Executive Summary
The Finance Act 2026 introduces several significant tax and regulatory changes aimed at broadening the tax base, accelerating digital compliance, encouraging formalisation of businesses and strengthening domestic revenue mobilisation.
While some measures provide relief and investment incentives, others introduce additional compliance obligations that businesses should assess immediately.
At HEMAC, we believe organisations that respond early to legislative change are better positioned to manage risk, preserve cash flow and avoid costly compliance issues. Below are the ten developments every business leader should understand.
One-Year Tax Holiday for Newly Registered Small Businesses
One of the most notable changes is the introduction of a 12-month income tax holiday for newly registered taxpayers operating under the presumptive tax regime. This initiative is intended to encourage informal businesses to formalise their operations and obtain Tax Identification Numbers (TINs).
Why It Matters
Many small businesses have historically avoided formal registration due to immediate tax obligations. The new measure lowers the entry barrier and encourages compliance from the outset.
HEMAC Perspective
Businesses considering formal registration should take advantage of this incentive while establishing proper bookkeeping and tax compliance processes from day one.
Presumptive Tax Threshold Increased to TZS 200 Million
The turnover threshold for businesses qualifying under the presumptive tax regime has increased from TZS 100 million to TZS 200 million annually.
Why It Matters
More businesses will now qualify for the simplified tax regime, potentially reducing compliance costs and administrative burden.
HEMAC Perspective
Businesses approaching the TZS 200 million threshold should reassess whether the presumptive regime remains the most tax-efficient option.
Presumptive Tax Rate Increased from 3.5% to 4.5%
While the tax holiday provides relief, the presumptive income tax rate has increased from 3.5% to 4.5%.
Why It Matters
Businesses under the presumptive regime may experience higher tax costs once the tax holiday period expires.
HEMAC Perspective
Cash flow projections and pricing models should be reviewed to account for the increased tax burden.
Digital Service Tax Increased from 2% to 3%
The Finance Act increases the tax rate applicable to foreign digital service providers from 2% to 3%. This may affect services such as:
- Online advertising
- Cloud platforms
- Digital subscriptions
- Streaming services
- Software platforms
Why It Matters
The increased tax cost may ultimately be passed to consumers and businesses using digital services.
HEMAC Perspective
Organisations heavily dependent on digital platforms should evaluate potential increases in operating costs.
Mandatory VAT Refund Timeline Introduced
A major positive development for businesses is the introduction of a mandatory 30-day timeline for processing VAT refunds. Interest may become payable where refunds are delayed beyond the statutory period.
Why It Matters
Historically, VAT refunds have been a significant cash flow challenge for many businesses.
HEMAC Perspective
Exporters and businesses with recurring VAT refund positions should benefit from improved cash flow predictability.
Digital Compliance Becomes a Strategic Priority
The Government continues to intensify digital tax administration through:
- Expanded use of EFD systems
- Digital payment requirements
- System integration
- Data analytics and artificial intelligence
- Increased transaction traceability
Why It Matters
Businesses operating largely in cash or with weak documentation processes face increased compliance exposure.
HEMAC Perspective
The era of informal record-keeping is rapidly ending. Businesses should strengthen controls, documentation and system capabilities immediately.
New 1% Withholding Tax on Agricultural Supply Chains
The Finance Act introduces a 1% withholding tax on certain transactions involving live animals, unprocessed milk, and fish and fish maws. In addition, a 1% single instalment tax is introduced on purchases of food crops.
Why It Matters
Agricultural traders, processors and distributors may face additional compliance obligations.
HEMAC Perspective
Businesses in agriculture and food processing sectors should review procurement processes and supplier arrangements immediately.
Excise Duty Changes Across Multiple Sectors
The Finance Act replaces the previous adjustment mechanism and introduces annual excise duty adjustments. For FY 2026/27, many excisable products experience an increase of approximately 8%. Affected sectors include:
- Beverages and alcohol
- Tobacco
- Imported food products
- Gaming activities
Why It Matters
These changes may directly affect pricing, profitability and consumer demand.
HEMAC Perspective
Businesses should review pricing strategies and inventory planning to mitigate margin pressure.
5% Excise Duty on Betting Activities
A new 5% excise duty has been introduced on the value of bets and wagers across gaming platforms.
Why It Matters
The measure increases the tax burden on betting operators and may affect customer behaviour.
HEMAC Perspective
Gaming businesses should evaluate the commercial implications and ensure systems can support compliance requirements.
Tax Dispute Resolution Period Extended
The period for resolving tax disputes through Alternative Dispute Resolution (ADR) has increased from 60 days to 90 days.
Why It Matters
Businesses involved in tax disputes will have additional time to negotiate and conclude settlements without prolonged litigation.
HEMAC Perspective
The change is positive, particularly for complex tax matters that require extensive documentation and negotiations.
What Business Leaders Should Do Now
The Finance Act 2026 signals a continued shift toward digital compliance, formalisation of businesses, stronger tax administration, increased transaction visibility and improved revenue collection. Business leaders should act immediately across these areas:
The Biggest Story Is Not a Rate Change. It Is a Compliance Shift.
The biggest story in the Finance Act 2026 is not the increase or decrease of a specific tax. It is the Government's clear move toward a digitally driven compliance environment where transactions, payments and reporting become increasingly visible.
Businesses that invest in strong controls, accurate records and proactive compliance will be best positioned to thrive in this new environment. Those that wait may find compliance becoming significantly more expensive.