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July 13, 2023

Tanzanian Finance Act, 2023 analysis

  • The recently passed Finance Act is aimed at accelerating economic recovery, climate change adaptation and mitigation, and enhancing certain sectors for improved livelihood.
  • This Tax Alert highlights key aspects of the Act and their implications.
  • Taxpayers and their advisors should familiarize themselves with the changes.

Executive summary

On 26 June 2023, the Tanzanian Parliament passed the Finance Bill, 2023 (the Bill). On 30 June, the President assented to the Bill, which then became the Finance Act, 2023 (the Act). All changes introduced by the Act are effective from 1 July 2023, unless indicated otherwise.

This Alert summarizes the key changes included in the Act as well as modifications from the Bill and the budget speech presented by the Minister for Finance and Planning.

Detailed discussion

Income Tax Act

Change-in-control rules

The Act has amended the change-in-control rules by excluding from taxation a change in underlying ownership that is either

  • A result of allotment of a new membership interest of the entity
  • Solely a result of transfer of a membership interest of a resident entity to another resident person

The amendment has now excluded from tax capital investments made in a resident entity that result in a change in the underlying ownership of an entity by reason of the issuance of new shares. This is a welcome change as it should foster investment in the country. However, the amendment does not clearly address the outcome if new shares are allotted in other group entities that indirectly own the Tanzanian entity.

A change is also made regarding the transfer of a membership interest. The amendment has eliminated the potential effect of double taxation in circumstances involving the direct disposal of shares in a resident entity that results in a change in the underlying ownership of the entity. However, the change does not cover shares transferred to nonresident persons. The direct transfer of shares to nonresident persons in a resident entity may still trigger change-in-control consequences where other conditions are met.

Digital service tax (DST)

Income tax is imposed on payments made to nonresident persons by individuals other than in the conducting of business in respect of electronic services. Further, the Act has extended the time for a nonresident person to file a tax return to the twentieth day of the month after the end of the month to which the return relates.

Payments that nonresident persons receive in respect of electronic services consumed by or attributable to an individual in Tanzania are sourced in Tanzania regardless of the place of payment, provided that the consumption of the electronic services by an individual is not for business purposes.

Previously, the scope of DST covered services rendered through a digital marketplace (i.e., a platform that enables direct interaction between buyers and sellers of electronic services). In addition, a nonresident person falling under the DST was required to file a return not later than the seventh day after the end of the month.

The amendments will enhance a proper implementation of the DST by clarifying the scope of DST. Payments made by individuals for business purposes are excluded from DST.

Income tax on realization of interest in land or building

The Act introduces a 3% single installment tax on the greater of the incomings (i.e., amount derived or to be derived in realising an asset) or approved value of an asset when a resident person who lacks records showing the costs of the asset disposes of an interest in land or building.

The amendment will speed up certain transactions and reduce the time typically spent in discussions with the revenue authority pertaining to costs of the assets.

However, the change may also produce high tax liabilities by charging a 3% tax on the incomings or the approved value of the asset without ascertaining the cost an asset.

Withholding tax

The following changes have been made in relation to withholding tax requirement.

  • The withholding tax obligation pertaining to residential rental payments made by individuals has been removed. The amendment follows challenges experienced in implementing the requirement since its introduction in 2022.
  • A 2% final withholding tax has been introduced on payments for purchase of precious metals, gemstones and other precious stones supplied by the holder of a primary mining license or artisanal miner. The amendment could have an impact in resolving the challenges experienced in collection of taxes from miners.
  • A 10% final withholding tax has been introduced on payments made to a resident person in respect of verified carbon emission reductions. The amendment has widened the tax base and could increase tax revenues. However, in light of the fees already introduced in the area of carbon credits through the Environmental Management (Control and Management of Carbon Trading) Regulations, 2022, the amendment could negatively impact the Government's efforts in reducing carbon emissions.

Income tax exemption

The following are exempted from income tax:

  • Gains derived from the internal restructuring of mining companies under a framework agreement between the Government and investor to form a partnership entity
  • Amounts derived by the National Health Insurance Fund from investment returns on fixed deposits, treasury bonds, treasury bills or dividends

Presumptive tax regime

Entities engaged in the business of transporting passengers and goods are now taxed under the normal corporate income tax rules. Individuals whose turnover does not exceed 100 million Tanzanian shillings (TZS 100 million) will be taxed in accordance with the prevailing presumptive income tax rates.

