Directors Fees Tax Tanzania: Board Pay, PAYE and the 15% Withholding

Directors fees tax Tanzania rules start from one question: is the director a full-time service director or not? The answer decides whether the company runs the payment through monthly PAYE or withholds a flat 15% on each board fee. It also shapes the SDL base, the VAT position and the paperwork a foreign board member will need at home.

This guide covers fees, sitting allowances and benefits paid to resident and non-resident directors. It covers Mainland Tanzania under the Income Tax Act, Cap. 332 R.E. 2023, and sets out what changes for a company in Zanzibar. It is written for finance teams, company secretaries and the directors themselves.

What the law says

The charge sits in the Income Tax Act, Cap. 332 R.E. 2023, as published by TRA. Four provisions do most of the work:

• Section 3 defines "employment" to include "a position of an individual as manager of an entity". A "manager" includes any director who takes part in senior management decisions. A "full time service director" is a person at a managerial position in full-time service of a corporation.
• Section 7(2)(a) brings wages, salary, fees, bonuses and allowances received in respect of employment into employment income.
• Section 7(2)(h) adds "annual director's fees payable to a director other than a full time service director". This is the line that taxes board fees.
• Section 104 places the withholding duty on employers, and the First Schedule sets the rates.

TRA's Taxes and Duties at a Glance 2025/2026 lists "Fees paid to part-time directors" at 15% for residents and 15% for non-residents. TRA's withholding tax page shows the same row as "Directors Fee (Non full time Directors)". The Finance Act, 2026 (Act No. 2 of 2026), in force from 1 July 2026, did not amend director's fees, the PAYE bands or the SDL rate.

Two other Acts complete the picture. The Value Added Tax Act, Cap. 148 R.E. 2023 decides whether VAT applies to board fees. The Vocational Education and Training Act, Cap. 82 R.E. 2023 decides whether fees enter the SDL base.

Who is affected

• Companies that pay non-executive directors an annual fee or a fee per meeting.
• Subsidiaries of foreign groups whose board includes directors living abroad.
• Owner-managed companies where the shareholder-director draws a salary, a fee or both.
• Banks, insurers, listed companies and state-linked bodies with independent board members and committee allowances.
• Professionals who sit on boards through their own consulting firm and invoice the fee.
• Company secretaries who draft the board and shareholder resolutions that fix director pay.

Read this alongside our guides to directors' duties in Tanzania and appointing or removing a director. A change on the board often changes the payroll file too.

Is a director's fee employment income or a service fee?

For an individual director, the Act treats it as employment income. Section 7(2)(h) names director's fees expressly, and section 3 treats a director's position as an employment. The fee is therefore not a service fee in the ordinary case, even if the director has no employment contract.

The answer changes when the board seat is held through a business. The Act defines a "service fee" as a payment reasonably attributable to services rendered "through a business". A consulting firm that nominates a partner and invoices the board fee is supplying a service. The payer then applies the service fee rules in section 106 instead of the director's fee row.

Register IDs refer to the Zatra fee and rate register. Each line was checked against the Act or TRA's own tables at the date of this guide.

How are fees to a resident non-executive director taxed?

The company withholds 15% from each fee and pays the director the balance. The rule applies to annual fees, retainers and per-meeting fees alike. The company remits the tax to TRA by the 7th day of the following month, the date TRA's Glance gives for PAYE and withholding taxes.

For a resident director the 15% is not final. The register records it as non-final, and the director credits it against the tax on total income for the year. A director whose other income already reaches the 30% band will owe more at year end. A director with little other income may have paid too much.

The director should therefore file an annual return of income under section 117 of the Act and claim the withholding as a credit. The company should issue a withholding certificate under section 110 so the director can prove the credit. Many directors skip this step and only find out when TRA matches their TIN against the company's withholding statement.

Residence follows section 86. In summary, a director is resident for a year of income if he or she has a permanent home in Tanzania and is present during the year. A director without a home here is resident after 183 days in the year, or an average of more than 122 days over that year and the two before it, as PwC's Tanzania summary sets out.

How are a non-resident director's fees taxed?

