Tax Losses in Tanzania: Carry-Forward, Ring-Fencing and Minimum Tax

This page is the tax-loss carry-forward operating file: which losses a Tanzanian company may deduct in later years, against what income, and what ends the entitlement. It is not a capital-allowance manual and not an opinion on a specific assessment.

• Instalments and the estimate: provisional tax
• The interest ceiling that often creates the loss: thin capitalisation
• When TRA disallows the balance: objection, TRAB and TRAT
• Rate map: 2026 tax rates

As at 14 September 2026. Confirm the consolidated Cap. 332 and its First Schedule on tra.go.tz; this file rests on sections 19, 56, 88, 89 and 91 of that Act, on the Tax Administration Act, and on the Finance Act 2025.

Section 19: an unrelieved loss rolls forward without a clock

The Tanzania Revenue Authority administers income tax under Cap. 332. Section 19 lets a person deduct, in calculating income from a business or investment, any unrelieved loss of that year from another business or investment and any unrelieved loss of a previous year. There is no expiry: a 2016 trading loss still reduces 2026 trading income if every intervening return carried it.

Income tax is a Union tax, so the same section governs a Zanzibar company. Its return goes to TRA’s Zanzibar offices, not to the Zanzibar Revenue Authority, which collects the island’s own VAT, stamp duty and levies. The practical difference is evidence: ownership history comes from BPRA rather than BRELA.

“Loss” means tax loss after add-backs, not the audited figure: depreciation gives way to Third Schedule capital allowances, general provisions are stripped out, and expenditure without a fiscal receipt is disallowed before any balance exists.

Ring-fences: pools that never meet

The fences run inside one legal person: a factory with a rented-out warehouse files one return with two ledgers. A mining group carries a balance per licence area, and the amount brought forward may now absorb at most 60% of that area’s income in a year, down from 70%, so 40% is taxed at 30% while a balance remains.

Minimum tax on turnover: 1% from the third loss year

Paragraph 3(3) of the First Schedule charges a corporation with perpetual unrelieved losses for three consecutive years at a percentage of turnover instead of nil. The charge was introduced at 0.3%, lifted to 0.5% by the Finance Act 2020 and to 1% by the Finance Act 2025 with effect from 1 July 2025. It is computed on gross turnover, not margin.

The charge is not a prepayment: nothing in the schedule credits it against a later 30% liability on profits. Paying it does not consume the ledger. And the schedule carves out named sectors (agricultural business and providers of health or education services at the last text this desk opened), so a farming company with three loss years pays nothing under the paragraph.

A fourth year that turns a profit but only partly absorbs the balance is the grey case: the return still shows nil tax, and the paragraph speaks of losses unrelieved, not of a loss made in the year. Budget the 1% and put the reading to the assessing officer in writing before the estimate is filed.

Change of control: section 56 closes the ledger

Section 56 applies where the underlying ownership of an entity changes by more than 50% compared with its ownership at any time in the previous three years. Two consequences follow: the entity is treated as realising every asset and liability immediately before the change, at market value, which can itself produce taxable income; and after the change it may not deduct a loss under section 19 that arose before it. The balance is forfeited, not reduced.

Underlying ownership looks through to individuals, so a sale of the foreign parent counts, as does a rights issue that dilutes the founders below half. A buyer paying for tax losses in a share-purchase agreement pays for something section 56 removes at completion. Keep the movement below the threshold, spread it beyond the window, or price the ledger at zero.

Losses and the statement of estimated tax

Section 89 requires every entity to file a statement of estimated tax payable by the due date of the first instalment, and section 88 fixes the instalments on the last day of the third, sixth, ninth and twelfth months of the year of income. A loss-making company still files the statement: nil tax and, once a third consecutive loss year is foreseeable, the minimum tax on projected turnover.

The Tax Administration Act, Cap. 438 charges interest where the estimate turns out below 80% of the final liability. A company that estimated nil and then met the 1% charge on TZS 12,000,000,000 of turnover carries that interest on the whole shortfall; the provisional tax page covers the mechanics.

The filing sequence TRA actually follows

1. Close the year and compute the tax loss by pool: accounting result, add-backs, capital allowances, then a split into the fenced ledgers.
2. Reconcile to the last assessed return: the opening balance must equal what TRA accepted on the e-filing portal; a gap is a query.
3. Screen section 56 against the BRELA or BPRA share register for the three-year window before claiming any brought-forward amount.
4. Test paragraph 3(3): count consecutive loss years; at three, compute 1% of turnover and check the sector carve-out.
5. File the statement of estimated tax by the first instalment date, carrying the minimum tax where it applies; revise if turnover moves.
6. File the return of income within six months after year end under section 91, with audited financial statements, the tax computation and the loss schedule.
7. Archive the origin-year pack until the balance reaches nil and the audit window on the year of use closes.

