Individual (Personal) Income Tax

Tanzania levies personal income tax (PIT) on individuals’ earnings. The tax system is progressive, meaning tax rates increase with income. Investors and expatriates in Tanzania should be aware of the rates, residency rules, and compliance obligations for personal taxation, especially if they draw salaries or consultancy fees from Tanzanian sources.

Residency and Scope of Taxation

An individual is considered a resident of Tanzania for tax purposes if they:

• are present in Tanzania for 183 days or more in any tax year, or
• average at least 122 days per year over the current and two preceding years​, or
• have a domicile in Tanzania (unless their permanent home is abroad).

A resident individual is taxed on their worldwide income, whereas a non-resident individual is taxed only on income derived from Tanzanian sources​. For example, a foreign expatriate living and working in Dar es Salaam for over 6 months becomes a tax resident and must report any overseas income (though foreign tax credits may apply), whereas someone on a short 3-month assignment would remain non-resident and only their Tanzanian salary is taxable locally.

Personal Income Tax Rates

Tanzania’s PIT rates for residents are graduated by income level. The tax year is the calendar year. As of the 2024/25 fiscal year, the monthly income tax brackets for resident individuals are as follows​:

• Up to TZS 270,000 per month – 0% (tax-exempt).
• TZS 270,001 – 520,000 – 8% on the amount above TZS 270,000.
• TZS 520,001 – 760,000 – TZS 20,000 plus 20% of the amount above TZS 520,000.
• TZS 760,001 – 1,000,000 – TZS 68,000 plus 25% of the amount above TZS 760,000.
• Over TZS 1,000,000 – TZS 128,000 plus 30% of the amount above TZS 1,000,000​.

The top marginal rate for residents is 30%, kicking in at just over TZS 1 million of monthly income (which is TZS 12 million annual)​. For instance, a resident employee earning TZS 1,200,000 per month would fall in the top bracket and pay: TZS 128,000 on the first TZS 1,000,000, plus 30% of the remaining TZS 200,000 (which is TZS 60,000), totaling TZS 188,000 in tax per month.

Non-resident individuals are subject to a flat 15% tax on employment income​. This 15% on gross salary is a final tax for non-residents (they do not get the graduated scale). Notably, 15% is lower than the top resident rate, but non-residents do not benefit from the tax-free band or lower brackets. For example, if a non-resident consultant earns TZS 5,000,000 in a month from a short-term contract, a flat 15% (TZS 750,000) would be withheld as final tax, whereas a resident on the same income would pay a bit more, as part would be taxed at 30%. Non-residents with other Tanzanian income (business income, etc.) may face different treatment (often taxed via withholding at non-resident rates).

Other personal tax rates:

• Investment Income: Tanzania often taxes investment income through withholding at source. For residents, bank interest is typically subject to a 10% final withholding tax​. (and not included in the PIT return). Dividends from resident companies are taxed at 5% or 10% final withholding (see section 4 on Withholding Taxes). Non-residents face 10% on interest and 10% (or 5% for listed company dividends) on dividends, via withholding​..
• Capital Gains: Individuals’ gains on sale of investments in Tanzania (like real estate or shares) are subject to tax. For residents, the net gain is included in income and taxed at normal rates (with a 10% withholding on real property sales as an advance tax). Non-residents are taxed 10% final on the gain from sale of Tanzanian real property and 20% on gains from sale of shares in Tanzanian companies (this is collected via withholding/certification at the point of transfer)​.

Personal Allowances and Exemptions

The tax brackets inherently provide a basic allowance – the first TZS 270,000 per month is tax-free for residents​, equating to an annual tax-free amount of TZS 3.24 million. There are no personal reliefs such as family/dependent allowances in Tanzanian tax law; the system instead uses the zero-rate band to provide relief to low-income earners.

Certain specific incomes are exempt from personal tax:

• Government-approved gratuities or retirement benefits (from registered pension funds like NSSF, PSSSF) are exempt up to certain limits. For instance, lump-sum retirement pay from a registered fund is typically not taxable (the fund’s contributions were from pre-tax income).
• Compensation for loss or injuries can be exempt.
• Some expatriate employment income may be exempt under diplomatic status or specific donor-agency agreements.