The Act has revised presumptive income tax rates for transporters of passengers and goods applicable to individuals whose turnover in a year do not exceed TZS 100 million. New presumptive income tax rates have also been introduced for tour service and private hire vehicles.

Class A: Passenger service vehicles


Number of passengers

Tax payable (TZS)


Up to 15



16 to 25



26 to 45



46 to 65



More than 65


Class B: Tour service vehicle


Number of tourists

Tax payable (TZS)


Up to 15



16 to 25



26 to 45



46 to 65



More than 65


Class C: Goods carrying vehicles


Capacity (Tones)

Tax payable (TZS)


Less than 1



1 to 5



6 to 10



11 to 15



16 to 20



21 to 25



26 to 30



More than 30


Class D: Private hire service vehicles


Vehicle category

Tax payable (TZS)











Ride hailing



Ride sharing



Special hire


Value-Added Tax (VAT)

Invoice requirements

The following changes have been made with respect to invoice requirements:

  • "Fiscal receipt" is now defined to have the meaning ascribed under the Tax Administration Act — that is, a receipt or invoice issued by using a fiscal device, Government electronic payment gateway system or any other electronic system approved by the commissioner general for Tanzania Revenue Authority (CG).
  • The conditions in the law on the requirements for a tax invoice to support an input tax credit or a refund claim have now been repealed. Effective from 1 July 2023, a credit for input tax or a claim for refund should be supported by a fiscal receipt.

VAT deferment on capital goods

The following changes have been made with respect to VAT deferment on capital goods:

  • The application of VAT deferment on capital goods has been extended to cover locally manufactured goods. Previously, VAT deferment was only applicable on imported capital goods and trailers and road tractors for semitrailers (heading 87.16 and HS Code 8701.20.90) locally manufactured or assembled in a customs bonded warehouse.
  • The application of VAT deferment on imported capital goods will cease beginning 30 June 2026. This amendment could have the positive impact in boosting local production of capital goods. However, it may also pose a challenge in case of incapacity by local manufacturers to produce capital goods.
  • A person approved for VAT deferment will be required to treat the tax payable on locally manufactured taxable supplies or imports as if these constituted output VAT payable by the person in the tax period in which the locally manufactured goods were supplied or imported goods were imported for home consumption.
  • Goods purchased or imported for resale in the ordinary course of a person's economic activity do not qualify for VAT deferment, whether in or not in the state in which the goods were purchased or imported.

Electronic services

The definition of "electronic services" has been extended to include online intermediation and online advertisement services.

Zero-rated supplies

A supply of locally manufactured garments made from locally grown cotton is zero rated for a period of one year from 1 July 2023 to 30 June 2024. This amendment will promote local production of cotton and manufactured garments. However, implementing the amendment may pose a challenge as it could be difficult to distinguish between garments that are locally manufactured from locally grown cotton and other garments.

The period for zero rating of supplies of locally manufactured fertilizers is extended until 30 June 2024. The amendment will boost the local manufacture of fertilizers and lower the costs of farming through reduced prices of fertilizers.

Input tax credit

The Value Added Tax (VAT) Act has been amended to provide clarity on the timing of input tax credits. Previously, Section 69 of the VAT Act contained a reference to Section 70, which provides for computation of partial input tax credit by a taxable person who supplies both taxable and exempt supplies. However, the proper reference should have been Section 68 of the VAT Act (as currently amended by the Act), which provides for a credit for input tax.

VAT exemptions

Exemptions upon application to CG

The CG is empowered to grant VAT exemptions on importation of the following:

  • Raw materials of polymers of propylene or of other olefins, in primary forms (HS code 39.02) and polyacetals, other polyethers and epoxide resins, in primary forms; polycarbonates, alkyd resins, polyallyl esters and other polyesters, in primary forms (HS code 39.07) to be used solely in the manufacturing of packaging materials for pharmaceutical products
  • Prefabricated structures or supply of locally manufactured prefabricated structures (HS code 9406.20.90) to be used solely in poultry farming

Those entitled to apply for the above VAT exemptions must be local manufacturers of packaging materials of pharmaceutical products or engaged in poultry farming in mainland Tanzania and have performance agreements with the Government.

