Resident entities are taxed on their worldwide income earned from within and outside Tanzania.
Capital Gains
Capital gains are subject to tax as ordinary income and there is no separate capital gains tax in Tanzania. Capital gains are gains derived from disposal of ‘investment assets', and mineral and petroleum rights. Investment assets (subject to certain exceptions) include shares, interest in land and buildings, and a beneficial interest in a non-resident trust.
Gains on the disposal of the following assets are exempt from tax:
- Residential property used for at least three years prior to the sale, exempt up to TZS 15 million;
- Agricultural land with value not exceeding TZS 10 million; and
- Units in approved collective investment schemes.
Further, effective 1 July 2022, the following gains are exempt from tax:
- Gains on realisation or transfer of mineral rights and mineral information to a partnership entity formed between the Government and an investor;
- Gains on realisation or transfer of free carried interest shares from a partnership entity to the Government; and
- Gains on realisation or transfer of shares to the Government through the Treasury Registrar.
Effective 1 July 2016, a change in the underlying ownership of a company by more than 50% during the previous 3 years attracts a capital gains tax on deemed transfer /realization of assets and liabilities at market values.
Dividends and Interest
Dividend income received by a resident company from another resident company is subject to withholding tax. Dividend paid to a resident company holding 25% or more of shares and voting rights in the dividend paying company attracts a reduced withholding tax. Further, dividend paid by a listed company is also subject to reduced withholding tax (see Sec 8.1.1.).
Interest on bonds issued by the East African Development Bank (EADB) listed on the Dar es Salaam Stock Exchange is exempt from tax. Interest income is considered as investment income.
Mining and Petroleum Companies
For corporate tax purposes, each mining operation and petroleum right is considered as an independent business. Accounts should be prepared for separately for each mining operation or each petroleum right. Similarly, taxable income should be determined and paid for each mining operation and each petroleum right separately for each tax year. Arrangements between mining and petroleum operations and the other activities of the person should reflect the arm’s-length principle.