On June 30, 2025, the Finance Act, 2025 (The Act) became operational after being passed by the Parliament and subsequently assented by the President. The Act implements the national budget for the fiscal year 2025/2026. This landmark legislation introduces sweeping amendments across multiple tax and regulatory laws, with significant implications for businesses, investors, and the broader economy.
While the Act modifies numerous statutes, this summary deliberately narrows its scope to the amendments most pertinent to our clients, stakeholders, and the business community, particularly those affecting:
- Banking & Financial Institutions Act, 2006
- Excise (Management and Tariff) Act, Cap 147 R.E. 2019
- Income Tax Act, Cap 332 R.E. 2019
- Mining Act, Cap 123 R.E. 2019
- Tax Administration Act, Cap 438 R.E. 2019
- Insurance Act No. 10 of 2009
Table: A summary of the amendments and implications
| S/N | Amended Legislation | The Amendment | Implication |
| 1 | The Income Tax Act Cap 332 RE 2019, | The amendment expands the definition of ‘equity’ under Section 12(5) to include retained earnings. It further introduces a withholding tax on retained earnings, whereby 30% of undistributed profits held for more than 12 months will be deemed as dividends and subject to a 10% withholding tax. | By broadening the definition of equity, the amendment effectively tightens the debt-to-equity ratio thresholds. This limits the extent to which companies can rely on debt financing without triggering thin capitalization rules. As a result, highly leveraged entities, particularly multinationals that typically fund subsidiaries through intercompany loans may be compelled to restructure their financing models to maintain deductibility of interest and avoid adverse tax consequences. Furthermore, the imposition of a 10% withholding tax on 30% of undistributed profits retained for over 12 months places pressure on companies to either reinvest swiftly or declare dividends. While the aim is to prevent indefinite profit retention, which erodes the dividend tax base this measure could have unintended effects on cash flow management. |
| The amendment of Section 105(2) by imposing 10% withholding tax on hired motor vehicles. | Compliance burden for Lessees (e.g., ride-hailing platforms such as Bolt, Uber) who must track and remit WHT, significantly increasing their administrative costs. Additionally, this may lead to higher rental prices to offset the tax burden. | ||
| 2% withholding tax imposed on purchases of raw salts from artisan miners or primary Mining license (PML) holders under section 115. | Artisan miners (often informal) may resist formal sales to avoid tax, leading to shortages for processors. Furthermore, processors may pass costs to consumers, raising prices for iodized salt, industrial salts, etc. | ||
| 10% withholding tax imposed on gaming advertisement and promotion commissions also under Section 115 of the parent Act | Gaming firms may reduce spending or shift advertising to untaxed channels (e.g., social media barter deals). Furthermore, smaller gaming operators with thin margins could exit the market, benefiting larger players. | ||
| Another crucial amendment is done in section 117(3) where only returns for individuals whose turnover in a year of income exceeds five hundred million shillings and a corporation whose gross income in a year of income exceeds one hundred million shillings, must be prepared or certified by a certified public accountant. | This relieves small and medium entrepreneurs from the costs of compliance. It also simplifies tax collection for small traders in the informal sector by requiring registration with relevant authorities and integrating Taxpayer Identification Numbers (TIN) for those below the income tax threshold. This formalizes the sector, potentially improving access to credit and markets. | ||
| The Act has also amended Paragraph 4(c) of the First Schedule by increasing the rate of withholding Tax from 5% to 10% in matters including insurance and reinsurance payments made to foreign companies. | The increase in the rate of withholding tax encourages the use of local insurance providers hence supports the growth of Tanzanian domestic insurance industry. However, non- resident insurers may view Tanzania as less attractive due to the high tax burden. | ||
| Amended Paragraph 4(c) of the First Schedule by increasing the rate of withholding Tax from 5% to 10% in payment of professional and management services provided by a resident person in the extractive industry. | The proposed tax amendment will directly increase the operational costs of extractive sector companies that heavily rely on subcontracted professional and management services. The upward revision of the withholding tax from 5% to 10%, translates into an immediate rise in the cost of engaging local and foreign service providers. For companies operating under existing service agreements, this change constitutes a material shift in the tax burden and may serve as a justifiable basis for initiating price renegotiations. | ||
| 2 | The Excise (Management and Tariff) Act Cap 147 RE 2019 | Amendment of section 2 by adding the following definition of “financial institution” to mean a bank or financial institution established or licensed under the Bank of Tanzania Act or the Banking and Financial Institutions Act, including a microfinance service provider falling under Tier 1 recognised under the Microfinance. | The recent amendment extends the scope of the 10% excise duty on fees charged by financial institutions to now include Tier 1 microfinance institutions. Previously, the definition of “financial institution” under the Banking and Financial Institutions Act, 2006 did not encompass microfinance institutions. As a result, microfinances fell outside the ambit of the Excise (Management and Tariff) Act, making it legally impossible to subject them to excise duty. This legal gap was confirmed by the Court of Appeal, which held that, based on the existing statutory definition, microfinances were not liable to excise duty. The amendment now cures this discrepancy by explicitly bringing microfinance institutions within the definition of financial institutions for the purposes of the Excise Act, thereby subjecting them to the 10% excise duty on applicable fees. This will likely increase their operational costs, particularly in relation to transaction and service fees charged to clients. To absorb this additional tax burden, many microfinances may respond by increasing lending fees, processing charges, or other service-related costs. This could make borrowing more expensive, especially for low-income and underserved borrowers who rely heavily on microfinance for access to credit. In the long term, the amendment may also discourage financial inclusion by reducing affordability and increasing barriers to entry for small-scale entrepreneurs. |
