United republic of Tanzania
Navigating international regulations with confidence
Currency
Tanzanian Shilling – TZS
Official Language
Swahili
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Fiscal Year
1 Jan - 31 Dec
Payroll Frequency
Weekly, Bi-weekly & Monthly
Tax System and Regulations
Income Tax Structure
Tanzania and Zanzibar share a unified Income Tax Act that applies to both jurisdictions, including the administration of Pay As You Earn (PAYE). However, tax administration is carried out separately, with the Tanzania Revenue Authority (TRA) overseeing mainland Tanzania and the Zanzibar Revenue Board (ZRB) handling Zanzibar. In contrast, Zanzibar operates its own VAT system and customs authority, meaning that taxes such as import VAT and excise duties are administered independently from the mainland. Residents are taxed on worldwide income and non-residents only on income sourced within Tanzania. For employees, taxable income primarily includes salaries, wages, bonuses and other employment-related benefits. Employers are required to deduct PAYE from employees’ salaries and remit it to the TRA on a monthly basis. Additionally, certain benefits or allowances may be subject to taxation depending on their nature. Employees are generally not required to file personal income tax returns unless they have additional sources of income or are specifically requested to do so by the TRA. Various tax reliefs and deductions, such as those related to contributions to approved retirement funds, may be available depending on the taxpayer’s status and income type.
Payroll Taxes
In both Tanzania and Zanzibar, payroll taxes consist of several mandatory deductions and contributions that employers must make on behalf of their employees. PAYE income tax is withheld from employees’ salaries based on progressive tax brackets. For social security contributions, private sector employers and employees in mainland Tanzania each contribute 10% to the National Social Security Fund (NSSF), while public sector employees contribute 5% and their employers 15% to the Public Service Social Security Fund (PSSSF). In Zanzibar, social security contributions in the private and public sectors are made to the Zanzibar Social Security Fund (ZSSF), where employers and employees contribute 14% (which includes a 1% employment injury benefit) and 7%, respectively. Employers in mainland Tanzania are also required to pay a 3.5% Skills Development Levy (SDL) on gross salaries to support vocational training and skills development. This levy is mandatory for businesses with four or more employees. Zanzibar has no SDL equivalent. Additionally, employers in mainland Tanzania are required to contribute to between 0.5% and 1% to the Workers Compensation Fund (WCF), depending on the risk level of their industry. The WCF provides compensation for employees injured at work. Employees do not contribute to the SDL or WCF. Lastly, Zanzibar established a Health Services Fund (ZHSF) in 2023 where both employers and employees are obligated to contribute 3.5% of the employee’s monthly salary. Health insurance in Tanzania is integrated in the NSSF contributions.
Tax Reporting and Payment Deadlines
Employers in mainland Tanzania are required to withhold and remit monthly PAYE income tax, SDL and other withholding taxes by the 7th day of the month following the relevant payroll month and must file corresponding monthly return statements. Contributions to social security schemes (e.g. NSSF or PSSSF) and WCF are generally due by the last day of the following month, with employers also submitting monthly returns to the relevant fund administrators. Employers must also file annual PAYE and SDL summaries, as well as annual WCF reports. In Zanzibar, employers follow similar schedules under the ZRB, with monthly remittance of PAYE and withholding taxes required by the 7th day of the following month, and monthly social security contributions to ZSSF (employer and employee portions) due by the end of the next month. Annual reconciliations and returns are also required per fund regulations. ZHSF contributions must be submitted within 14 days after the end of each payroll month.
Compliance and Record-keeping
Employers in both mainland Tanzania and Zanzibar are legally required to maintain accurate and comprehensive payroll records for at least five years, as stipulated under the Tax Administration Act. These records must include employee details, salary payments, tax deductions, social security contributions and other statutory levies. Records must be available in either paper or electronic format and must be accessible for inspection by the TRA and ZRB on request. Compliance involves timely filing of monthly and annual returns, accurate withholding and remittance of taxes, and proper use of the respective revenue authorities’ online systems for generating control numbers and submitting returns. Employers must also ensure that all employee and company Tax Identification Numbers (TINs) are correctly used in filings. Failure to comply with these obligations can result in significant penalties. Late filing of returns incurs monthly penalties, either a percentage of the unpaid tax or a fixed amount, while late payments attract compounded interest. Failure to maintain proper records results in monthly fines, while underestimating provisional tax by more than 20% leads to interest charges on the shortfall. Submitting false or misleading information or assisting others in evading taxes can result in further penalties and legal action. These measures are enforced rigorously by the TRA and ZRB to ensure compliance.
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