United republic of Tanzania

Tanzania and Zanzibar share a unified Income Tax Act that applies to both jurisdictions, including the administration of Pay As You Earn (PAYE). However, income tax, including PAYE, is a Union matter administered by the Tanzania Revenue Authority (TRA) in both mainland Tanzania and Zanzibar. The Zanzibar Revenue Authority (ZRA), formerly the Zanzibar Revenue Board, administers Zanzibar’s non-Union taxes. In contrast, Zanzibar operates its own VAT system under the ZRA. However, customs duties and Union excise duties remain administered by the TRA, while the ZRA administers VAT and certain domestic excise duties and levies imposed under Zanzibar law. Residents are generally taxed on worldwide income and non-residents only on income sourced within Tanzania. For employees, taxable income primarily includes salaries, wages, bonuses and other employment-related benefits. Employers are required to deduct PAYE from employees’ salaries and remit it to the TRA on a monthly basis. PAYE is calculated using a progressive rate structure, with marginal tax rates ranging from 0% to 30% and a tax-free threshold applied to lower income levels. Certain benefits and allowances may be subject to taxation depending on their nature. Employees are generally not required to file personal income tax returns unless they have additional sources of income or are specifically requested to do so by the TRA. Various tax reliefs and deductions, such as those related to contributions to approved retirement funds, may be available depending on the taxpayer’s status and income type.

In both Tanzania and Zanzibar, payroll taxes consist of several mandatory deductions and contributions that employers must make on behalf of their employees. PAYE income tax is withheld from employees’ salaries based on progressive tax brackets. Under the current PAYE system, for resident employees, income up to TZS 270,000 per month is not subject to tax, while income above this threshold is taxed progressively at rates of 8%, 20%, 25% and 30%, depending on the applicable income band. Non-resident employees are generally subject to PAYE withholding at 15%. For social security contributions, private sector employers and employees in mainland Tanzania each contribute 10% to the National Social Security Fund (NSSF), while public sector employees contribute 5% and their employers 15% to the Public Service Social Security Fund (PSSSF). In Zanzibar, social security contributions in the private and public sectors are made to the Zanzibar Social Security Fund (ZSSF), where employers and employees contribute 14% (which includes a 1% employment injury benefit) and 7%, respectively. Employers in mainland Tanzania are also required to pay a 3.5% Skills Development Levy (SDL) on total gross monthly salaries to support vocational training and skills development. This levy generally applies to employers with ten or more employees, subject to certain statutory exemptions. Zanzibar also imposes a Skills Development Levy. The 2026/27 Zanzibar budget announced that the levy would be reduced from 4% to 3% of payroll; the 3% rate should be treated as announced pending confirmation in the applicable amending legislation. Additionally, employers in mainland Tanzania are required to contribute 0.5% of employees’ earnings, including basic salary and regularly paid fixed allowances, to the Workers Compensation Fund (WCF), depending on the risk level of their industry. The WCF provides compensation for employees injured at work or who contract occupational diseases. Employees do not contribute to the SDL or WCF. Health-related contributions are not fully integrated into social security. In mainland Tanzania, the Universal Health Insurance framework requires formal-sector employees to have coverage through a public or approved private health insurance scheme. Where NHIF contributions apply, the standard contribution is 6% of salary, ordinarily split equally between the employer and employee at 3% each. In Zanzibar a Health Services Fund (ZHSF) has been introduced, requiring formal public- and private-sector employers and employees to each contribute 3.5% of the employee’s consolidated monthly salary, producing a total contribution of 7%.

Employers in mainland Tanzania are required to withhold and remit monthly PAYE income tax, SDL and other withholding taxes by the 7th day of the month following the relevant payroll month, and must file corresponding monthly return statements. Contributions to social security schemes have different deadlines. NSSF contributions must be remitted within one month after the end of the relevant contribution month, together with the prescribed employee particulars. PSSSF contributions are payable monthly; the PSSSF Act treats the contribution as paid on the last day of the month to which the salary relates, and employers must submit returns as directed by the Fund. WCF contributions are payable monthly, within the relevant month or the following month. An employer may report and pay quarterly, semi-annually or annually only after notifying or obtaining the agreement of the WCF Director General, as applicable. Employers must also provide employees with an annual PAYE withholding certificate by 30 January following the end of the calendar year. SDL returns and payments are required monthly by the seventh day; the current Vocational Education and Training Act does not prescribe a separate annual SDL return. All mainland employers covered by the Workers Compensation Act must file a WCF annual return of earnings (Form WCR-3) by 31 March each year. In Zanzibar, employers follow similar schedules for Union income taxes under the TRA. Monthly remittance of PAYE and withholding taxes to the TRA is required by the 7th day of the following month, and monthly social security contributions to ZSSF (employer and employee portions) must be remitted within 15 days after the date on which the relevant salary is paid. The annual PAYE withholding certificate requirement also applies in Zanzibar, while any additional social security returns must be submitted in the form and manner prescribed by the relevant fund. ZHSF contribution deadlines are determined by the Zanzibar Health Services Fund Act: formal public- and private-sector contributions must be submitted by the employer within 14 days after the end of each month.

Employers in both mainland Tanzania and Zanzibar are legally required to maintain accurate and comprehensive payroll records for five years for Union taxes, including PAYE, and for seven years for Zanzibar-administered taxes. These records must include employee details, salary payments, tax deductions, social security contributions and other statutory levies. Records must be available in either paper or electronic format and must be accessible for inspection by the TRA and ZRA on request. Compliance involves timely filing of monthly and annual returns, accurate withholding and remittance of taxes, and proper use of the respective revenue authorities’ online systems for generating control numbers and submitting returns. Employers must also ensure that all employee and company Tax Identification Numbers (TINs) are correctly used in filings. Failure to comply with these obligations can result in significant penalties. Late filing of returns incurs monthly penalties, either a percentage of the unpaid tax or a fixed amount, while late payments attract interest charges. Failure to maintain proper records may result in fines, while underestimating provisional tax by a significant margin can lead to additional interest on the shortfall. Submitting false or misleading information or assisting others in evading taxes can result in further penalties and legal action. These measures are enforced rigorously by the TRA and ZRA to ensure compliance.