TANZANIA: “TAXES are the price we pay for a civilized society,” as the saying goes, and Tanzania’s tax system exemplifies this principle, serving as a vital pillar of the nation’s economic development.

It plays a central role in financing infrastructure projects, public services and other key national priorities. This robust tax administration is supported by a comprehensive legal framework that underpins the entire system and ensures its functionality in various sectors.

The legal framework

Tanzania’s tax system is governed by a comprehensive legal framework that extends beyond core laws such as the Income Tax Act (2004), the Value Added Tax (VAT) Act (2014) and the Fiscal Administration Act ( 2015).

“TAXES are the price we pay for a civilized society,” as the saying goes, and Tanzania’s tax system exemplifies this principle, serving as a vital pillar of the nation’s economic development.

It plays a central role in financing infrastructure projects, public services and other key national priorities. This robust tax administration is supported by a comprehensive legal framework that underpins the entire system and ensures its functionality in various sectors.

Legal Framework Tanzania’s tax system is governed by a comprehensive legal framework that extends beyond core laws such as the Income Tax Act (2004), the Value Added Tax (VAT) Act (2014) and the Administration Act fiscal (2015).

Key complementary laws include the Excise (Management and Tariff) Act (1952), which regulates excise duties on goods such as alcohol, tobacco and petroleum, and the Customs Tariff Act (1976), which aligns with the East African Community Management Act (EAC ) ( 2004) for import and export taxes.

The Local Government Finance Act (1982) allows local government authorities to collect property taxes, business licenses and other fees, while the Land Act (1999) and the Village Lands Act (1999) regulate land taxes.

Sector-specific laws such as the Mines Act (2010) and the Petroleum Act (2015) deal with royalties and revenues from extractive industries, while the Tanzania Investment Act (1997) and the Export Tax Act provide tax incentives and regulations of export.

Other important laws include the Stamp Duty Act (1972), the Business Licensing Act (1972), the Gaming Act (2003) and the Environmental Management Act (2004), which introduce specific taxes and fees.

In addition, the Public Finance Act (2001), the Financial Institutions Act (2006) and the Tanzania Harbors and Wildlife Authority Acts regulate specific industries and services.

Together, these laws establish a robust and transparent tax system that supports Tanzania’s development goals while ensuring that taxpayer classification promotes fairness and aligns with the country’s diverse economic activities.

Categories of tax payers

Tanzania’s tax system classifies taxpayers according to their economic activities, income levels and legal structures, ensuring that tax obligations align with financial capabilities and promoting fairness.

Individual taxpayers include salaried employees, the self-employed and informal sector participants. Salaried employees are subject to Pay-AsYou-Earn (PAYE), a progressive tax deducted from monthly wages, while the self-employed must file annual tax returns and pay tax on declared profits.

Participants in the informal sector are often taxed through presumptive tax schemes, which simplify compliance for small businesses and informal workers.

Small and Medium Enterprises (SMEs) are classified by turnover, those earning less than 100m/- qualify for the presumptive tax scheme, while larger SMEs must register for VAT and comply with corporate tax requirements.

Corporate entities, including domestic and foreign companies, partnerships and trusts, are taxed on their profits, with domestic companies subject to a corporate tax rate of 30%.

Foreign companies operating through branches in Tanzania are taxed on local operations and may face withholding taxes on remittances. Large taxpayers such as multinational corporations and major mining companies are managed by the Large Taxpayer Department of the Tanzania Revenue Authority (TRA) due to their significant tax contributions and sectoral importance.

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Government and parastatal agencies are taxed on income-generating activities, while non-governmental organizations (NGOs) are generally exempt from income tax but may be subject to VAT or PAYE on employee wages.

Professionals and consultants, including lawyers, doctors and independent contractors, are taxed on income earned through commissions or services, often subject to withholding taxes.

Non-residents earning income in Tanzania are taxed through withholding tax on payments for dividends, royalties and technical services, while branch profit tax applies to remittances to parent companies. Importers and exporters contribute through customs duties, import VAT and export taxes, aligning themselves with trade regulations.

Businesses operating in Special Economic Zones (SEZs) and Export Processing Zones (EPZs) benefit from specific tax regimes such as reduced corporate tax rates, VAT exemptions and customs duty exemptions.

