🚗 Withholding Tax Now Applies to Motor Vehicle Rentals
The Finance Act, 2025 (Act No. 11 of 2025), effective 1 July 2025, introduces a significant amendment to Tanzania’s Income Tax Act [Cap. 332], expanding the withholding tax scope to include hired motor vehicles.
This change affects both businesses and individuals who lease or rent vehicles (as lessees) — requiring them to withhold 10% tax on payments made to the vehicle owner. It also affects those who rent out vehicles (lessors), as their rental income will now be subject to withholding at source, reducing their upfront receipts and requiring proper tax recordkeeping.
🔍 Legislative Reference:
“The principal Act is amended in section 105(2) by adding the words ‘hired motor vehicle’ immediately after the word ‘aircraft’ appearing in paragraph (d).”
— Finance Act 2025, #55
This means that payments for hiring motor vehicles are now subject to 10% withholding tax, just like payments for leasing aircraft or construction equipment.
📌 Key Provisions
| Topic | Details |
|---|---|
| Effective Date | 1 July 2025 |
| WHT Rate | 10% of gross payment for hired motor vehicles |
| Responsibility | Payer (lessee/renter) must withhold and remit to TRA |
| Remittance Deadline | Within 7 days after the end of the month in which payment was made |
| Scope | Applies to both individuals and entities leasing vehicles for business or personal use |
📈 Implications
- Lessees (hirers) must withhold 10% from the gross rental payment and remit it to the Tanzania Revenue Authority (TRA).
- A withholding tax payment control number must be generated via the TRA Taxpayer Portal.
- Upon payment, the Withholding Tax Certificate is automatically generated by the portal — and becomes visible both to the payer and the vehicle owner (lessor).
- Important: The certificate will only appear in the lessor’s TRA portal if the WHT return was correctly generated using both the lessee’s and lessor’s TINs.
- Lessors (vehicle owners) must now track and account for income net of withholding tax in their returns.
- Failure to comply may result in penalties, interest, or disallowance of expenses in tax assessments.
✅ Compliance Tip
- Always use the correct TINs (for both parties) when generating the withholding return.
- Generate and pay using the control number issued on the TRA portal.
- Confirm that the Withholding Tax Certificate appears in both accounts after payment.
- Retain all records in case of future audits or verifications.
📎 Source:
🏷️ SEO Tags
#FinanceAct2025 #WithholdingTaxTanzania #MotorVehicleRental #TaxUpdateTanzania #TRACompliance #BusinessTax #WHTMotorVehicles #TanzaniaTaxLaw #VehicleLeasing
⚠️ DISCLAIMER
As always, anything on this site should not be relied upon in place of appropriate professional advice. Tax laws and regulations may change from time to time and may vary depending on your specific situation.
📞 Need Help?
For professional tax advice or compliance support, connect with us today:
- WhatsApp / Phone: +255 757 555 055