Alternative Minimum Tax in Tanzania: The 1% Turnover Charge After Three Loss Years

This guide reads the 2023 text section by section and works the numbers in shillings.

What the law says about the alternative minimum tax

Tanzanian law does not use the phrase "alternative minimum tax". The Income Tax Act calls the targets "perpetual loss corporations". Practitioners and TRA staff use the shorter label, and so does this guide.

The current text is the Revised Edition 2023 of Cap. 332, published by the Tanzania Revenue Authority. Four provisions work together:

• Section 4(1)(a) charges income tax on every person "who has total income for the year of income or is a corporation which has a perpetual unrelieved loss determined under section 19 for the year of income and the previous two consecutive years of income".
• Section 3, definition of "income", paragraph (c), says that for such a corporation, income means "the turnover of that corporation for the year of income".
• Section 6(1)(c) makes the turnover of a resident corporation with perpetual unrelieved losses its chargeable income for the year.
• Section 4(8) switches the charge off for agriculture, health and education, and since 2024 for tea processing for a fixed period.

The rate sits in paragraph 3(3) of the First Schedule. The Finance Act 2025, Act No. 11 of 2025, section 60(d), deleted the figure "0.5" in that subparagraph and substituted "1". The change took effect on 1 July 2025, according to the TRA copy of the Finance Act 2025. TRA's own Taxes and Duties at a Glance 2025/2026 lists the rate as 1% for residents and "N/A" for non-residents.

The charge replaces nil, not the 30% corporate rate. A profitable company pays 30% of total income (register line F0196). A company in its third straight tax loss pays 1% of turnover (F0198). The test is the tax loss, not the accounting loss.

Who is affected

• Resident companies in a third consecutive tax loss year, whether the loss comes from trading conditions, start-up costs, interest or capital allowances.
• Manufacturers and processors in heavy investment phases, where accelerated allowances push the tax computation into loss for several years.
• Foreign-owned subsidiaries incorporated in Tanzania, which are resident corporations even when the parent funds the losses.
• Companies in Zanzibar, because the Income Tax Act applies to the whole Union and TRA collects it there.

Which sections govern it in the 2023 revised edition?

The 2023 revision renumbered the later Parts of the Act. Sections 3, 4, 6, 19 and 56 kept their numbers. The residence, payment and return sections moved, and older guides still cite the 2019 numbers. We compared the R.E. 2023 arrangement of sections with the Ministry of Finance copy of the R.E. 2019 text.

Quote the edition with the number in any letter to TRA. Our corporate income tax return guide uses the same R.E. 2023 numbering.

When does the alternative minimum tax bite?

The trigger has three parts, all read from section 4(1)(a):

1. A corporation. Individuals and partnerships are outside the charge.
2. A perpetual unrelieved loss determined under section 19. Section 19(5) defines an unrelieved loss as a loss not yet deducted in calculating income.
3. Three years in a row. The loss exists for the year of income and for each of the two previous consecutive years.

So the charge first applies in the third loss year. A company with tax losses in 2024 and 2025 pays nothing extra for those years. If 2026 is also a loss year, 2026 is taxed at 1% of its turnover. Each later year that remains in loss is charged again.

A profit year breaks the run. A company with losses in 2023 and 2024, a profit in 2025 and a loss in 2026 has one consecutive loss year in 2026, not three. The count restarts.

Do losses caused by tax incentives count?

Yes, on the current wording. Section 4(1)(a) refers to a perpetual unrelieved loss "determined under section 19". It does not ask why the loss arose. A loss created by capital allowances, by investment deductions or by an incentive certificate counts in the same way as a trading loss.

This matters most for investors with heavy plant. Our guide to capital allowances in Tanzania shows how first-year and accelerated allowances can turn an operating profit into a tax loss.

How is turnover defined for the minimum tax?

Section 3 defines turnover, for a business of a resident person, as "an amount to be included in calculating the person's income under section 8 without deducting any amount under Subdivision D of Division I of Part III". Subdivision D holds the deductions in sections 11 to 19.

In plain terms, turnover is the gross business income before any expense, allowance or loss. Four practical points follow:

• Gross, not margin. A trader with TZS 10 billion of sales and a 2% gross margin still pays 1% of TZS 10 billion.
• Business income only, on the words. The definition points to section 8, the business income section. Interest, dividends and rent held as investments fall under section 9. Whether TRA includes them is a point to confirm.
• VAT collected is not income. Output VAT is collected for TRA and is not an amount included under section 8. Confirm the treatment in the computation file with the assessing officer.
• Gains on business assets. Section 8 includes them, so model any asset sale in a third loss year.

The same word appears in other charges with different meanings. The council service levy on the Mainland is 0.25% of turnover net of VAT and excise (F0283), under the Local Government Finance Act. That is a separate charge, paid to the council. Our note on the service levy on turnover covers it.

Which businesses are excluded from the minimum tax?

Section 4(8) states that the tax on a corporation with a perpetual unrelieved loss for three consecutive years "shall not apply to a corporation conducting agricultural business or engaged in the provision of health or education". The Finance Act 2024, Act No. 6 of 2024, section 34, added tea processing for a fixed window. The text is in the TRA copy of the Finance Act 2024.

Section 4(8) does not define "agricultural business". Section 19(5) does, for section 19 only. It covers rearing crops or animals, forestry, beekeeping, aquaculture and farming for profit. It excludes processing beyond preparing produce for sale in its original form. The tea amendment suggests Parliament read processing as outside the farming exclusion. A cashew processor, a miller or a juice plant should not assume it is excluded.

The tea window ends on 30 June 2027. A tea processor with a 31 December year end faces a 2027 year that straddles that date. The Act does not say how to treat it. Our tea export guide covers the wider tea regime.

How did the rate move to 1%, and did the 2026 Finance Act change it?

Three Finance Acts in three years touched this area. Only one changed the rate.

The Finance Act 2026 amended sections 10, 33A, 44, 116, 116A and 118 and paragraphs 2 and 4 of the First Schedule. It left the minimum tax alone. EY's Finance Act 2026 analysis of 17 July 2026 lists no change to it either.

Independent firms record the 2025 increase in the same terms. EY's Finance Act 2025 analysis of 4 August 2025 says the rate "has been increased from 0.5% to 1% of the entity's turnover". Clyde & Co reported the same on 3 July 2025. PwC Worldwide Tax Summaries, last reviewed on 9 September 2026, gives 1% with the agriculture, tea, health and education exclusions.

One timing point is open. A company with a 31 December 2025 year end had six months at the old rate and six at the new one. The Finance Act does not apportion. Confirm with TRA which rate applies to that year before filing.

How does the minimum tax interact with loss carry-forward and the loss cap?

Section 19 lets a loss roll forward without a time limit, section 19(2) caps how much of a profit year it can absorb, and section 4(1)(a) taxes turnover while the run continues.

The payment does not use up the loss

The 1% charge is computed on turnover. It does not consume any part of the unrelieved loss balance. A company that pays TZS 48 million of minimum tax on a TZS 95 million loss carries the full TZS 95 million forward. We found no provision that credits minimum tax paid against later corporate tax. Treat it as a cost, not a prepayment.

The cap on loss relief after four loss years

Section 19(2) applies to a person with chargeable income in the year and unrelieved losses for the four previous consecutive years. Its income may be reduced by those losses, but not below a floor. The R.E. 2023 text set that floor at thirty per centum of income before losses. The Finance Act 2024, section 36, replaced "thirty" with "forty".

So a company returning to profit after four or more straight loss years can offset at most 60% of that year's income. The other 40% is taxed at 30%. Clyde & Co's note of 8 July 2024 describes the change as a move from 70% to 60%. The same proviso excludes agriculture, health and education. Extractive licence areas have their own ring-fenced cap, covered in our tax loss carry-forward guide.

The grey year

Consider a fourth year with a profit that is wholly absorbed by brought-forward losses. The return shows nil chargeable income, but there is no new loss. Does the corporation still have "a perpetual unrelieved loss for the year of income"? The Act does not answer it directly. Our loss guide budgets the 1% in that case and asks the assessing officer in writing. This guide takes the same position.

Worked example: a Dar es Salaam manufacturer in its third loss year

Illustrative arithmetic, not a quotation. Company A makes packaging in Dar es Salaam. It is a resident company with a 31 December year end. It has no agricultural, health, education or tea activity, and no investment income.

For example, in 2026 the company pays TZS 48,000,000 to TRA even though it lost money. At the pre-July 2025 rate of 0.5%, the same turnover would have produced TZS 24,000,000. The loss balance of TZS 625,000,000 is untouched by the payment.

In 2027 the company has a profit. It has only three previous consecutive loss years, so the section 19(2) floor does not apply. It deducts the full TZS 625,000,000. Taxable income is TZS 275,000,000 and tax at 30% is TZS 82,500,000.

Variant: one more loss year in 2023

Assume Company A also lost TZS 150,000,000 in 2023. Two things change. First, 2025 becomes a third consecutive loss year, so 2025 also carries the minimum tax. Second, 2027 now follows four consecutive loss years, so the cap applies:

• Loss brought into 2027: TZS 775,000,000.
• Floor: 40% x TZS 900,000,000 = TZS 360,000,000 taxable at least.
• Maximum relief: TZS 540,000,000.
• Tax: 30% x TZS 360,000,000 = TZS 108,000,000.
• Loss still carried forward: TZS 235,000,000.

The provisional side of the same year

For 2026 the company should have estimated TZS 48,000,000 by 31 March 2026. That gives four instalments of TZS 12,000,000 on 31 March, 30 June, 30 September and 31 December 2026. An estimate below 80% of the correct tax, here below TZS 38,400,000, exposes the company to interest under section 86 of the Tax Administration Act (NEW-02-10).

If the TZS 48,000,000 were still unpaid after the due date, the late payment penalty would be the higher of 2.5% of the unpaid tax or TZS 300,000 for a body corporate, each month (NEW-02-06). Here 2.5% is TZS 1,200,000 a month, plus interest at the statutory rate (NEW-02-08). Our guide to TRA penalties and interest shows the monthly compounding.

How do provisional tax and the final return handle the minimum tax?

The minimum tax is income tax. It follows the same calendar as the 30% charge.

• Statement of estimated tax. Section 114 of the R.E. 2023 text. TRA's 2025/2026 summary puts it within three months from the start of the year of income. A company that can foresee a third loss year estimates 1% of projected turnover, not nil.
• Quarterly instalments. Section 113. Due on the last day of the third, sixth, ninth and twelfth months. TRA's corporation tax page says the first instalment is paid when the estimate is submitted.
• Revisions. If turnover forecasts move, revise the estimate so later instalments track the 1% figure.
• Final return. Section 117. Filed within six months after year end, with audited accounts and the loss schedule. Any balance is due on the same date.

The TRA corporation tax page lists "tax paid out of turnover of companies with perpetual unrelieved losses for three consecutive years" among the taxes it collects. Our provisional tax guide explains the 80% test and revisions in detail.

Does the alternative minimum tax apply to branches and non-residents?

Probably not, but confirm. Section 6(1)(c) speaks of "a resident corporation". The section 3 definition of turnover is framed around "a business by a resident person". TRA's Taxes and Duties at a Glance 2025/2026 shows the rate as "N/A" for non-residents.

A Tanzanian branch of a foreign company is a permanent establishment of a non-resident, so on those texts it sits outside the charge. A Tanzanian subsidiary is a resident corporation and sits inside it.

Mainland and Zanzibar: who collects the minimum tax?

Section 2 of the Income Tax Act states: "This Act shall apply to Mainland Tanzania as well as Tanzania Zanzibar." Income tax is a Union matter, and TRA administers it on both sides of the Union.

• Mainland. The company files and pays through TRA. The council service levy on turnover applies separately.
• Zanzibar. A company registered in Zanzibar still files its income tax return with TRA and pays the minimum tax to TRA. The Daily News reported on 16 January 2023 that TRA keeps individual and corporate income tax in Zanzibar after the ZRA reform.
• ZRA taxes. The Zanzibar Revenue Authority administers the non-Union taxes, such as Zanzibar VAT, hotel levy and stamp duty. None of those has a minimum tax on losses of this kind.

What happens if the minimum tax is not paid or is disputed?

The minimum tax is a tax debt like any other. The Tax Administration Act, Cap. 438, published by TRA, supplies the consequences:

A dispute usually turns on one of four questions. Was there a profit year that broke the run? Is the company in an excluded sector? What belongs in turnover? Were the earlier losses properly filed? An objection on any of them is admitted only once the deposit is paid. Our guide to appealing a TRA assessment covers TRAB and TRAT.

Representation before TRAB or TRAT, a formal legal opinion on a sector exclusion, and any response to an agency notice or seizure of assets belong with an advocate. Zatra's in-house advocate takes those matters.

What to do now

1. Count the loss years. List the tax result for each of the last four years from the filed returns, not the management accounts. Mark any profit year that breaks the run.
2. Check the exclusions. Record whether the business is agriculture, health, education or tea processing, with evidence such as licences and revenue splits.
3. Measure turnover. Reconcile gross business income in the ledger to the VAT returns and the audited revenue line. Note any investment income separately.
4. Estimate at 1%. If the current year is likely to be a third loss year, file the statement of estimated tax at 1% of projected turnover by the due date.
5. Pay against a control number. Generate each instalment's control number on the TRA portal and keep the receipts with the computation file.
6. Model the loss cap. If four or more consecutive loss years are behind you, project the 40% floor for the first profit year.
7. File the return with the loss schedule. Show brought-forward losses, the year's result and the minimum tax in the return due six months after year end.
8. Escalate disputes early. If TRA assesses the charge and you disagree, brief an advocate before the 30-day objection window closes.