The rate is the same: 15% of the gross fee. TRA's Glance and the PwC withholding table both show director fees at 15% for non-residents. The fee has a Tanzanian source because it is paid by a Tanzanian company for a Tanzanian board office.

The open question is finality. A non-resident director with no other Tanzanian income will in practice treat the 15% as the Tanzanian tax and claim it as a foreign credit at home. The Act charges a non-resident individual's total income at 30% (F0183), and Zatra's register records the 15% on resident directors as non-final. Until TRA confirms the position in writing, keep a return-filing option open for a director with other Tanzanian income.

A double tax agreement can cap or remove Tanzanian tax on directors' fees. Tanzania has a limited treaty network, and the Act gives treaties effect through section 154. Check the treaty with the director's home state before applying a lower rate, and keep the director's tax residence certificate on file.

Two practical points follow for foreign board members:

• Ask TRA whether the director needs a TIN for the company's withholding statement. Our guide to TIN and VAT registration covers the process.
• A non-resident director who travels for meetings needs the right entry document. The Immigration Services Department lists a multiple entry visa for non-resident directors of Tanzanian companies at USD 100 (register F0395), valid up to 12 months with stays of up to 90 days.

Fees remitted abroad also pass through the bank's foreign exchange checks. Our guide to withholding on cross-border payments explains the file the bank will ask for.

How are executive directors taxed on salary and benefits?

A managing director or finance director in full-time service is an employee for tax purposes. The company runs the salary through PAYE at the resident monthly bands:

Benefits in kind form part of employment income under section 7(2)(f). The common ones for directors are a company car and housing. TRA's tables value a car up to 1000cc at TZS 250,000 a year where the vehicle is up to five years old (F0186), rising to TZS 1,500,000 above 3000cc (F0187). Housing is valued at the lower of market rent and the greater of 15% of the director's other employment income or the employer's claimed expenditure (F0188).

A director who is also employed elsewhere receives fees as secondary employment income. Our guide to PAYE and net salary in Tanzania explains the bands, pension deductions and secondary employment in more detail.

Do sitting allowances and board expenses count?

Sitting allowances are part of the fee. Section 7(2)(a) lists fees and "any subsistence, travelling entertainment or other allowance" received in respect of employment. A per-meeting allowance to a non-executive director is therefore withheld at 15% in the same way as the annual fee.

Reimbursement of costs is different. Section 7(3) excludes certain reimbursements of expenditure incurred in earning employment income. A company that pays a director's hotel and flight against receipts, for travel to a board meeting, is meeting a business cost. A flat travel allowance paid without receipts is an allowance and sits inside the fee.

The safest practice is to separate the two in the board pay policy:

• A fixed annual fee and a per-meeting fee, both subject to the 15% withholding.
• Actual travel and accommodation paid direct to suppliers or reimbursed against receipts.
• A written rule for meals, ground transport and per diems, so the auditor can test it.

Gifts, club memberships and school fees paid for a director are benefits. They belong in the director's employment income at market value under section 27 unless an exclusion in section 7(3) applies.

Does VAT apply to directors' fees?

Usually not. The VAT Act defines "economic activity" in section 2 and excludes "activities performed as a director of a company". A director who takes a board seat personally is not making a taxable supply, even if he or she is registered for VAT for another business.

The exclusion has an exception. It does not apply "where the director accepts such office in carrying on an economic activity". In that case the board services are treated as supplied in the course of that activity. A consulting firm or a professional practice that holds board seats as part of its business, and is registered for VAT, must charge VAT at 18% on the fee it invoices.

The paying company can then claim the VAT as input tax if it makes taxable supplies. It must hold a valid tax invoice and an EFD receipt. Our guide to withholding VAT covers the separate rules that apply when the payer is an appointed withholding agent.

Do SDL and NSSF apply to directors' fees?

SDL is charged under section 14 of the Vocational Education and Training Act. An employer with ten or more employees pays 3.5% of "the total gross monthly emoluments payable by the employer to his employees" (F0276). Section 14(3) defines gross monthly emoluments to include wages, salary, "fee, commission, bonus, gratuity" and allowances paid in respect of employment or service.

