Tanzania has unveiled a sweeping set of VAT changes as part of its 2026/27 budget, presented to parliament on 11 June 2026 by Finance Minister Ambassador Khamis Mussa Omar. The measures span new exemptions, exemption extensions, structural reforms to refunds and deferrals, and a handful of exemption withdrawals — with all VAT changes combined expected to reduce government revenue by a net 26.6 million shillings.
VAT Refund Reform: 30-Day Deadline with Interest
The most structurally significant change is a new statutory requirement that VAT refunds be paid within 30 days of a claim being submitted. Critically, the legislation will also establish a taxpayer's legal right to interest where refunds are not made on time. The government frames the measure as a tool for encouraging voluntary compliance and improving accountability at the Tanzania Revenue Authority.
New and Extended Exemptions
The budget introduces VAT exemptions on several categories of goods effective 1 July 2026. Boarding passes will be brought within the exempt category to fulfil obligations under international air transport agreements Tanzania has ratified. Equipment for electric vehicle charging stations (HS Code 8504.40.00) will be exempt, at an estimated revenue cost of 5.97 billion shillings. Aircraft turbojets, turbo-propellers, and other gas turbines (HS Heading 84.11), along with aircraft tyres (HS Code 4011.30.00), will also be exempt, at a cost of 14.84 billion shillings, with the stated aim of reducing operating costs and stimulating investment in aviation. LPG smart meters (HS Code 9028.10.00) will be exempt, though only when imported by licensed LPG distributors, at a revenue cost of 16.8 million shillings.
Two existing exemptions are being extended. The VAT exemption on locally produced cooking oil made from domestically grown seeds — introduced for one year under the Finance Act 2025 and due to expire 30 June 2026 — will continue for a further year. Clothing and garments manufactured from locally grown cotton will also be exempt, a measure the government expects to save 6.30 billion shillings in VAT refunds that would otherwise have been payable to exporters.
Dairy packaging materials (HS Code 3920.20.90), whether locally produced or imported, will be brought into the exempt category to reduce costs in the dairy sector and support competitiveness in regional and international markets, at an estimated revenue cost of 17.8 million shillings.
VAT Deferment: Time Limit Removed
The budget proposes removing the existing time cap on VAT deferment for imported capital goods. A government review found that domestic production of such goods does not meet market demand, and the removal of the time limit is intended to keep investment costs down by ensuring capital equipment can continue to be imported affordably on an ongoing basis.
Mining Sector: Framework Agreement Exemptions Formalised
The VAT Act will be amended to formally recognise VAT exemptions provided under framework agreements signed between the government and mining investors, subject to Cabinet approval. The change is designed to give legal clarity to existing contractual commitments and to facilitate the implementation of joint mining projects on time.
Exemptions Withdrawn
Some exemptions are being revoked. The VAT exemption on imported fishing nets (HS Code 5608.11.00) will be removed, replaced by a new exemption on polyester yarn (HS Code 5402.20.00) used in domestic fishing net production — a shift intended to support local manufacturing rather than imports, expected to generate an additional 2.55 billion shillings in revenue. The VAT exemption on pet food (HS Heading 23.09), both locally produced and imported, will also be withdrawn as part of a broader government effort to rationalise unproductive exemptions, expected to yield 6.73 billion shillings.
Revenue Context
The budget chart presented during speech showed VAT on imported goods projected to rise from 4,973.4 billion shillings in 2025/26 to 5,631.0 billion in 2026/27, while VAT on domestic goods is projected at 4,405.8 billion shillings, roughly flat against the prior year's 4,332.1 billion. Income tax remains by far the largest single revenue line at 13,758.1 billion shillings projected for 2026/27.
