Investors investing in Free Economic Zones are granted the following tax incentives:-

• 10 year Corporate Tax Holiday and 25% tax rate for the subsequent ten years.

• 10 year withholding tax holiday on dividends to non residents.

•  Duty and VAT Exemption on raw materials, machinery, equipment and other inputs.

•  Stamp Duty Exemption

• 100% investment deduction on capital expenditure within 20 years.

• Exemption from Tax on dividend for ten years.

• Duty and Tax free Import of goods from domestic area permissible.

• Duty Free import of raw materials for construction of factory buildings.

• Duty free export of goods produced.

• Exemption of income Tax on interest on borrowed capital.

• Exemption from payment of all taxes and levies imposed by local government authorities for gods and services produced in Free Economic Zones.

• On site custom inspection of goods in lieu of off-port inspection.

Investors investing in Free Zones are granted the following tax incentives:

• Exemption from any tax on all goods destined for re-export.
• Exemption from local taxes on all goods produced in Freeport for export
• Exemption from payment of corporate tax for the first 20 years.
• No limit to the durations that goods may be stored to Freeport Zones.
• 100% retention of all profits.
• 100% foreign ownership allowed.
•  Free repatriation of profit.

 NB: 20% of turnover is allowed for sale at the local market and is subject to the payment of all taxes.

Zero Rated Exports and Exempt Supplies

In order to encourage export of locally produced goods from Tanzania all exports are zero rated under the VAT law.

Goods are regarded as exported out of the country if they are made available at an address outside Tanzania.  

VAT Refunds.

VAT refunds are made either within 30 days or 6 months from the due date depending on the type of taxpayer.  Regular repayment traders like exporters can claim their VAT refunds within 30 days. An authorized auditor must certify a VAT claim. It is important to note that, for a VAT registered trader to be able to deduct or claim the input tax, he must be in possession of fiscalised receipts or customs receipts.

VAT Exemption and special relief.

Under the VAT law, there are certain goods and services which are exempted from VAT. Such goods or services are like food crops and livestock supplies, equipments used for storage, transportation, and distribution of natural gas, health supplies and hospital equipment, education services, financial and insurance services, transportation of persons, sale or lease of an interest in land and tourist services such as guide services, game driving, water safaris, animal or bird watching, park fees and tourist charter services. Aircrafts, aircraft engines, parts and maintenance are also VAT exempt supplies.

Under the VAT law, some persons and organizations are entitled to relief from VAT within the limits and conditions subject to procedures laid down. Some persons such as importers of capital goods enjoy 45% VAT relief. Some goods are given special VAT relief at the rate of 100%.

Corporate tax rate.

The income tax rate for resident and non-resident companies is 30%. (No discrimination)

There is a reduced rate of 25% which is charged for three years to newly listed companies with Dar es Salaam Stock Exchange, with at least 35% of equity share issued to the public.

100%   capital   allowance in agriculture.

Investors in agriculture enjoy 100% capital allowance on expenditure incurred on plant and machinery, including windmills, electric generators and distribution equipment used solely in Agriculture.

50% Initial capital allowance.

The 50% allowance is granted on expenditure of plant and machinery that is used in manufacturing and installed in the factory or providing services to tourists and fixed in a hotel. Other rates for capital allowances range from 37.5% for items like computers and earthmoving equipment to 5% for buildings dams, water reservoir etc.

Withholding tax exemption

The law provides exemption of withholding tax chargeable by foreign banks on interests payable to strategic investors as defined by Tanzania Investment Act. This is one of the measures devised to encourage investment in the country.

Tax Credit

The income tax law provides for tax credit in case the tax was paid abroad on the same income, which was assessed in respect to resident person (Individual or entity).

100% Deduction in mining operations.

Theinvestments in mining operations get special treatment in Tanzanian tax system. The whole expenditure incurred for the year (both capital and revenue expenditure) is deducted when calculating taxable income.

Income Tax exemption under Export Processing Zone (EPZ)

As per Income tax Act, 2004 the following amounts are exempted from income tax:-

• Income derived from investment or business conducted within the Export Processing Zone and Special Economic Zone, during the initial period of ten years.
• Payment of withholding tax in respect of foreign loan granted to an investor licensed under in the Export Processing Zone and Special Economic Zone during the initial period of ten years.
•  Payment of withholding tax on dividend arising from investment in the Export Processing Zone and Special Economic Zone during initial period of ten years.
• Payment of withholding tax on rent payable by an investor licensed under the Export Processing Zone and Special Economic Zone during initial period of ten years.

East EAC Customs Union

Tanzania is a member of East African Customs Union which involves 5 countries of Kenya, Uganda, Tanzania, Rwanda and Burundi.

Movement of goods among these countries is duty free. This is an attractive incentive to producers of goods in the region as long as they meet the Rules of Origin Criteria which were established and agreed upon by member states.

Import Duty Drawbacks

Import duty charged on imported inputs used for producing goods for export and goods sold to foreign institutions like United Nations  in Tanzania, is refunded. The aim of this scheme is to maximize production and minimize the cost of production for local industries and enable them to compete in the world market

Export Processing Zone (EPZ)

Under the Export Processing Zones Act, all goods processed and manufactured in the areas designated as EPZ are exempted from import duty on raw materials.

Manufacturing under Bond

All factories registered to manufacture goods under bond for export purpose are exempted from import duty and other taxes on inputs used to manufacture those goods.