Tanzania: Income tax and VAT changes for nonresident providers of digital services
Tax obligations include higher digital services tax, new VAT rules, and excise duty requirements
Tanzania’s Finance Act 2026—effective July 1, 2026—introduces income tax and VAT changes for nonresident providers of electronic services that could significantly affect digital platforms and online marketplaces operating in Tanzania.
Income tax
Section 116(1) of the Income Tax Act CAP 332 has been amended by increasing the income tax rate applicable to payments made to nonresident providers of digital services (digital services tax (DST)) from 2% to 3%. Accordingly, effective July 1, 2026, nonresidents providing digital services to individuals (not acquiring such services for business purpose) will now be required to account for income tax at the rate of 3% on revenue derived from Tanzania.
VAT
Section 51 of the Value Added Tax Act CAP 148 (VAT Act) has also been amended by introducing a “deemed supplier rule” requiring online marketplaces that facilitate the supply of services to be treated as the suppliers and thus responsible to collect and account for VAT in Tanzania. Section 94 of the Finance Act 2026 adds subsections 51(2) and (3) in the VAT Act that state:
(2) Notwithstanding subsection (1), where an electronic service is supplied to an unregistered person in Mainland Tanzania by a digital intermediary through online intermediation services or any other digital marketplace, the operator of such online intermediation service or digital marketplace shall, for purposes of this Act, be deemed to be the supplier of the service.
(3) For the purpose of this section, “digital intermediary” means an electronic interface, including website, internet portal, application, online store or digital marketplace that allows recipients and persons offering services through the electronic interface to enter contact which results in a sale through that electronic interface.
Expansion of scope of “electronic services”
The VAT Act is also amended to include in the definition of “electronic services”, any other service of a similar nature delivered through internet or a telecommunications network.
Excise duty
The Excise (Management and Tariff) Act CAP 147 (Excise Duty Act) has been amended to introduce excise duty on certain services such as pay-to-view and electronic communications services, provided by a nonresident service providers to unregistered persons / end users as stated below:
(4) There shall be charged, levied and collected an excise duty on the dutiable value, charges or fees payable in respect of services specified under subsections (6), (7), (9)(d) and (14) at the rate specified in the respective subsections that are provided or delivered by a non-resident through internet or any other electronic form to a resident person who has not been registered or required to file returns under this Act for provision of the same service in Tanzania.
(5) A non-resident required to pay excise duty under subsection (4) shall be required to be registered, charged excise duty, file return and pay excise duty in accordance with regulations made under this Act.
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Mwaliki Sabato | msabato@kpmg.co.tz