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6.3. Depreciation and Amortization

Assets (excluding interest in land and goodwill) are depreciated either under straight-line method or declining-balance method.

The applicable depreciation rates for various asset classes are given below. Assets under class 1, 2 and 3 are depreciated under declining-balance method, whereas assets under class 5, 6, 7 and 8 are depreciated under straight line method.

Class 1: Computers and data handling equipment, together with peripheral devices, automobiles, buses and minibuses, goods vehicles, and construction and earth-moving equipment 37.5%
Class 2: Buses, heavy general purpose or specialized trucks, trailers and trailer-mounted containers, railroad cars, locomotives and equipment, vessels, barges, tugs and similar water transportation equipment, aircraft; other self-propelling vehicles, plant and machinery used in agriculture or manufacturing, specialized public utility plant and equipment, and machinery irrigation installations and equipment  25%
Class 3: Office furniture, fixtures and equipment, and any assets not included in another class  12.5%
Class 4: No assets (Refer Note 1) Nil
Class 5: Buildings, structures and similar works of a permanent nature used in agriculture, livestock farming or fish farming 20%
Class 6: Buildings, structures and similar works of a permanent nature other than those mentioned in Class 5. Effective 1 July 2021, assets used in the East African crude oil pipeline. 5%
Class 7: Intangible assets other than those in Class 4 1 divided by the useful life of the asset
Class 8: Plant and machinery (including windmills, electric generators and distribution equipment) used in agriculture, electronic fiscal devices purchased by traders not registered for VAT, and equipment used for prospecting and exploration of minerals or petroleum 100%

Effective 1 July 2016, petroleum and mining assets mentioned in Class 4 are removed and assets used by companies engaged in petroleum and mining operations (other than those in Class 8) are pooled separately and not under the regular classes. Assets of mineral or petroleum companies are depreciated at the rate of 20% of written down value of the pool every year.

Depreciation allowance is granted in respect of additions to the cost of assets used exclusively for petroleum and mining operations and expenditure (excluding financial costs) incurred in respect of reconnaissance, appraisal and prospecting or exploration of petroleum and mining companies.

Depreciation allowance granted to petroleum and mining companies in a tax year should be claimed in the same tax year and is not allowed to be deferred to subsequent years.

Plant and machinery in Classes 2 and 3 are eligible for an initial depreciation allowance of 50% of the cost of asset incurred in the first year, subject to the following conditions:

  • It is used in a hotel providing tourism services;
  • It is used in a factory for manufacturing process; or
  • It is used for fish farming.

The maximum depreciable amount for a non-commercial automobile is TZS 30 million.