Tanzania cuts VAT to 16% on sales to unregistered buyers who pay by bank or approved e-payment, from 1 September 2025

What changed in detail

Section 124 of Tanzania’s Finance Act, 2025 (Act No. 11 of 2025), assented to on 30 June 2025, adds a new subsection (6) to section 5 of the Value Added Tax Act (Cap. 148).

Where a supply taxable at the standard rate is made in Mainland Tanzania to an unregistered person in Mainland Tanzania who pays the consideration through a bank or an electronic payment system approved by the Commissioner General, the rate is 16% instead of the standard 18%.

Two provisos qualify the rule. The Commissioner General must specify, by public notice, the persons eligible and the manner in which the arrangement is implemented. And the subsection comes into operation on 1 September 2025, two months after the rest of the Act.

Section 131 of the same Act adds s.70(3): a supplier that charged 16% under s.5(6) must submit, through the system or as the Commissioner General directs, proof of the bank or electronic payment showing that the consideration was paid that way.

What it means

The 16% rate remains in the VAT Act in November 2026; the Finance Act 2026 (Act No. 2 of 2026) amends s.5(5) and adds s.5(7) but leaves s.5(6) untouched.

The reduced rate is an incentive to move retail trade off cash. It is not automatic: the buyer must be unregistered, the payment must go through a bank or an approved channel, the supplier must fall within the Commissioner General’s notice, and the supplier must be able to evidence the payment. A sale paid in cash, or one the supplier cannot document, stays at 18%. The rate applies in Mainland Tanzania only; Zanzibar has its own VAT law.