Filing Obligations and PAYE

Most employees in Tanzania pay tax through Pay As You Earn (PAYE) withholding by the employer. Employers are required to compute and deduct PIT from wages each month according to the above rates and remit it to TRA by the 7th day of the following month. For many employees, PAYE is final, and they are not required to file an annual return if they have no other income.

However, an individual must file an annual income tax return by June 30 (six months after year-end) if they have sources of income not fully covered by final withholding. This typically includes sole proprietors with business income, professionals with consultancy income, landlords receiving rent (beyond any final tax paid), or individuals who opt out of presumptive tax. The return declares total income and computes tax per the brackets, giving credit for any PAYE or other prepaid tax. Even if no additional tax is due, filing is required in such cases.

Presumptive Tax Regime: Tanzania has a simplified tax system for small resident traders (sole proprietors) with annual turnover not exceeding TZS 100 million who do not maintain audited accounts. This presumptive income tax is based on turnover slabs, with tax rates ranging from 0% to about 3.5% of turnover (the exact tax due depends on turnover and whether the taxpayer has complete records). Notably:

• To qualify, one must be a resident individual, with exclusively Tanzanian business income, turnover ≤ 100m, and not opt out.
• Such individuals are not required to file a final return if they use presumptive tax. They simply pay the assessed presumptive tax (often in quarterly instalments).
• For example, a small shopkeeper with annual sales of TZS 50 million might pay a fixed amount of presumptive tax (say a few million shillings) according to a schedule, instead of computing actual profit and tax. This eases compliance for small businesses.

Individuals with business turnover above 100 million or who elect out of presumptive must file audited accounts and are taxed on actual profits at the normal rates​.

Other Taxes on Individuals

Beyond income tax, individuals may encounter:

• Social Security Contributions: These are not taxes but mandatory. Typically, an employer withholds 10% of salary for the employee’s NSSF pension and contributes another 10% on the employee’s behalf​. While not part of PIT, they affect take-home pay.
• Skills and Development Levy (SDL): Paid by employers at 3.5 % of payroll​. Again, this is on the employer and not deducted from the employee’s PIT, but it’s a labor cost.
• Residential Rent Withholding: Tenants (especially corporate tenants) renting property from individuals must withhold 10% tax from rent payments​. This serves as advance income tax for the landlord (final for residents in some cases).
• Turnover Tax for Professionals: There isn’t a separate turnover tax, but professionals like lawyers or architects, if operating solo, either fall under presumptive rules (if small) or regular PIT.

Taxation of Expatriates

Investors often bring in expatriate staff. Expatriates working in Tanzania are subject to the same tax rates based on residency status. A foreigner who stays and works in Tanzania for most of the year will be treated as resident and taxed at the progressive rates on both local and any foreign income (with credit for any foreign tax)​. Many expats, however, stay less than 183 days in a year and remain non-resident; in that case, their Tanzanian employment income is taxed at flat 15% at source​.

A common scenario is net-of-tax employment contracts for expats. Companies often agree to pay an expat a net (take-home) amount and bear the tax on their behalf. The Court of Appeal in 2021 (Pan African Energy case) confirmed that when an employer “grosses-up” an expat’s salary to cover the PAYE, that tax paid is considered a taxable benefit to the employee​. In Pan African Energy (T) Ltd v. TRA, the company argued that it correctly paid all PAYE by grossing up, but TRA assessed additional tax claiming the gross-up was itself a benefit in kind ​Tanzania law. The Court upheld TRA’s view: since no law explicitly allowed grossing-up to reduce tax, the extra amount was a benefit and taxable​. This means if an expat’s contract is net TZS 10m per month, the employer must gross up (perhaps to TZS 14m) and PAYE is calculated on 14m. The Court’s decision​ guides that employers should treat the tax they pay on behalf of employees as additional taxable income to avoid disputes.