These categories of taxpayers ensure that Tanzania’s tax system is comprehensive, fair and tailored to the country’s diverse economic activities, effectively supporting national revenue targets under the administration of dedicated collectors.

Categories of tax collectors

Tax collection in Tanzania is managed by a number of government bodies, each with specific responsibilities to ensure effective revenue mobilization.

The Tanzania Revenue Authority (TRA) is the primary agency charged with collecting taxes at the national level, including income tax, value added tax (VAT), excise duties, customs duties and withholding taxes.

TRA also supervises large taxpayers, ensures compliance and collaborates with the Ministry of Finance to implement tax policies. At the local level, Local Government Authorities (LGAs) collect taxes and fees such as property taxes, business license fees, market taxes, agricultural produce and service taxes under the Local Government Finance Act (1982) .

These revenues support local development and service provision. In addition, various regulatory authorities collect sector-specific fees and charges.

For example, the Energy and Water Utilities Regulatory Authority (EWURA) collects licensing fees in the energy and water sectors, while the Tanzania Communications Regulatory Authority (TCRA) levies spectrum fees for telecommunications and broadcasting services.

The Land Transport Regulatory Authority (LATRA) handles transport licensing fees and the Tanzania Bureau of Standards (TBS) collects certification and compliance fees.

Sector-specific agencies such as the Tanzania Ports Authority (TPA) and the Tanzania Wildlife Authority (TAWA) generate revenue through port user fees, park entry fees and tourism fees. Similarly, the Tanzania Mining Commission collects royalties, license fees and taxes related to mining activities, and the Business Registration and Licensing Agency (BRELA) handles business registration and industrial license fees.

Other entities also contribute to revenue collection. The Immigration Department collects visa, residence permit and citizenship-related fees, while the court system imposes court fees and fines.

Social security contributions to the National Social Security Fund (NSSF) and the Public Service Social Security Fund (PSSSF), although not taxed, are mandatory payments that support pensions and welfare programs.

Environmental management bodies such as the National Environment Management Council (NEMC) impose waste and emission management fees to promote sustainable practices. Finally, agencies that manage special economic zones (SEZs) and export processing zones (EPZs), such as the Export Processing Zones Authority (EPZA), oversee tax incentives and collect taxes to attract investment and to facilitate trade.

This multi-faceted approach to tax collection ensures diversification, efficiency and equity in revenue generation, supporting Tanzania’s national and local development goals.

Regional and international context

Tanzania’s tax system is competitive within the East African Community (EAC), with its VAT rate of 18% and corporate tax rate of 30%, aligning closely with neighbors such as Kenya, Uganda and Rwanda.

However, challenges such as a narrow tax base and a large informal sector are common across the region. Tanzania’s adoption of the EAC Customs Management Act (2004) ensures the harmonization of customs duties and trade regulations within the bloc, facilitating regional trade.

The use of digital tax systems such as Electronic Fiscal Devices (EFDs) and online platforms reflects innovations in countries such as Rwanda to improve compliance. Globally, Tanzania aligns itself with international standards, including OECD tax principles and efforts to combat database erosion and profit shifting (BEPS).

Transfer pricing regulations under the Income Tax Act (2004) and participation in the Global Forum on Transparency and Exchange of Information demonstrate commitment to tax transparency and anti-avoidance measures.

In addition, adherence to the EAC Common External Tariff (CET) and environmental taxes aligns with global trade and sustainability goals.

Despite progress, challenges in implementation and broadening the tax base remain, but ongoing reforms position Tanzania well in the regional and global tax landscape.

Final note

Tanzania’s tax system is a comprehensive and adaptable framework, effectively balancing revenue generation with economic growth and social development. While it has positioned the country as a competitive player regionally and globally, opportunities for improvement remain.

The following article will delve into the operational aspects of the tax system, examining policy implementation, tax collection processes and compliance enforcement.

It will highlight the impact of digital innovations such as Electronic Fiscal Devices (EFDs) and the collaborative efforts of TRAs, LGAs and other bodies, revealing both the challenges and opportunities shaping the system’s role in driving sustainable national development.

You can send your comments and opinions about the series of tax reforms through the following mobile phones: 0655-963224, 0715-369696 or e-mail [email protected].