The 10% Nobody Mentions: Buying Treasury Bonds and Bills in Tanzania

A first-time buyer of government paper in Tanzania almost always starts at the short end — a 364-day Treasury bill, the shortest commitment the market offers — having read somewhere that government securities are tax-free. They are not. The short end is precisely where the 10% withholding tax bites, and it is where most first bids are placed.

This page is the government securities file: what is taxed and what is exempt, who may buy, the tenors and the minimums, how a bid reaches the auction, what the market has recently paid, and what happens to a bond sold before it matures.

Are Tanzanian government securities tax-free?

No. The treatment turns on the instrument and on the tenor, and the Bank of Tanzania states the position in the tender document for every issue.

The exemption is narrow, and it is conditional on three things holding at once: a tenor of not less than three years, issue by the Government, and listing on the Dar es Salaam Stock Exchange. Paper that fails any one of the three is taxed at 10%.

The 2-year bond is the instrument that catches people. It is called a bond, it sits in the bond table on the issuance calendar, it pays a coupon twice a year like every other bond — and it is taxed like a bill, because two years is less than three.

A separate rule covers corporate and municipal bonds listed on the exchange, which have attracted nil withholding tax since 1 July 2022. That is a different rule about different paper, and it does not reach government securities. The tender document for the issue actually being bid on is the operative record, and its tax line is read before the bid is lodged rather than after the first interest payment arrives short.

Who may buy government securities in Tanzania?

Investors of all nationalities. The Bank of Tanzania's tender documents state that all investors including foreign nationals are eligible to participate. That position took effect in August 2026, and it superseded an earlier restriction under which participation was limited to residents of the East African Community, residents of the Southern African Development Community and Tanzanian citizens in the diaspora.

Accounts may be held by institutions, by individuals, jointly, and on behalf of minors.

Eligibility is not the same as access. Every bid reaches the auction through an intermediary, and the account that intermediary opens carries the ordinary customer due diligence requirements — identification, a bank account into which interest and redemption proceeds are paid, and tax identification details. A non-resident buyer should expect to evidence where the money came from as well, in the terms the source of funds file sets out.

What tenors are offered, and what is the minimum?

The minimums apply to every bidder, individual or institutional. They are the floor, not the recommended size, and a bid may be placed at the floor.

Not every tenor is auctioned in every quarter. The issuance calendar the Bank of Tanzania publishes for each quarter states which tenors are actually on offer and when, and it is the calendar — not a list of instruments in issue — that says what can be bought this month.

The tenor is a decision about when the money is needed back. It is settled before the amount is settled, because the amount can be adjusted at the last minute and the maturity date cannot.

How does a bid reach the auction?

Not directly. A bid goes online through a Central Depository Participant — a bank licensed to conduct banking business, or a broker or dealer licensed by the Capital Markets and Securities Authority under the Capital Markets and Securities Act, Cap 79. The Central Depository Participant opens the account, lodges the bid and settles the trade.

The Bank of Tanzania closes bidding at 11:00 a.m. on the auction date. A bid is lodged with the Central Depository Participant well before that close, and confirmed with the Participant that it went in. The confirmation is the point: an instruction given is not a bid received.

There are two kinds of bid.

• A competitive bid names the yield or the price the bidder will accept. It is allotted only where it falls inside the range the Bank accepts, so a bid pitched too aggressively is not filled at all.
• A non-competitive bid takes whatever the auction produces, without naming a rate.

Each auction states separate allotment amounts for the two, by tenor. Bills are quoted at a discount to four decimal places per TZS 100.

Settlement is T+1 — one business day after the auction. Bonds are then listed on the Dar es Salaam Stock Exchange, with secondary trading opening roughly two days after settlement, in multiples of TZS 100,000.

What does the 10% withholding tax cost?

Both worked examples below use TZS 1,000,000, so the two treatments can be read against each other.

Example 1 — TZS 1,000,000 in a 364-day Treasury bill. At the July 2026 auctions the weighted average yield across all Treasury bill tenors was 4.74%.

• Gross interest for a full year at 4.74%: TZS 1,000,000 × 4.74% = TZS 47,400
• The bill runs 364 days, not 365: TZS 47,400 × 364 ÷ 365 = TZS 47,270
• Withholding tax at 10%: TZS 47,270 × 10% = TZS 4,727
• Net interest: TZS 47,270 − TZS 4,727 = TZS 42,543

So a gross 4.74% annualised becomes 4.266% annualised after the 10% withholding tax. On TZS 1,000,000 held for the full 364-day tenor that is TZS 42,543, which is 4.2543% over the period. The tax takes TZS 4,727 of it.

One mechanical note. A bill is bought at a discount to face value rather than paying interest at the end, so the cash figures on the contract note follow the discount price at which the bid is allotted.

Example 2 — TZS 1,000,000 of a 10-year Treasury bond. A 10-year bond in issue carries a fixed coupon of 11.75%.