Documents that keep a loss alive on audit

• Audited financial statements for every year in the chain, signed by an NBAA-registered auditor
• The tax computation for each year, from accounting result to loss carried forward, by pool
• TRA e-filing acknowledgements and any assessment or adjusted assessment for every origin year: an unfiled year breaks the chain
• BRELA or BPRA share register and annual returns covering the three-year section 56 window
• Fiscal (EFD) receipts, contracts and bank evidence for the expenditure that created the loss
• Transfer-pricing documentation under the Tax Administration (Transfer Pricing) Regulations 2018 (GN No. 166 of 2018) where related-party transactions reach TZS 10,000,000,000 in the year, plus the thin-capitalisation computation where interest drove the loss

On audit TRA tests the year the loss arose, not only the year of use. The five-year record-retention minimum in the Tax Administration Act is shorter than the life of many losses.

Worked file: three loss years, then a buyer

Illustrative arithmetic, not a quotation. A Dar es Salaam manufacturer, 31 December year end, no agricultural or investment income.

• Year 1: tax loss TZS 900,000,000. Nil tax. Unrelieved balance TZS 900,000,000.
• Year 2: tax loss TZS 400,000,000. Nil tax. Balance TZS 1,300,000,000.
• Year 3: tax loss TZS 100,000,000; turnover TZS 12,000,000,000. Third consecutive loss year: minimum tax 1% × TZS 12,000,000,000 = TZS 120,000,000, payable by instalment. Balance TZS 1,400,000,000, untouched by the payment.
• Year 4: taxable profit before losses TZS 800,000,000. Relief TZS 800,000,000; taxable income nil; balance TZS 600,000,000. Turnover TZS 15,000,000,000: the conservative estimate carries 1% = TZS 150,000,000 on the grey-case reading.
• Year 5: taxable profit TZS 1,500,000,000. Relief TZS 600,000,000; taxable income TZS 900,000,000 × 30% = TZS 270,000,000. Ledger closed; minimum tax ceases.

Now insert a sale of 60% of the shares at the start of year 4. Section 56 is met: the company is deemed to realise its assets at market value on that date and the TZS 1,400,000,000 brought into year 4 is forfeited. Year 4 pays 30% on its full TZS 800,000,000 (TZS 240,000,000) before the deemed realisation is counted. A buyer who priced the ledger at 30% of face, TZS 420,000,000, bought nothing.

Where the loss file stalls

• An origin year filed late or never filed: the portal shows no assessed loss and the officer disallows the brought-forward figure
• Management-account losses claimed without add-backs; depreciation and provisions inflate the ledger until audit
• Exploration spend on licence B set against production income from licence A
• Related-party fees and interest behind the loss with no transfer-pricing file, so the expense is recharacterised
• A 60% share sale two years ago that nobody mapped to section 56

What the Finance Act 2025 changed

From 1 July 2025 the Finance Act 2025 raised the minimum tax from 0.5% to 1% of turnover; cut the extractive-sector offset ceiling from 70% to 60% of annual income per licence or contract area; added positive retained earnings to “equity” for the thin-capitalisation ratio, no help to a company carrying accumulated losses; and gave the Commissioner General a discretion to treat 30% of profits left undistributed twelve months after year end as distributed, with 10% withholding tax. That last item bites a company whose accounting profits sit behind tax losses: no corporate tax, yet a deemed dividend. Earlier, the Finance Act 2020 lifted the minimum tax from 0.3% to 0.5%.

Desks this file does not replace

TRA assesses, audits and decides objections; an objection goes to the Commissioner General within 30 days of the assessment, and the Tax Administration Act asks for one-third of the assessed tax or the amount not in dispute, whichever is greater, before it is heard. The Tax Revenue Appeals Board and Tribunal sit above that. BRELA and BPRA keep the ownership record section 56 is tested against. NBAA registers the auditor whose signature the return needs. Zatra computes the ledger, prepares the estimate and return pack and coordinates the audit response; it neither audits nor decides the objection.

What to confirm before you act

• The live paragraph 3(3) rate and sector exclusions, dated the day the estimate is filed
• That every origin year has a filed return and a TRA acknowledgement
• The share register for the prior three years: does underlying ownership move past 50%?
• Which pool each loss belongs to, and whether a licence-area cap applies
• Whether the estimate carries the minimum tax and clears the 80% line
• That origin-year records survive until the balance is nil
• For a Zanzibar company: return to TRA Zanzibar, ownership evidence from BPRA