Relief for businesses as Tanzania offers tax breaks, subsidies and VAT exemptions in 2026/27 budget

The incentives are intended to support industrialisation, boost agricultural output, encourage business formalisation and attract private sector investment.

On fuel, the government said it continued to intervene to cushion transport costs and inflationary pressures. Diesel subsidies reached Sh259 per litre in May and Sh535 per litre in June, according to the Treasury.

Among the key measures is a 12-month income tax holiday for newly registered taxpayers under the presumptive tax regime.

“The objective of this reform is to reduce compliance burdens on startups, mitigate early-stage operational disruptions, and ensure future tax assessments align with verifiable historical turnover,” Mr Omar said.

Manufacturers will also benefit from the removal of the sunset clause on VAT deferment for imported capital goods, making the incentive permanent. The measure allows firms importing machinery and industrial equipment to defer VAT payments, easing cash-flow pressures.

Agriculture remains a priority area, with VAT exemptions extended to edible oil produced from locally grown oilseeds, aimed at reducing reliance on imported cooking oil while supporting domestic sunflower production and processing.

The government said it would continue providing subsidies for sunflower and cotton seeds, alongside distributing two million seedlings annually to boost raw material supply for the edible oil industry.

“We will continue to support production of oilseed crops with the aim of reducing imports of edible oil,” the minister said.

Fertiliser support programmes and settlement of subsidy claims will also continue to help farmers manage input costs and improve productivity.

The textile industry has also been supported through VAT exemptions on garments made from locally produced cotton, in line with efforts to strengthen value addition in the sector.

In the energy transition agenda, imported equipment for electric vehicle charging stations will be exempt from VAT, reducing investment costs in emerging clean mobility infrastructure.

Similarly, imported smart meters for liquefied petroleum gas (LPG) systems will also be exempt from VAT to support wider adoption of cleaner cooking energy.

The aviation sector has received relief through VAT exemptions on airline boarding passes, aircraft turbines and aircraft tyres, measures expected to reduce operating costs and support expansion of air transport services.

“The objective of this measure is to reduce operating costs and stimulate investment in the aviation sector,” Mr Omar said.

Dairy processors will benefit from VAT exemptions on selected packaging materials, while polyester fibres used in the production of fishing nets have also been exempted to support local manufacturing.

Corporate taxpayers will see a reduction in the taxable portion of deemed retained earnings from 30 percent to 15 percent for qualifying companies, a move aimed at encouraging reinvestment and expansion.

However, the incentive excludes small financial institutions, insurance companies, firms listed on the Dar es Salaam Stock Exchange (DSE) and entities operating under framework agreements with the government.

Regional trade has also been supported through the exemption of qualifying goods originating from East African Community member states from Industrial Development Levy charges.

Taken together, the measures reflect a dual strategy of broadening the tax base while offering targeted incentives to sectors considered key to economic transformation.

The impact of the incentives on investment, employment and consumer prices will be closely monitored as the new fiscal year begins on July 1.