By Leah Turuka
The East African Community countries are approaching national budget announcements for the fiscal
year 2026/27, and businesses are currently operating in a fiscal environment characterized by close
monitoring of fiscal policy shifts, evolving tax policy, strengthened tax administration and efforts to
align taxation with economic activity. Specifically in Tanzania, we anticipate both incremental policy
refinements accompanied by intensified enforcement measures.
What businesses should expect from the upcoming national budget
The upcoming budget is expected to introduce means to expand the domestic revenue base. With the
recent cut down of up to 90% of foreign contracts and grants from USAID, leading to closure of major
projects in the country – the government must seek alternative funding for substituting this sudden
revenue cut-off which highly supported economic initiatives in sectors including agriculture, health and
education.
Moreover, with the ongoing Middle – East crisis causing an exponential spike in fuel prices, sectors
such as tourism, have been heavily impacted. Furthermore, there has been mounting pressure on the
Tanzanian shilling and major disruption of supply chains and food security in the country. The
government will seek to ensure stability in its revenue collection through increasing the base of tax
and non-tax revenues in the country.
Borrowing experience from current trends in tax audits, we note that TRA has become more
aggressive, data-driven and focused on broadening the tax base. We, therefore, look forward to
hearing proposals with a genesis from tax audit conclusions. A vivid example is on the zero-rating
scrutiny. Zero-rated supplies continue to attract a close review by TRA, with constant reclassification
of zero-rated supplies into standard rated for VAT purpose. We foresee the budget to bring about
changes in relation to zero rating by tightening documentation requirements for zero-rating and
narrowing zero-rating categories.
Specifically in insurance, we noted a sharp change of approach in TRA tax audits conducted this year
whereby premium received was treated on the cash basis concept contrary to the accrual basis as
before. This gave rise to alarming tax liabilities for insurance companies and is still an ongoing cry by
the stakeholders. We expect the national budget to bring clarity to the matter after deep brainstorming
and analysis through the Tanzania Insurance Regulatory Authority (TIRA).
On the same note, the TRA has intensified data verification efforts by reconciling taxpayer
submissions with data from its systems, including EFDMS and TANCIS. The aim being to strengthen
data matching and digital audit trails. To support this initiative and improve revenue collection, the
national budget may introduce stricter digital reporting obligations and additional customs compliance
requirements. The TRA may also increase penalties for non-compliance.
Furthermore, introduction of the Integrated Domestic Revenue Administration System informally
introduced new administrative practices that are absent in legislation. Consequently, we anticipate
changes to be passed by law in relation to facilitation of operations in IDRAS, intended to guide the
taxpayer towards aligned administrative and legal compliance. As an example, taxpayers observed a
newly introduced requirement that came with IDRAS on registration for Tax Identification Numbers for
non-resident suppliers. We understand that this requirement primarily aims to widen the tax base by
capturing all income sourced in Tanzania, however, its implementation faced a push back as the
requirement is unsupported by law.
Over the course of time, we have also experienced efforts from the government to protect strategic
sectors such as agriculture, mining, manufacturing, tourism and the energy sectors. This has been
evident from consistent Finance Act amendments in favour of the sectors and from decided cases in
favour of Taxpayers in the sectors. As of recent, we have witnessed a decided case in which the
Court of Appeal ruled in favour of the Taxpayer by allowing employee accommodation at remote
project locations as a fundamental business input directly linked to the generation of taxable income
as opposed to being “entertainment”. This underscores the Government’s recognition of the
importance of strategic sectors that contribute substantially to the national income, for that, we look
forward to the national budget introducing targeted incentives such as tax reliefs and duty exemptions
to the strategic sectors.
Transfer pricing trends the government is focusing on
Recently, the Transfer Pricing landscape has exponentially changed in the country, for that, we
anticipate the Transfer Pricing Regulations to change to match the improving landscape, not only in
Tanzania, but globally. Along with improved legislation, we expect enhanced enforcement of transfer
pricing legislations in the country with key areas of focus being management fees, intra-group service
charges, royalties, and financing arrangements between related entities – being the most scrutinised
transactions in ensuring compliance with arm’s length principles.
Looking into taxpayer disputes with TRA over the course of years, there is a consistent scrutiny on the
treatment of receivable balances from related party entities whereby the tax authority reclassifies such
balances as loans, and accordingly, imposes withholding tax on deemed interest on the balances.
This position is further reinforced by a recent Court of Appeal decision, which was determined in
favour of the TRA on the same issue.
Conclusion
The upcoming national budget is expected to reinforce Tanzania’s focus on revenue mobilisation, tax
compliance, and economic development. While this may introduce additional compliance
requirements, especially for businesses, it also presents opportunities for growth through targeted
incentives and infrastructure investment. Businesses that ensured compliance and maintained a
proactive approach such as self-verification exercises are better positioned to adapt to policy changes
and a clean cut off upon introduction of any changes. Additionally, it is important that taxpayers stay
engaged with policy updates after the budget announcement and seek professional advice where
necessary to interpret new provisions and ensure timely compliance.
The views expressed herein are those of the author and do not represent the position of Coretax
Africa. This article is for information purposes only and does not constitute professional tax or legal
advice.