Tanzania Finance Act 2025: Withholding Tax on Services Increased from 5% to 10% in Key Sectors

SRA

Tanzania’s Finance Act 2025 raises WHT from 5% to 10% for select services. See what changed and how S R Auditors can help you stay compliant.

The Government of Tanzania has introduced significant tax changes through the
Finance Act, 2025, amending the Income Tax Act (Cap. 332).

One of the most impactful changes is the increase in withholding tax (WHT)
rates from 5% to 10% on specific service payments.

These adjustments reflect the government’s strategy to broaden the tax base and improve revenue collection,
especially from sectors where cross-border and high-value transactions are common.

Key Changes in Withholding Tax (WHT)

1) Technical & Management Services in the Extractive Sector

  • Payments for technical or management services by resident companies in the extractive sector (mining, oil, and gas) are now subject to 10% final WHT, up from 5%.

2) Insurance Premiums Paid to Non-Residents

  • Insurance premiums paid to non-resident insurers now attract 10% WHT, up from 5%.

3) Rental of Motor Vehicles

  • A new 10% WHT applies to payments for the rental of motor vehicles.

4) Gaming Advertising & Promotion Commissions

  • Commissions for gaming advertisements or promotions now attract 10% WHT.

5) Deemed Dividend Distribution

  • Companies that fail to distribute after-tax profits within 12 months face a 10% deemed dividend WHT on 30% of retained earnings.
  • Dividends later declared will not face double taxation on amounts already deemed distributed.

What Remains at 5%

For general professional services (consulting, legal, auditing, accounting, etc.) not linked to extractives
or other special categories, the 5% WHT rate remains unchanged.

Implications for Businesses

  1. Higher Compliance Costs – Update withholding tax processes to reflect new rates.
  2. Contract Adjustments – Review pricing and contract clauses to account for WHT changes.
  3. Cash Flow Impact – Withholding reduces net receipts; plan liquidity accordingly.
  4. Profit Distribution Planning – Align dividend policies to avoid the 10% deemed dividend exposure.

Conclusion

The Finance Act, 2025 marks a shift in Tanzania’s tax framework, particularly affecting the extractive,
insurance, motor vehicle leasing, and gaming sectors. While the 5% WHT remains intact for most professional services,
the new 10% rate introduces additional obligations for businesses in specific industries.

How S R Auditors Can Help

Navigating these changes requires professional advisory and compliance expertise.
S R Auditors helps businesses and NGOs in Tanzania to:

  • Review and structure contracts to align with the new WHT obligations.
  • Provide strategic tax planning to minimize cash flow disruptions.
  • Ensure compliance with the Income Tax Act and Finance Act amendments.
  • Advise boards on dividend planning to avoid unexpected 10% deemed tax exposure.

Talk to S R Auditors today to keep your organisation compliant and prepared.

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Tanzania professional services tax; Extractive sector tax Tanzania; Insurance withholding tax Tanzania; Motor vehicle rental tax Tanzania;
Gaming commission tax Tanzania; Deemed dividend tax Tanzania; Tax advisory Tanzania; Audit firms in Tanzania; S R Auditors Tanzania.