The Tanzania Revenue Authority (TRA) has confirmed that the country’s Value Added Tax (VAT) rate has been reduced from 18 percent to 16 percent following amendments under the Finance Act 2025.
The Act, which came into effect on July 1, 2025, amended Section 5 of the VAT Act (Cap. 148), creating a new subsection (6) that provides for the reduced standard rate.
However, TRA Commissioner General Yusuph Juma Mwenda has clarified that the effective application of the new rate will only take place after the issuance of a formal public notice specifying eligible persons and the modalities of implementation.
“The Commissioner General is currently working on the requirements put by this provision of the law. Once finalized, the public will be informed on the implementation of this law accordingly,” Mwenda stated in a notice released on Tuesday.
The reduction marks Tanzania’s most significant VAT policy shift in recent years and is aimed at easing the tax burden on businesses and consumers, while aligning with regional competitiveness strategies.
The move comes as neighboring Kenya continues to debate its own VAT policy framework under the Medium-Term Revenue Strategy (MTRS). Kenya’s 2024 Finance Bill had proposed lowering VAT from 16 percent to 15 percent and raising the VAT registration threshold to KSh 8 million. However, the proposal was rescinded following strong pushback during public consultations.
Analysts say Tanzania’s VAT reduction could sharpen the contrast between the two economies, particularly in the East African Community (EAC), where tax harmonization has been a long-standing goal.
While Tanzania awaits detailed implementation guidelines, businesses and consumers are closely watching for the TRA’s public notice, which will determine when and how the reduced VAT rate will apply.
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