Exemptions on imports and local supplies

Imports and supplies of the following items are exempted from VAT:

  • Raw materials (benzalkonium chloride and Glutaraldehyde) of HS Code 2916.32.00 for the manufacture of insecticides and acaricides that have been approved by the relevant Minister
  • A house sold by a real estate developer at a value not exceeding TZS 50 million
  • A supply of precious metals, gemstones, and other precious stones at refineries, buying stations or mineral and gem houses designated by the mining commission
  • A supply of double refined edible oil from locally grown seeds by a local manufacturer until 30 June 2024
  • A supply of automobile accessories used to convert motor vehicle fuel system to natural gas or electricity system to persons engaged in the conversion of such motor vehicles
  • Moulds imported by a local manufacturer of pharmaceuticals for exclusive use in manufacturing pharmaceutical products in Mainland Tanzania
  • A supply of aircraft, aircraft engines, aircraft parts and aircraft maintenance to a local operator of air transportation; however, the VAT exemption on importation of aircraft, aircraft engines or parts by a local operator of air transportation has been abolished

The Act has also amended the existing exemptions in the VAT Act to align the H.S. codes with the current version of the H.S. Codes as set out in the East African Community Common External Tariff, 2022.

Tax Administration Act

Primary data server

A "primary data server" is now defined to mean a physical, virtual or any other server that stores data created or collected by a taxable or liable person in the ordinary course of business. However, this definition contradicts the law with respect to virtual server. All persons who store data in electronic form are now required to maintain a primary data server in Tanzania effectively from 1 January 2024.

The amendment has now provided some clarity that will assist in its implementation. In addition, the amendment will be effective from I January 2024 to give businesses some time to prepare and invest in Information Communication Technology (ICT) infrastructures. However, there are still uncertainties. While the Tax Administration Act requires maintaining in Tanzania a primary data server for storage of data in electronic form, the definition's reference to a virtual server suggests the possibility that the server could be outside Tanzania.

Application for refund

The time limit to apply for a tax refund has been extended to cover the date a tax decision or other decision giving rise to a tax overpayment is made. Previously, the time limit for an application for refund was three years from the date of payment of tax in excess.

Through the above changes, the date of a tax decision or other decision (e.g., determination of objections, decisions of Tax Revenue Appeals Board, Tax Revenue Appeals Tribunal or Court of Appeal of Tanzania) that results in a tax overpayment shall be considered in determining the three-year time limit on submitting an application for refund.

Storage facility

The following definitions are provided with respect to a storage facility. 

  • A "storage facility" means a warehouse, go-down or any other storage facility that is used to store goods for business purposes, provided that such warehouse, go-down or other facility is not part of a shop, factory, industry, or farm.
  • An "owner" means a person who establishes or operates and is in control of the facility and possession of the storage facility or a person to whom the storage facility has been leased or sublet.

The above definitions provide clarity on the requirement for registering storage facilities, the kinds of storage facilities that are required to be registered, and the persons who are required to comply. After becoming law through the Finance Act, 2022, the requirement to register a storage facility was sometimes difficult to implement because definitions like these were lacking.

Fine for failure to use fiscal device

The following fines now apply with respect to failure to acquire or use a fiscal device or failure to demand a fiscal receipt.

  • Failure to acquire and use a fiscal device or failure to issue a fiscal receipt results in a fine of 20% of the value of goods sold or services rendered, or TZS 1,500,000, whichever is greater.
  • A fine of 20% of the tax evaded or TZS 30,000, whichever is greater, is imposed for failure to demand a fiscal receipt.

Disclosure of information on contracted services

An entity engaged in construction or extractive industry is now required to disclose to the CG the names of all persons contracted and subcontracted during performance of their duties or business or carrying out of any project within 30 days of executing the contract for contracted or subcontracted services. Previously, no timeline was provided for submission of the information to CG.

However, the CG has not prescribed any forms or manner of submission of the information.

Excise (Management and Tariff) Act

Periodic adjustments

Excise duty rates may be adjusted every after a period of three years from 2023/24 financial year. Previously, excise duty rates were adjusted annually depending on inflation rate or other key macro-economic indicators.