That case underscores that all compensation, whether cash or in kind, is taxable unless specifically exempt. Housing provided by employer, cars, utility payments, etc., are generally valued and taxed as benefits under rules in the Income Tax Act and TRA’s PAYE Guidelines​. Investors employing expatriates should structure packages with the understanding that Tanzania taxes these benefits and to factor the gross-up cost.

Compliance for High-Net-Worth Individuals and Investors

Investors residing in Tanzania should ensure they comply with annual filing if required. If an individual only has employment income fully taxed via PAYE, they may not need to file. But if they have business income, rental income, or capital gains, an annual tax return is required by June 30. The return should declare worldwide income for residents, but Tanzania provides a foreign tax credit for any tax paid abroad on foreign income (limited to the amount of Tanzanian tax on that income)​.

High-net-worth individuals should note Tanzania does not levy wealth tax or inheritance/gift tax. Estate planning is more about succession law than tax, as inheriting assets doesn’t trigger income tax (though there may be stamp duty on transferring property to heirs).

Example Calculation

Suppose an entrepreneur from abroad moves to Tanzania on July 1, 2024 and starts drawing a salary of TZS 18 million per month from their company:

• From July–December 2024, they spend 184 days in Tanzania, becoming resident for tax. Their monthly PAYE would be roughly TZS 4,948,000 (per month), calculated as: 128,000 + 30% of (18,000,000 – 1,000,000) = 128,000 + 30% of 17,000,000 = 128,000 + 5,100,000 = 5,228,000, but since the tax brackets apply monthly, the first 1,000,000 is taxed at lower rates – doing it bracket by bracket yields around 5.2 million. Over 6 months, that’s about TZS 31.2 million tax.
• In 2025, if they stay the full year, they remain resident and pay that monthly PAYE. If they depart and become non-resident, the employer would switch to 15% flat withholding. On 18,000,000, 15% is 2,700,000, significantly lower per month – demonstrating how residency affects the rate.

This example shows the impact of progressive rates and residency. Many expatriates inadvertently become resident by extended stays and then are subject to higher taxes – planning the timing of stays can legitimately minimize tax if they keep within non-resident thresholds.

Tax Administration for Individuals

The Tax Administration Act requires individual taxpayers who must file returns to do so by June 30. Any balance of tax due must be paid by that date. For small business owners, quarterly installment payments may apply (similar to companies). Late filing by individuals can attract a penalty (e.g. TZS 50,000 or more) and late payment incurs interest.

Tanzania has strengthened enforcement: employers are strictly liable to remit PAYE timely; failure can lead to penalties and the tax becoming a debt. Individuals with business income should register with TRA and get a Taxpayer Identification Number (TIN). The TRA has online filing and payment systems (through the Taxpayer Portal). Individuals can now apply for certain reliefs or file objections online.

If an individual disagrees with an assessment (say, TRA audits a landlord and finds undeclared rent), they can object within 30 days and must pay any undisputed tax or 1/3 of the disputed amount as deposit​. This deposit requirement applies to individuals too. The recent PanAfrican Energy case (though a corporate) in Court of Appeal underscores that waivers of this deposit are hard to obtain and the law is strict​. Thus, individual taxpayers should maintain good records (like rental agreements, receipts of expenses) to defend their tax positions and avoid large unexpected assessments.

Summary: Tanzania’s personal income tax regime features a 30% top rate for residents and a flat 15% rate for non-residents’ employment income​. The system is Pay-As-You-Earn for employment, easing compliance for most. However, entrepreneurs and investors with diverse incomes should engage tax advisors to ensure proper filings and utilization of any credits or exemptions. With the enforcement of fiscal receipt requirements and high penalties for non-compliance, voluntary compliance is the prudent path for individuals. In the end, understanding the residency rules and rate structure helps investors and expatriate employees plan their compensation and presence in Tanzania tax-efficiently, while remaining compliant with the TRA’s requirements.

For more inquiries and information reach us out through info@auditaxinternational.co.tz