The Act does not define "employee" and does not mention directors. Because the Income Tax Act treats a director's office as an employment, and the SDL definition includes a "fee", the cautious course is to include non-executive directors' fees in the SDL base. A company that excludes them should hold a written basis for doing so. Read our SDL guide for the exemptions.

NSSF is different. Contributions under the NSSF Act, Cap. 50 attach to the wages of employees who are members of the Fund (F0279). A non-executive director who holds office under the articles, without a contract of employment, is not normally enrolled. An executive director on a service contract is an employee and contributes like any other. Confirm the treatment of a hybrid director, such as a shareholder-director on a fee and no contract, with NSSF.

Can the company deduct directors' fees?

Yes, within the general rule. Section 11 of the Income Tax Act allows expenditure incurred wholly and exclusively in the production of income from the business. Fees and salaries for genuine board and management work meet that test.

Three limits apply in practice:

• Arm's length. Fees to a director who is also a shareholder, or to a foreign parent's nominee, are dealings with associates. Section 33 lets TRA adjust amounts that are not at arm's length.
• Evidence. TRA will ask for the resolution that fixed the fee, the attendance record and proof of withholding. A fee invoiced by a firm needs a fiscal receipt under section 11(4), inserted by the Finance Act, 2024.
• Withholding first. A company that pays without withholding is liable for the tax it failed to withhold, with interest and penalties under the Tax Administration Act. Section 76 of that Act can make directors personally liable for unpaid tax of the company in defined cases.

Our guide to withholding tax on local payments covers the remittance file in more detail.

What the Companies Act requires before paying directors

The Companies Act, Cap. 212 regulates how director pay is approved and disclosed. The R.E. 2023 numbering, from the arrangement of sections, places these rules in sections 202 to 215:

• Section 202 prohibits tax-free payments to directors. A resolution should state the fee as a gross amount before the 15% withholding.
• Section 203 restricts loans to directors and connected persons.
• Section 204 requires company approval for a payment to a director for loss of office.
• Section 209 requires particulars of directors' salaries and pensions in the accounts.
• Section 214 makes directors' service contracts open to inspection, and section 215 deals with a director's employment contract for more than five years.

The articles usually say who fixes the fees. In many companies the shareholders fix the board fee pool in general meeting, and the board allocates it. Check your own articles before the first payment. Our corporate secretarial service drafts these resolutions.

What changes in Zanzibar?

Income tax is a Union matter. The Income Tax Act, including section 7(2)(h) and the 15% rate, applies to a company in Zanzibar in the same way. Our guide to Union and non-Union taxes explains the split.

Three things differ. SDL in Zanzibar is a ZRA levy under the Vocational Training Act No. 8 of 2006. The Zanzibar Finance Act and Orders 2026/2027 set it at 3% of gross monthly emoluments from 1 July 2026, for employers with four or more employees (F0278). VAT in Zanzibar is a ZRA tax with its own Act, rate and threshold. Pension contributions go to ZSSF, not NSSF.

We could not verify whether the Zanzibar VAT Act carries the same director exclusion as the Mainland Act. We also could not confirm from a primary text which authority collects PAYE from each class of Zanzibar employer. Our Zanzibar payroll taxes guide sets out the current practice; confirm both points with ZRA before relying on them.

Worked example: one board, three directors

A Dar es Salaam company with 40 employees has a three-person board for 2026. All figures are illustrative.

Director A, resident non-executive. Annual fee TZS 12,000,000 plus four meetings at TZS 2,000,000 each. Total fees: TZS 20,000,000. The company withholds 15%, or TZS 3,000,000, and pays A TZS 17,000,000. If the company includes the fees in its SDL base, SDL at 3.5% adds TZS 700,000 to its cost.

If the fees are A's only income, the tax on TZS 20,000,000 at the annual resident bands is TZS 3,936,000. That is nil on the first 3,240,000, then 240,000, 576,000 and 720,000 on the next three bands, plus 30% of the 8,000,000 above TZS 12,000,000. A credits the TZS 3,000,000 withheld and pays TZS 936,000 with the return.

Director B, non-resident. The board resolution grants USD 10,000 a year. The company withholds USD 1,500 and remits it in shillings at the rate TRA accepts, paying B USD 8,500. If the resolution had promised B "USD 10,000 net", section 202 of the Companies Act would be engaged. A gross equivalent is USD 11,764.71, with USD 1,764.71 withheld.

