The term “person,” as used in the Tanzanian Income Tax Act, reflects both individuals and corporate bodies, such as companies.
A person in Tanzania is an agent of a nonresident person or a beneficial owner if any of the following conditions is satisfied:
• The person is employed by or on behalf of a nonresident person or a beneficial owner.
• The person has a business connection with a nonresident person or a beneficial owner.
• A nonresident person or a beneficial owner is in receipt of any income, whether directly or indirectly, from or through the person
• The person is a trustee of a nonresident person. This includes any person who has acquired by means of a transfer a capital asset situated in Tanzania.
Rates of corporate tax. Both resident and nonresident companies are subject to income tax at a rate of 30%.
The corporate income tax rate is reduced from 30% to 25% for the first three years from the date of listing for companies that are newly listed on the Dar es Salaam Stock Exchange and that issue at least 30% of their share capital to the public.
Companies operating in the Export Processing Zone (EPZ) and Special Economic Zone (SEZ) are exempt from corporate income tax for the first 10 years. The exemption does not apply to Category “B” investors whose primary markets are within the area outside the SEZ or who produce for 100% local supply. They are also exempt from withholding tax on dividends, interest and rental payments.
The corporate income tax rate is reduced from 30% to 10% for five consecutive years from the year of commencement of pro duction for companies that have a newly established plant for assembling motor vehicles, tractors, fishing boats or outboard motors for boats and that have a performance agreement with the government of Tanzania.
The corporate income tax rate is reduced from 30% to 20% for five consecutive years from the year of commencement of production for newly established entities that are engaged in the manufacturing of pharmaceuticals or leather products and that have a performance agreement with the government of Tanzania.
The corporate income tax rate is reduced from 30% to 25% for companies that are engaged in the manufacturing of sanitary pads and that have a performance agreement with the govern ment for two consecutive years from 1 July 2019 to 30 June 2021.
Alternative minimum tax. Companies reporting tax losses or uti lizing loss carryforwards for three consecutive years must pay an alternative minimum tax at a rate of 0.5% on the annual turnover in the third loss year.
Capital gains. Capital gains are treated as business income for companies and are taxed at the corporate income tax rate. Direct and indirect share transfers are subject to capital gains tax. Disposals of mineral and petroleum rights are also subject to capital gains tax.
Administration. A company’s year of income is the calendar year. Companies may apply to the Commissioner General for the Tanzania Revenue Authority for approval of a different year of income.
Companies must file installment tax returns by the end of the third month of their year of income and file their final tax returns within six months after the end of the year of income. The esti mated tax must be paid in four equal installments, as set forth in the installment return. The remaining balance of tax due (the difference between the actual tax and tax paid in installments) must be paid by the due date of filing the final return. The tax payer’s estimate of taxable income may not be less than 80% of the company’s taxable income as finally determined for the year of income. The Commissioner of Income Tax may allow a lower estimate if justified by the facts and circumstances of the case. Companies that are registered and issued a taxpayer identifica tion number for the first time may elect to apply for deferment of the requirement to pay installment taxes for six months, with the deferred amount payable in three equal installments for the remaining period in the year of income.
Companies may revise their installment return and file a revised return in the 6th, 9th or 12th month of the year of income if new developments suggest an increase or decrease in income.
Tax returns are filed online through the e-filing portal of the Tanzania Revenue Authority. Companies are required to appoint a declarant (for example, a director or manager) who will be responsible for filing the company’s tax returns. The declarant is also required to have an account in the e-filing portal so that he or she can manage the company’s account.
A penalty is imposed for a failure to file a return. The penalty equals the greater of the following:
• 2.5% of the amount of tax assessable less tax paid by the start of the period in which the return is due
• 15 currency points (1 currency point = TZS15,000)
Fraud related to a return is subject to a penalty of 50% of the tax shortfall if the statement or omission is made without reasonable excuse. The penalty is increased to 75% of the tax shortfall if the statement or omission is made knowingly or recklessly.
Dividends. A final withholding tax is imposed on dividends. A 10% withholding rate applies to dividends paid to residents and nonresidents. A 5% withholding tax rate applies to dividends paid by companies listed on the Dar es Salaam Stock Exchange and to dividends paid to resident companies that hold 25% or more of the shares in the payer of the dividends.
Extractive industry. Technical services provided by resident com panies or branches to the extractive industry in mining or oil and gas are subject to a final withholding tax of 5%. For nonresident service providers, the withholding tax rate is 15%.
A special tax regime was introduced for the extractive industry, effective from 1 July 2016. Significant aspects of the regime are discussed below.
Under the regime, each separate mining operation and each sepa rate petroleum right is treated as an independent business for corporate income tax purposes. Accounts should be prepared for each separate mining operation or each separate petroleum right.
Taxable income should be determined, and income tax should be paid for each separate mining operation and each separate petro leum right for each year of income.
Royalties paid under the Mining Act or Petroleum Act are not deductible for tax purposes.
Arrangements between separate mining and petroleum operations and the other activities of the person should reflect the arm’slength principle.
Losses are ring-fenced for each mining and petroleum operation.
C. Determination of trading income
General. The audited financial statements serve as the starting point for computing taxable income. Expenses and losses are generally not deductible unless they are incurred wholly and ex clusively in the production of income. Realized foreign-exchange losses on an interest free debt obligation are deductible up to 70% of the debt obligation.
Certified financial statements must now be attached when filing a corporate income tax return.