• Annual coupon: TZS 1,000,000 × 11.75% = TZS 117,500
• Withholding tax: nil — a bond of three years or more, issued and listed on the Dar es Salaam Stock Exchange, is exempt
• Amount that reaches the holder: TZS 117,500

Put the two treatments side by side. Were the 10% to apply to that bond, TZS 11,750 would be withheld each year and TZS 105,750 would reach the holder. Across the bond's ten years that is TZS 117,500 withheld — precisely one full year's coupon. That is what the exemption is worth on a single million shillings, and it is why the three-year line matters more than the headline rate.

The two examples are not a comparison. One is a year of capital with a known repayment date; the other is a ten-year commitment whose market price moves every day it is held.

What has the market recently paid?

Yields move with every auction. The picture below is the July 2026 auction round with the June 2026 round beside it.

Those are weighted average auction yields for the months named. They are not a rate card and they are not a promise of anything. The next auction produces different numbers, and a government yield quoted without a date attached is a number that has already changed.

The two ends of the curve moved in opposite directions through 2026. The Treasury bill weighted average yield was 5.68% in March 2026 and 4.74% in July 2026 — a fall of 94 basis points in four months. The long end went the other way and went faster: the 20-year was 10.43% in June 2026 and 11.33% in July 2026, ninety basis points in a single month. That divergence is exactly why a bond sold before maturity can realise a capital loss, and it is the subject of the section below.

A coupon is not a yield. The coupon is the fixed percentage of face value a bond pays, fixed at issue — 11.75% on the 10-year in issue, 10.25% on the 5-year. The yield is what the market currently prices that stream of payments at, and it moves with the price. At the July 2026 auctions the 10-year cleared at a weighted average yield of 10.87% while a 10-year bond in issue carried an 11.75% coupon: two different numbers, the same instrument, neither of them wrong.

A yield is judged against the cost of living, not against zero. The National Bureau of Statistics publishes the inflation rate monthly, and a net 4.266% annualised — TZS 42,543 on a million shillings across the full 364-day tenor — is a real gain only where inflation sits below it.

Can a bond be sold before it matures?

A bond, yes. A bill, in practice no.

Treasury bonds are listed on the Dar es Salaam Stock Exchange, and a holder sells by placing an order through a Licensed Dealing Member. The exchange states that there is no penalty for selling a bond before the maturity date.

No penalty is not the same as no loss. The price is set by the market on the day of sale. When yields rise, the price of a bond already in issue falls — a buyer can obtain the higher new yield elsewhere, and will take the older, lower-paying bond only at a discount. The 20-year yield rose ninety basis points between the June and the July 2026 auction rounds, and a holder selling into that move was selling into falling prices. Yields fall as readily as they rise, lifting the price. The outcome is not knowable in advance, and no one can promise otherwise.

There is depth to sell into. Listed government bonds stood at TZS 32,008.82 billion and secondary-market Treasury bond turnover was TZS 1,755.25 billion in the quarter ended 30 June 2026.

Treasury bills are different. The tender documents carry no secondary-trading clause for bills. A bill is planned as a hold to maturity, and money that may be needed in month seven does not belong in a 364-day bill. Where reachability at short notice matters more than yield, where savings are actually protected is the prior question. Where the choice lies between government paper and listed equity, buying shares on the Dar es Salaam Stock Exchange sets out the other side.

Two questions worth settling before the bid

When is this money needed back? The tenor answers that, not the yield. A 364-day bill and a 20-year bond are not two versions of the same decision, and the higher number belongs to the instrument that gives the money back last.

What does the tax line in this tender document say? Not what a general article says about government paper, and not what the rule was on a previous issue. The tender for the issue being bid on carries either the 10% line or the exemption, and that line governs the interest actually received.

Mandate-holders this file does not replace

The Bank of Tanzania owns the issue of government securities, the auction, the issuance calendar and the tender document for each issue, including the tax line and the eligibility line in it. The Capital Markets and Securities Authority licenses the brokers and dealers that act as Central Depository Participants, and publishes the register of licensees; a bank licensed to conduct banking business may act as a Participant on the same footing. The Dar es Salaam Stock Exchange owns the listing of government bonds and the secondary market in them, and CSD & Registry Company Limited owns the depository behind it. The Tanzania Revenue Authority owns the assessment and collection of tax on investment income. An investment adviser licensed by the Capital Markets and Securities Authority owns advice on whether any instrument suits a particular investor. The National Bureau of Statistics owns the inflation rate every net yield is measured against. Zatra prepares, structures and coordinates the file, grants no licence and does not practise law.

What to confirm before the Client acts

• Whether the tender document for the specific issue being bid on carries the 10% withholding line or the exemption — that document governs that issue.
• Whether the tenor the Client intends to buy is on the current issuance calendar, and whether its maturity date matches the date the money is needed back.
• What the Central Depository Participant charges to open and to run the account, obtained in writing before the account is opened.
• That the Client's identification, the bank account for interest and redemption proceeds, and the tax identification details are complete and held by the Participant before the auction date.
• That the bid was actually lodged, confirmed with the Central Depository Participant ahead of the 11:00 a.m. close on the auction date.
• The current inflation rate published by the National Bureau of Statistics, against which any net yield is judged.