| New excise duty rates: Imported margarine – TZS 50 per kgPotatoes – TZS 50 per kg for locally produced and TZS 100 per kg for importedIce cream, whether or not containing cocoa – 5% for locally produced and 10% for imported, per kgBeer made from malt – TZS 630 per litre / TZS 928 per litre/ TZS 937.90 per litreWine with domestic grapes content exceeding 75% – TZS 215 per litreCider – TZS 2,974.74 per litreOpaque beer – TZS 555 per litre / TZS 978 per litreVodka, whiskies, and rum – TZS 4,003 per litre/ TZS 4,411.06 per litre/ TZS 4,411.06 per litreFireworks – 25%Soap – 10%Cufflinks and studs – 10%Imported seats – 25% | These changes reflect the government’s revenue mobilization efforts, but businesses must adapt pricing strategies, explore local sourcing, and enhance compliance to mitigate cost pressures and potential market shifts, with some sectors facing risks of increased informality or demand erosion. | ||
| 4 | The Mining Act Cap 123 RE 2019 | Introduction of section 113A which imposes HIV response levy where seventy percent of the collected amount to the AIDS Trust Fund established under the Tanzania Commission for AIDS Act and thirty percent of the collected amount to the Universal Health Insurance Fund established under the Universal Health Insurance Act. | This will result in a raise of funds for public health but increases the Tax and Levy Burden to the mining sector. The levy also raises production costs for mineral producers. |
| 5 | The Tax Administration Act Cap 438 RE 2019 | The finance Act 2025, repeals and replaces section 23 of the Act to recognize small scale traders conducting business in the informal sector who has been duly registered by the relevant authority and shall asses such trader and demand the tax payable if such trader has the annual turnover exceeding the minimum taxable income as specified under the Income Tax Act. | While the amendment may be seen as a step toward legitimizing informal trade, it also exposes registered informal traders to income tax assessment and enforcement. More traders will be pulled into the tax net: Previously unregistered or unassessed informal sector operators who now seek official recognition (to access financing, participate in procurement, or get licenses) will find themselves subject to tax once they cross the minimum income threshold. |
| Repeal and replacement of section 42 which mandates the commissioner General to establish and operate a computerised electronic system for filing, furnishing, storing, archiving and accessing electronic documents and carrying out any other tax administration functions. The system strictly allows registered users only to access it. Electronic documents become legally valid once the system generates a registration number using a taxpayers authentication code, with printed copies serving as court admissible evidence. Businesses operating digital receipt systems must integrate their platforms with this tax authority system. | All tax compliance matters such as submitting of returns will be entirely online hence simplifying both storage and retrieval. The centralized system will also enhance transparency and accountability ensuring tax payers are held accountable for all documentation. | ||
| Amendments to Sections 62 and 63 of the Tax Administration Act. An objection will now be deemed duly lodged and accepted if it is filed within the statutory 30-day period from the date of receiving the tax assessment, or on the date the required deposit (either one-third of the assessed amount or a lesser amount agreed upon by the Commissioner General) is paid, whichever is later. Additionally, where the Commissioner General issues a settlement proposal in response to a notice of objection, and the objector fails to respond within 30 days of receiving the proposal, the Commissioner General’s proposal will automatically be deemed a final objection decision. In such cases, the objector retains the right to appeal the deemed decision to the Tax Revenue Appeals Board. | These changes reinforce the importance of strict adherence to timelines and aim to reduce delays in the tax dispute resolution process by introducing deemed decisions where either the Commissioner or taxpayers is unresponsive. | ||
| Amendment to Section 90(2) which introduces a 30% penalty on adjusted losses resulting from transfer pricing adjustments applied to loss-making entities. This marks a significant departure from the previous position, where the penalty was pegged at 100% of the tax shortfall, a standard that did not accommodate entities declaring a loss. | While it still penalizes manipulation of intercompany transactions, it reduces the punitive burden on businesses that genuinely operate at a loss. However, it also signals increased scrutiny of loss-making entities, especially multinationals with recurring losses, by discouraging the use of pricing arrangements to artificially shift profits or inflate deductions. In practical terms, loss-making firms may now face material penalties even in the absence of a tax liability, heightening the need for robust transfer pricing documentation and defensible intercompany pricing. | ||
| 5 | Insurance Act No 10 of 2009. | Introduction of Section 134 A which poses a requirement that foreigners (with exception of members of the EAC and SADC) entering Mainland Tanzania through land, seaport or airport shall, upon arrival, purchase an inbound travel insurance policy at a premium amount of Tanzania Shillings equivalent to 44 United States Dollars. However, the Minister will make regulations for better implementation of the provisions of this section. | This ensures enhanced traveler protection which covers medical emergencies, repatriation accidents, baggage loss and other contingencies. However, it may raise concerns among tour operators, particularly with respect to price sensitive tourists, many of whom already hold travel insurance from their country of origin. It remains unclear how the regulations intend to address such scenarios or whether exemptions will be provided. |
Disclaimer: This review does not cover all amendments under the Act but selectively highlights those likely to impact our clients due to their sector-specific relevance, compliance burden, or operational consequences. We encourage businesses to seek tailored advice to assess full implications. By focusing on these critical changes, we aim to provide actionable insights to help you navigate the evolving fiscal landscape, mitigate risks, and capitalize on emerging opportunities.