The amendment will help provide certainty around the application of excise duty rates; in the previous system, the rates were adjusted annually.

Adjustment of excise duty rate

The Fourth Schedule to the Act has been amended to adjust excise duty rates on a variety of goods, including the following.

  • A 10% increase in excise duty rate on soft drinks such as mineral water and juices, and a 20% increase on beer; the amendment could reduce the demand for these products and ultimately affect the Government's efforts in increasing revenue
  • Excise duty at a rate of TZS 20 per kg of cement locally manufactured or imported; the amendment could adversely impact construction activities due to increase in costs
  • Excise duty at a rate of 30% on cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes under HS code 2402.90.00
  • Excise duty at a rate of 30% on electronic cigarettes and personal electric vaporising devices under HS code 8543.40.10 and HS code 8543.40.90, respectively
  • Excise duty at a rate of 30% on smoking pipes (including pipe bowls) and cigar or cigarette holders, and parts thereof under HS code 9614.00.00.
  • Excise duty at a rate of 10% on various motor vehicles for transporting 10 or more persons, under heading 87.02
  • Excise duty on various motor cars and other motor vehicles principally designed for transporting people at a rate of 5% for those with cylinder capacity exceeding 1000cc but not exceeding 2000cc and 10% for those with cylinder capacity exceeding 2000cc, under heading 87.03

Vocational Education and Training Act

The following changes have been made with respect to Skills Development Levy (SDL).

  • The SDL rate has been reduced from 4% to 3.5%.
  • The obligation to file SDL returns has been removed for an employer who is not under obligation of paying SDL.
  • The minister for finance has been granted powers to exempt any person from paying SDL upon consultation with the Minister for Education, provided that the exemption is in the public interest.

The above changes will reduce costs to employers. In addition, the removal of the obligation to file SDL returns for an employer who is not required to pay the levy will reduce an administrative burden for these employers.

Changes in other laws

The Act has also amended the following laws:

Mining Act

The following changes are made in the Act

  • Exempt refineries from paying inspection fee of 1%
  • Reduction of royalty rate for salt from 3% to 1%

Gaming Act

The following terms have been defined in the Act.

  • "Commercial gaming undertaking" means any gaming activity that is subject to gaming tax.
  • "Gross gaming revenue" means the collective amount of wagering or staking placed by players minus the collective amount of winnings paid out to players.

Gaming licenses for operating commercial gaming undertakings are now issued to companies that have at least 5% paid-up share capital owned by Tanzanian citizens.

Export Tax Act

An investor whose commercial undertaking in an Export Processing Zone is the export of meat shall not be liable for an export tax on exported raw hides or skins.

Electronic and Postal Communications Act

The airtime levy has been removed.

National Payment Systems Act

The Act is amended to remove a levy on electronic transfer of money. The levy is now only applicable on electronic money withdrawal transactions.

Local Government Finance Act

The following changes have been made.

  • Holders of electronic money issuance licenses are included among entities required to pay a service levy.
  • The Tanzania Revenue Authority (TRA) will remain obligated to evaluate, assess, collect, and account for property rates until 31 December 2023; beginning in 2024, the obligation shall be vested in local government authorities.
  • The mandate to collect and account for advertising fees on billboards, posters and "hoarding" is vested in the local government authority.

Local Government Authorities (Rating) Act

The following changes have been made.

  • Mud huts, thatched houses, mud houses and other similar houses used for residential purposes are excluded from rateable properties.
  • Applicable rates for property tax are increased as follows:
    1. From TZS 12,000 to TZS 18,000 for property situated in city council, municipal council, town council and district council
    2. From TZS 60,000 to TZS 90,000 for each storey in a multi-storey building in city, municipal and town councils and a multi-storey building in a district council

Road and Fuel Tolls Act

The rate of road and fuel toll has been increased from TZS 413 to TZS 513 per liter of petrol and diesel.

Foreign Vehicles Transit Charges Act

The transit charge for a foreign-registered vehicle from a country that charges a higher rate than the one set out in the Act shall be charged at the rate applicable in that respective country.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Tanzania), Dar es Salaam

Ernst & Young Société d'Avocats, Pan African Tax — Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor