Capital Allowances Tanzania: Asset Classes, Rates, Pools and a Worked Example

This guide covers each class, pooling, the vehicle limit, the 50 percent initial allowance, mining, disposals and losses, with a two-year worked computation.

What the law says about capital allowances

Capital allowances Tanzania taxpayers claim are called depreciation allowances in the statute. The Income Tax Act, Cap. 332 R.E. 2023, published by TRA, sets the rule in three steps.

• Capital spending is not deductible. Section 11(3) bars a deduction for "expenditure of a capital nature". Section 11(4) defines that as spending that secures a benefit lasting longer than twelve months.
• Section 17 grants the allowance instead. A business deducts, for depreciable assets "owned and employed" during the year "wholly and exclusively in the production of the person's income from the business", the allowances granted under the Third Schedule.
• The Third Schedule does the arithmetic. Paragraph 1 sets the classes and pools, paragraph 3 the depreciation basis and written down value, and paragraph 4 the treatment of disposals. Section 8(2)(d) brings the paragraph 4 amounts into business income.

Section 3 defines a "depreciable asset" as one used wholly and exclusively in the business that is likely to lose value through wear and tear, obsolescence or the passage of time. It excludes goodwill, mineral or petroleum rights, other interests in land, membership interests and trading stock. Finance Acts from 2024 sit outside the R.E. 2023 text, so we read them separately.

Who should read this

Any business in Tanzania that buys assets lasting more than a year, in particular:

• Finance teams preparing the annual return. The capital allowance schedule is part of the tax computation attached to the corporate income tax return.
• Manufacturers, hoteliers and farmers. They get the most generous rules.
• Mining and petroleum licence holders. Their capital spending runs under separate rules in Part V of the Act.
• Investors planning a project. Allowances shape early tax cash flow, alongside the capital goods duty exemption.

What changed from 2023 to 2026?

The class rates have not moved in this period. The changes are at the edges, and two of them matter for most claims.

EY's alert of 30 July 2024 reads the 2024 amendment the same way: 25 percent of the cost in the year the asset is added to the pool, and 25 percent in the next year. Clyde & Co's summary of 11 July 2023 reports no depreciation change in the Finance Act 2023.

What are the depreciable asset classes and rates?

TRA's Taxes and Duties at a Glance 2025/26, item 9.1, lists the classes. PwC's Worldwide Tax Summaries, last reviewed 9 September 2026, give the same rates.

RSM's Tanzania Tax Guide 2025/26 and Habib Advisory's Tax Guide 2025/2026 list the same eight classes.

The class turns on what the asset is and how it is used, not on its accounting label. A generator in a factory is Class 2 plant. The same generator on a farm is Class 8.

How does pooling and the diminishing value method work?

Classes 1, 2 and 3 are pools. Every asset in a class goes into one pool, and the allowance is a percentage of the pool, not of each asset. TRA's guide states that these pools run on the diminishing value balance method.

Each year, take the pool's opening written down value, add the cost of assets added and deduct incomings from assets realised. The result is the depreciation basis. The allowance is the basis times the class rate, and the balance opens the next year.

Cost follows section 37, so import duty, freight and installation form part of it. Input VAT claimed as a credit does not.

None of the summaries we read pro-rates the allowance by purchase date, so an asset bought on 28 December earns a full year. Confirm against paragraph 3 before a large year-end purchase.

Habib Advisory's guide reports that a pool whose written down value falls below TZS 1,000,000 can be written off in full that year. We list that figure under the items to confirm below.

How are buildings and intangibles treated?

Classes 5 to 8 run on the straight-line method, according to note 2 of TRA's guide. The allowance is a fixed share of cost each year rather than a share of a falling balance.

• Class 6 buildings. A factory, warehouse, office block or hotel building earns 5 percent of cost a year, so it is written off over 20 years. The land under it is not depreciable, because section 3 excludes interests in land. Split the purchase price between land and building at acquisition.
• Class 5 farm buildings. Buildings and permanent works used in agriculture, livestock or fish farming earn 20 percent, so they are written off over five years.
• Class 7 intangibles. Software licences, patents, trademarks bought from another person and similar rights are written off over their useful life. PwC describes the rate as one divided by the useful life, rounded down to the nearest half year. A ten-year licence earns 10 percent a year.

Goodwill earns no allowance, so the price allocation on a business purchase is a tax decision. Where the seller is an associate, TRA can test it; see our guide to related-party compliance.

How are motor vehicles treated?

Vehicles fall into Class 1 or Class 2, depending on size.

RSM's guide states that the depreciation basis of a non-commercial vehicle "shall not exceed TZS 30,000,000". The excess is never deductible. Habib's guide describes a commercial vehicle as one designed to carry more than half a tonne or more than 13 passengers, or one used in a transport business. We did not read the Third Schedule wording for this limit, so treat both points as adviser-reported.

For example, a company that buys a TZS 85,000,000 executive car adds only TZS 30,000,000 to its Class 1 pool. The first year's allowance is TZS 11,250,000, and the other TZS 55,000,000 earns nothing.

Which plant gets the 50% initial allowance?

Three kinds of plant and machinery qualify, according to EY, PwC and RSM:

• plant used in a manufacturing process and fixed in a factory;
• plant used in fish farming, which EY extends to farming;
• plant providing services to tourists and fixed in a hotel.

The allowance is 50 percent of the cost when the asset joins its pool. Since the Finance Act 2024 amended paragraph 2(3) of the Third Schedule, the 50 percent is taken in two equal portions: 25 percent in the first year and 25 percent in the second. The East African Community's corporate tax matrix still calls it a first-year allowance, the older reading.

What happens to the other half of the cost is less clear from the sources we read. Habib's guide says the assets are added to the Class 2 or Class 3 pools, and PwC says normal rates then apply. Do not compute a claim on the remaining balance without reading paragraph 2 in the current Act, or a TRA ruling. Moveable equipment does not qualify.

What is excluded from capital allowances?

Some spending is outside the Third Schedule, either because another section deals with it or because the law excludes it.

Replacing a worn engine part is a repair; fitting a larger engine is an improvement.

How do mining and petroleum capital expenditure differ?

Mining and petroleum run under their own divisions of Part V of the Act. In the R.E. 2023 numbering these are sections 66 to 75 for mining and sections 76 to 84 for petroleum. Each mining licence area and each petroleum contract area is treated as a separate operation.

• Rate. TRA's guide, item 9.2, gives 20 percent of expenditure in each of the first five years.
• No deferral. Habib notes the allowance cannot be pushed to a later year.
• Exploration equipment. Equipment used for prospecting and exploration of minerals or petroleum is Class 8 at 100 percent.
• Ring-fencing. Losses from one licence area cannot reduce income from another.
• Loss cap. The Finance Act 2025 raised from 30 to 40 percent the share of each area's income that losses cannot reduce. Brought-forward losses can now absorb at most 60 percent of that income.

A new mine's allowances cannot shelter an older mine's profits. For licensing see our mining licence guide.

What happens when you sell or scrap an asset?

A sale, scrapping or insurance payout produces incomings, which reduce the pool for that year.

• Incomings below the pool. The pool shrinks and the allowance is computed on the smaller balance. No separate gain arises.
• Incomings above the pool. The pool would go below zero. The excess is included in business income under paragraph 4 of the Third Schedule, as section 8(2)(d) requires. Practitioners call this a balancing charge.
• Straight-line assets. A building sold for more than its written down value produces income on the excess. Advisers commonly treat a shortfall as deductible. Confirm both against paragraph 4 before filing.

Transfers to an associate follow the asset rules in sections 36 to 47. The Finance Acts 2025 and 2026 both amended the proviso to section 44(1) on cost after such a transfer, so take advice before moving assets within a group.

How do capital allowances interact with tax losses?

Allowances are deductions like any other. Where they exceed income, they create or increase a tax loss under section 19. That loss carries forward with no time limit, as our guide to tax loss carry forward explains.

Two limits bite on companies with large early allowances:

• The 60 percent cap. Section 19(2), as amended by the Finance Act 2024, means that after four consecutive loss years, chargeable income cannot be reduced below 40 percent by brought-forward losses. Agriculture, health and education are carved out.
• Alternative minimum tax. A company with a perpetual unrelieved loss in the current and two prior years pays 1 percent of turnover (F0198), with the same sector carve-outs. Tea processing is also excluded from 1 July 2024 to 30 June 2027.

Why is accounting depreciation added back?

Depreciation in the audited accounts is an estimate under IFRS. It is capital in nature and is not deductible under section 11(3). The tax computation therefore adds back book depreciation, impairments and losses on disposal. It then deducts the capital allowances, and taxes or relieves any balancing charge or allowance.

The gap between book value and tax written down value drives deferred tax in the accounts.

Worked example: a truck, computers and a factory building

Take Pwani Packaging Ltd, a Mainland company with a 31 December year end. In the 2026 year of income it buys and brings into use three assets, and it has no earlier pools.

• A heavy goods truck with a load capacity above 7 tonnes, TZS 120,000,000, used to deliver to customers: Class 2 at 25 percent.
• Computers and servers, TZS 15,000,000: Class 1 at 37.5 percent.
• A factory building, TZS 800,000,000, excluding the land: Class 6 at 5 percent straight line.

Year 2 applies the reducing-balance rates to the closing values: 37.5 percent of 9,375,000 and 25 percent of 90,000,000. The building earns the same 40,000,000 each year until its cost is used up in 2045.

At the 30 percent corporate rate (F0196), the allowances save tax of TZS 22,687,500 in 2026 and TZS 19,804,688 in 2027.

Suppose the 2026 accounts show a profit before tax of TZS 300,000,000, after book depreciation of TZS 61,000,000. That is the truck over five years, the computers over three and the factory over 25.

Two variations change the answer. If the truck carried less than 7 tonnes, it would join the computers in Class 1. The Class 1 allowance would then be 37.5 percent of 135,000,000, or TZS 50,625,000, and the 2026 total TZS 90,625,000. If the factory held plant fixed in the manufacturing process, that plant would also earn the 50 percent initial allowance in two halves.

Finally, suppose the truck is sold in 2028 for TZS 80,000,000, with no other Class 2 assets. The pool stands at 67,500,000, so the incomings exceed it by TZS 12,500,000. That excess is included in 2028 income under paragraph 4, and the pool closes at nil.

Expected allowances also belong in the provisional tax estimate.

What records support a claim?

The Tax Administration Act, Cap. 438, section 43, requires a taxpayer to keep the documents needed to compute its tax. For capital allowances that means a fixed asset register showing, for each asset:

• the supplier invoice, EFD receipt and proof of payment, and for imports the customs entry and duty paid;
• the date brought into use, and the class with reasons;
• for vehicles, whether they are commercial, and how the TZS 30,000,000 limit was applied;
• for 50 percent plant, evidence that it is fixed in the factory or hotel;
• for buildings, the split between land and building;
• disposal dates and proceeds.

A false or misleading return carries a penalty of 50 percent of the tax shortfall, or 75 percent where the statement was made knowingly or recklessly (NEW-02-11). Overclaimed allowances are a common source of shortfalls in a TRA tax audit. Where a debt funds the assets, the interest limit in our thin capitalisation guide applies separately from the allowance.

Mainland and Zanzibar: what applies where?

Income tax is a Union matter. Section 2 of the Act states that it "shall apply to Mainland Tanzania as well as Tanzania Zanzibar". A company registered in Zanzibar with BPRA claims capital allowances under the same Third Schedule, files with TRA's Zanzibar offices and pays TRA.

The VAT difference changes the cost of an asset for a business that cannot recover input VAT. A Zanzibar hotel registered for Zanzibar VAT recovers it through ZRA, not TRA. Read our guides to Union and non-Union taxes and running a group across the Mainland and Zanzibar.

What to do now

1. Build the tax register. Give every asset a class, a tax cost and a tax written down value.
2. Split mixed purchases. Separate land, goodwill and fixed plant before the first claim.
3. Test every vehicle. Record seats, load capacity and use, and apply the TZS 30,000,000 limit to non-commercial cars.
4. Document 50 percent claims. Keep installation evidence and split the allowance 25 and 25.
5. Model the loss position. Project the 60 percent cap and the 1 percent minimum tax.
6. Reconcile to the accounts. Add back book depreciation and reconcile deferred tax.
7. Take advice on disputes. If TRA reclassifies an asset or disallows a claim, take advice before the 30-day objection window runs out.

Key dates and deadlines

• 1 July 2024: Finance Act 2024 takes effect: 50 percent initial allowance in two equal portions; 60 percent cap on brought-forward losses.
• 1 July 2025: Finance Act 2025 takes effect: mining and petroleum losses capped at 60 percent of each area's income.
• 31 December 2026: year end for calendar-year companies; assets in use by this date enter the 2026 pools.
• 31 December 2026: fourth provisional tax instalment for the 2026 year of income.
• 31 March 2027: first instalment and statement of estimated tax for the 2027 year of income.
• 30 June 2027: return of income for the 2026 year of income, with the capital allowance schedule, due six months after the year end.

How Zatra helps

Zatra's tax advisory and planning team classifies assets, builds the tax fixed asset register and prepares the capital allowance schedule for the return. Our accounting and bookkeeping team keeps the book and tax registers aligned, and our tax compliance desk files the return and instalments. The Finance & Tax Control package, USD 3,600 to 4,800 a year, covers the annual tax cycle. A Senior Advisory Session at USD 49 suits a single classification question. Prices are on our pricing page.

Income tax, penalties and interest are paid to TRA at the official amount against a GePG control number. These charges are separate from Zatra's professional fee and are never marked up. Official charges are listed in our government fees handbook.

TRA assesses the tax and decides objections. Zatra prepares and coordinates the file; it does not decide or guarantee any authority's outcome. An objection, an appeal to the Tax Revenue Appeals Board, a prosecution, a seizure or a formal legal opinion goes to an advocate. Zatra routes those steps to an advocate on the team. See our guide to appealing a TRA assessment.

Sources and status

Accurate as at 10 October 2026.

• The Income Tax Act, Cap. 332 R.E. 2023: published by TRA, ss.2, 3, 8, 11, 14, 15, 17 to 19 and arrangement of sections. Accessed 10 Oct 2026.
• The Income Tax Act, Cap. 332 R.E. 2019: published by TRA, revised to 30 Nov 2019, definitions and ss.39 and 44. Accessed 10 Oct 2026.
• The Finance Act, 2024: published by TRA, in force 1 Jul 2024, Part X ss.35, 36 and 47. Accessed 10 Oct 2026.
• The Finance Act, 2025: published by TRA, in force 1 Jul 2025, Part XIII ss.50, 51 and 53. Accessed 10 Oct 2026.
• The Finance Act, 2026: published by TRA, in force 1 Jul 2026, Part IX. Accessed 10 Oct 2026.
• Taxes and Duties at a Glance 2025/26: Tanzania Revenue Authority, July 2025, items 1.0, 9.1 and 9.2. Accessed 10 Oct 2026.
• EAC tax matrices: income tax, corporate entities: East African Community, undated. Accessed 10 Oct 2026.
• Tanzania, Corporate, Deductions: PwC Worldwide Tax Summaries, last reviewed 9 Sep 2026. Accessed 10 Oct 2026.
• Tanzanian Finance Act, 2024 makes changes affecting businesses and individuals: EY tax alert, 30 Jul 2024. Accessed 10 Oct 2026.
• Tanzania Tax Guide 2025/26: RSM Tanzania, 2025. Accessed 10 Oct 2026.
• Tanzania Tax Guide 2025/2026: Habib Advisory, 2025, pp.20 to 21. Accessed 10 Oct 2026.
• Tanzania: key highlights of the Finance Act of 2023: Clyde & Co, 11 Jul 2023. Accessed 10 Oct 2026.

Figures to confirm before you act

• Third Schedule wording: we read section 17, the definitions and the Finance Act amendments, but could not open the Schedule text itself; class contents and rates are from TRA's 2025/26 guide and agree with PwC, RSM and Habib
• Non-commercial vehicle limit of TZS 30,000,000 and the commercial vehicle test: reported by RSM and Habib; not read in the Schedule
• Treatment of the other half of 50 percent plant: Habib says Class 2 or 3 pools; confirm against paragraph 2 or by ruling
• Low-value pool write-off below TZS 1,000,000: reported by Habib only
• No pro-rating by date of purchase, separate pools for straight-line assets and balancing allowances on straight-line assets: our reading of the adviser summaries; confirm against paragraphs 3 and 4
• Section numbering: mining and petroleum sections follow the R.E. 2023 arrangement (ss.66 to 84); older texts and adviser notes use ss.65A to 65S
• Register lines F0196, F0198 and NEW-02-11: Zatra Handbook 06 register at 26 September 2026; the control number governs on the day of payment

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.