Exemptions. Interest, fees or other financial charges paid by the government of Tanzania to a nonresident bank, financial institu tion, another government or a representative of another govern ment, arising from a loan agreement, entitles the nonresident entity to a tax exemption for purposes of financing government projects. The exemptions have a retroactive effect from 1 June 2017. Interest derived by a person from government bonds issued for a period not less than three years and listed on the Dar es Salaam stock exchange from 1 July 2021 is exempt from income tax.
Inventories. Inventories are valued at the lower of cost or net realizable value. The last-in, first-out (LIFO) method is not allowed.
Provisions. Provisions may not be deducted.
Depreciation. Depreciation computed for financial statement pur poses is not deductible, but capital allowances are provided for de preciable assets, which are allocated to one of the eight classes. The following are the classes and the rates of the capital allowances.
Class Assets Rate
1 Computers and data handling equipment, together with peripheral devices; automobiles, buses and minibuses with a seating capacity of less than 30 passengers; goods vehicles with a load capacity of less than 7 tons; and construction and earth-moving equipment 37.5% (reducingbalance)
2 Buses with a seating capacity of 30 or more passengers; heavy general purpose or specialized trucks, trailers and trailer-mounted containers; railroad cars, locomotives and equipment; vessels, barges, tugs and similar water transportation equipment; aircraft; other self-propelling vehicles; plant and machinery used in agriculture or manufacturing; specialized public utility plant and equipment; and machinery irrigation installations and equipment 25% (reducingbalance)
3 Office furniture, fixtures and equipment; and any assets not included in another class 12.5% (reducingbalance)
4 No assets (the depreciation rules for the assets that had been in this class are discussed in the paragraphs after the table)
5 Buildings, structures and similar works of a permanent nature used in agriculture, livestock farming or fish farming 20% (straightline)
6 Buildings, structures and similar works of a permanent nature other than those mentioned in Class 5 5% (straightline)
7 Intangible assets other than those in Class 4 1/useful life
8 Plant and machinery (including windmills, electric generators and distribution equipment) used in agriculture; electronic fiscal devices purchased by non-value-added tax registered traders; and equipment used for prospecting and exploration of minerals or petroleum 100%
Depreciable assets used in petroleum and mining operations are placed in a separate pool, which does not fall under the normal classes. The depreciation allowance with respect to mineral or petroleum operations is granted at the following rates.
Year of income
Depreciation allowance
First 20% of expenditure
Second 20% of expenditure
Third 20% of expenditure
Fourth 20% of expenditure
Fifth 20% of expenditure
Depreciable assets included in Class 4 were deleted, effective from 1 July 2016. However, the classes of depreciable assets were not renumbered when the above changes were introduced. To date, the law still provides for eight classes, despite the removal of depreciable assets that were under Class 4, and no amendment has been made with respect to the reference to Class 4 that is found under Class 7.
Plant and machinery in Categories 2 and 3 qualify for an initial capital expenditure allowance of 50% for the first year if they satisfy any of the following conditions:
• They are fixed in a hotel used for tourism services.
• They are fixed in a factory used for manufacturing.
• They are used in fish farming.
The maximum depreciable amount for a non-commercial automobile is TZS30 million.
Relief for tax losses. Companies may carry forward tax losses indefinitely. The deductibility of tax losses brought forward is restricted after a period of four years of continuous losses such that only 70% of the taxable profits in the fifth year can be shel tered by tax losses brought forward (with any excess losses car ried forward to future years). Mineral and petroleum operations loss carryforwards may only offset 70% of the profits in a tax year. No carryback is allowed. Special rules for long-term con tracts may apply.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax (VAT) 18
Customs duties (imports may also be subject to VAT)
Raw material or capital goods 0
Semifinished goods 10
Finished goods 25
Property tax; imposed by local governments on the value of real property 0.15 Skills and Development Levy; imposed on gross remuneration (excluding benefits-in-kind) 4 Social security; imposed on basic salary; rates depend on the respective fund; paid by Employer 10/15 Employee 5/10
Nature of tax Rate (%)
Workers’ Compensation Fund; imposed on employers’ annual wage bill; employers must make monthly payments through deposits in the fund’s bank account; payments must be made on the last working day of the month after the month to which the payment relates
Private sector employers 1
Public sectors employers 0.5 Railways Development Levy; imposed on customs value on importation of goods 1.5
E. Miscellaneous matters
Foreign-exchange controls. Tanzania does not impose foreignexchange controls on current-account transactions, but the Bank of Tanzania must be notified of foreign capital-account transac tions.
Transfer pricing. A company with controlled transactions of TZS10 billion (approximately USD4,300,000) or more in a tax year is required to file contemporaneous transfer-pricing docu mentation together with the final tax return. Taxpayers whose controlled transactions in a tax year do not reach the TZS10 bil lion threshold do not have to submit the contemporaneous transfer-pricing documentation with the final income tax return but must have it in place by the due date for filing the final income tax return and should submit it to the Tanzania Revenue Authority within 30 days on request.
A penalty is imposed for failure to prepare contemporaneous transfer-pricing documentation. The penalty is a minimum of 3,500 currency points, as prescribed from time to time by the Commissioner General for the Tanzania Revenue Authority. One currency point equals TZS15,000, which results in a penalty of TZS52,500,000 (approximately USD23,000).
F. Treaty withholding tax rates
Dividends Interest Royalties
Canada
South Africa
Non-treaty
20
20
15 20
20
15
15 20
10
15 20
15
The East African countries, which are Burundi, Kenya, Rwanda, Tanzania and Uganda, have signed a tax treaty, which has not yet been ratified.