Key dates

How Zatra helps

Zatra's tax advisory and planning team models the loss run, the minimum tax and the 40% floor before the estimate is filed. The tax and regulatory compliance desk prepares the computation, reconciles turnover and files the estimate and the return. Where TRA has already assessed, the TRA audit and dispute team prepares the objection file and works with our advocate.

Costs come in two buckets. Government charges, here the tax itself and any penalty or interest, are paid to TRA at the official amount against its control number. Zatra's professional fee is quoted separately and never folded into them. Zatra prepares and files; it does not decide or guarantee any authority's outcome. For the wider picture of what a company owes each year, see our plain-language guide to business taxes.

Sources and status

Accurate as at 17 October 2026. Desk tiers: the charge, the three-year test, the exclusions and the 1% rate are settled on the Act and the Finance Acts. The items in the list below the sources are verify or unknown.

• The Income Tax Act, Cap. 332 R.E. 2023: Tanzania Revenue Authority, Revised Edition 2023; ss.2, 3, 4, 6 and 19 read 17 Oct 2026. Accessed 17 Oct 2026.
• The Finance Act, 2025, Act No. 11 of 2025: Tanzania Revenue Authority, assented 30 Jun 2025. Accessed 17 Oct 2026.
• The Finance Act, 2024, Act No. 6 of 2024: Tanzania Revenue Authority, assented 30 Jun 2024. Accessed 17 Oct 2026.
• The Finance Act, 2026, Act No. 2 of 2026: Tanzania Revenue Authority, assented 30 Jun 2026. Accessed 17 Oct 2026.
• Taxes and Duties at a Glance 2025/2026: Tanzania Revenue Authority, July 2025. Accessed 17 Oct 2026.
• Corporation tax: Tanzania Revenue Authority, live page 2026. Accessed 17 Oct 2026.
• The Tax Administration Act, Cap. 438 R.E. 2023: Tanzania Revenue Authority, Revised Edition 2023. Accessed 17 Oct 2026.
• The Income Tax Act, Cap. 332 R.E. 2019: Ministry of Finance, revised to 30 Nov 2019. Accessed 17 Oct 2026.
• Acts and regulations: Zanzibar Revenue Authority, live page 2026. Accessed 17 Oct 2026.
• Tanzanian Finance Act, 2025 analysis: EY, 4 Aug 2025. Accessed 17 Oct 2026.
• Tanzanian Finance Act, 2026 analysis: EY, 17 Jul 2026. Accessed 17 Oct 2026.
• Tanzania Tax Update: Finance Act 2025 highlights: Clyde & Co, 3 Jul 2025. Accessed 17 Oct 2026.
• Tanzania Tax Update: Highlights of the Finance Act 2024: Clyde & Co, 8 Jul 2024. Accessed 17 Oct 2026.
• Tanzania: taxes on corporate income: PwC Worldwide Tax Summaries, last reviewed 9 Sep 2026. Accessed 17 Oct 2026.
• Isles replaces ZRB with ZRA to raise revenue collection: Daily News, 16 Jan 2023. Accessed 17 Oct 2026.
• Zatra fee register lines F0196, F0198, F0283, NEW-02-06, NEW-02-08, NEW-02-10 and NEW-02-19: Tanzania Government Fees 2026, fees at 26 Sep 2026. Accessed 17 Oct 2026.

Figures to confirm before you act

• First Schedule para 3(3) operative text: the R.E. 2023 schedule could not be read in full; the 1% rests on Finance Act 2025 s.60(d), TRA's 2025/2026 summary and the register (F0198)
• Calendar 2025 year ends: whether 0.5% or 1% applies to a year that straddles 1 July 2025
• Tea processing in 2027: how a year straddling 30 June 2027 is treated
• Turnover content: whether TRA includes investment income and how it treats VAT and gains on business assets
• The grey year: whether a profit year wholly absorbed by brought-forward losses continues the run
• Mixed activities: whether a company with partly excluded activities is apportioned or tested as a whole
• Branches: confirm that a domestic permanent establishment of a non-resident is outside the charge
• Statutory interest rate: the register gives 8.75% for the third quarter of 2026 (NEW-02-09); confirm the current quarter before computing

This article is general information based on official sources available at the date of publication. It is not legal, tax or financial advice. Laws and notices change. Verify with the issuing authority or consult Zatra before acting.