Major Tax Reforms in the Tanzania Budget 2026/27-Value Added Tax Act

VAT refunds within 30 days, with interest on delay.

This is among the strongest reforms in the entire budget. Delayed refunds have been a concern for businesses.  It directly supports neutrality, investment and certainty by reducing refund-related cash-flow costs. The risk is fiscal and administrative: without risk-based audits and payment discipline, refund fraud or arrears could rise. The interest rate will be indicated in the Finance Act.

Remove the sunset clause on VAT deferment in Tanzania for imported capital goods. Objective: keep capital formation affordable until local supply matures. Tax implication: pro—highly supportive of investment and closer to neutral VAT treatment of business inputs; con—if deferment is too broad or poorly monitored, abuse risk rises.

VAT Exemptions

Exemption of airline boarding passes from VAT. Objective: comply with aviation agreements and international practice. Exemption of dairy packaging materials. Objective: strengthen dairy competitiveness. Tax implication: pro—reduces sector costs; con—selective item-by-item VAT relief weakens neutrality compared with a cleaner input-credit approach.

Exempt EV charging-station equipment from VAT. Objective: support charging infrastructure. Tax implication: pro—targets a real infrastructure bottleneck; con—revenue cost and classification risk.

Exempt turbojets, turbopropellers, gas turbines and aircraft tyres from VAT. Objective: reduce aviation operating cost and stimulate investment. Tax implication: pro—may help connectivity and fleet economics; con—selective relief can become tax expenditure without clear performance tests.

Exempt imported LPG smart meters for LPG distributors. Objective: support clean cooking and proper metering. Tax implication: pro—supports energy transition; con—pass-through to consumers is not automatic.

Continue VAT exemption on edible oil produced using locally produced seeds for one year. Objective: hold down edible-oil prices and support domestic seed use. Tax implication: pro—temporary relief and industrial support; con—poor VAT design if kept permanent.

Exempt VAT on garments and clothing made with locally grown cotton. Objective: support local cotton demand. Tax implication: pro—industrial linkage; con—again, exemption is weaker than zero-rating from a VAT-neutrality standpoint.

Abolish VAT exemption on imported fishing nets while exempting polyester fibres used to produce fishing nets. Objective: shift support from imports to domestic production. Tax implication: pro—better targeted industrial policy than blanket import exemption; con—still selective and dependent on actual domestic production capacity.

Abolish VAT exemption on dog and cat food. Objective: reduce ineffective exemptions and protect revenue. Tax implication: pro—broadens the base and improves neutrality by removing a weak exemption; con—slightly higher consumer prices for a narrow product market.

Recognize mining-investor framework-agreement VAT exemptions, with SOPs. Objective: accelerate joint-venture mining projects and honour Cabinet-approved agreements. Tax implication: pro—legal certainty for signed projects; con—serious horizontal-equity and transparency concerns if framework agreements sit outside ordinary law or are not publicly disclosed. Good practice would require publication, clear eligibility and sunset review.

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