Director C, executive. C is a full-time managing director on a monthly salary of TZS 8,000,000, before pension deductions. PAYE is TZS 128,000 plus 30% of TZS 7,000,000, which is TZS 2,228,000 a month. An approved pension contribution reduces the taxable pay and the PAYE. C receives no board fee, because a full-time service director falls outside section 7(2)(h).

What to do now

1. Classify every director as full-time service, non-executive, non-resident or firm-nominated, and record the basis on the payroll file.
2. Fix the fees in writing through the resolution the articles require, stated as gross amounts before tax.
3. Withhold at source 15% on every fee and sitting allowance, or PAYE for executive directors, at the time of payment.
4. Remit and report by the 7th of the following month, with SDL where the company has ten or more employees.
5. Issue certificates under section 110 so each director can claim the credit in a return or abroad.
6. Check treaties and VAT for non-resident directors and for firms that invoice board fees.
7. Disclose in the accounts the directors' remuneration that section 209 of the Companies Act requires.

Key dates

How Zatra helps

Zatra sets up board pay files for Tanzanian companies and foreign-owned subsidiaries. We classify each director, draft the remuneration resolution, run the monthly withholding and SDL, and issue the certificates directors need. Our payroll compliance and tax compliance teams handle the TRA side, and tax advisory reviews treaty and VAT questions.

Where TRA disputes a director's fee, a deduction or a withholding assessment, we prepare the file and work with an advocate for objections, appeals, legal opinions and any recovery or seizure action. Zatra prepares and files documents; Zatra does not decide or guarantee any authority's outcome.

Costs come in two buckets. Government charges, such as tax, SDL, interest and visa fees, are paid to the authority at the official rate against a control number. They are separate from Zatra's professional fee, which we quote in writing before work starts. To begin, contact Zatra with your board list and the latest resolution on fees.

Sources and status

Accurate as at 11 November 2026.

• The Income Tax Act, Cap. 332 R.E. 2023. Tanzania Revenue Authority, 2023 revised edition. Accessed 11 Nov 2026.
• Taxes and Duties at a Glance 2025/2026. Tanzania Revenue Authority, July 2025. Accessed 11 Nov 2026.
• Withholding Tax. Tanzania Revenue Authority, web page, 2026. Accessed 11 Nov 2026.
• The Finance Act, 2026, Act No. 2 of 2026. Tanzania Revenue Authority copy, assented 30 June 2026. Accessed 11 Nov 2026.
• The Value Added Tax Act, Cap. 148 R.E. 2023. Tanzania Revenue Authority, 2023 revised edition. Accessed 11 Nov 2026.
• The Vocational Education and Training Act, Cap. 82 R.E. 2023. Tanzania Revenue Authority, 2025 print. Accessed 11 Nov 2026.
• Companies Act, Cap. 212. TanzLII, 2002 text. Accessed 11 Nov 2026.
• Finance Act and Orders 2026/2027. Zanzibar Revenue Authority, 6 August 2026. Accessed 11 Nov 2026.
• Tanzania: Corporate withholding taxes. PwC Worldwide Tax Summaries, reviewed 9 September 2026. Accessed 11 Nov 2026.
• Tanzania: Individual residence. PwC Worldwide Tax Summaries, reviewed 9 September 2026. Accessed 11 Nov 2026.
• Finance Act 2026 newsletter. RSM Tanzania, July 2026. Accessed 11 Nov 2026.

Figures to confirm before you act

• Whether TRA treats the 15% on a non-resident director's fee as a final withholding payment under section 111.
• The resident rate on service fees: the Act and TRA's web page show 5%, while the Glance 2025/26 prints 10%.
• Whether TRA includes non-executive directors' fees in the SDL base in practice.
• The NSSF treatment of a shareholder-director paid a fee without a contract of employment.
• The full text of Companies Act sections 202 and 215 in the R.E. 2023 print.
• Whether the Zanzibar VAT Act excludes director services, and which office collects PAYE from each Zanzibar employer.
• The due date of a resident individual's annual return of income.

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.