Tanzania is looking to make changes to the Income Tax Act in order to tax cryptocurrency trades, with a proposed 3% withholding tax on income generated from such transactions.
During a recent National Assembly meeting, the Finance Minister Hon. Dr. Mwigulu Lameck Nchemba Madelu presented the proposal along with Tanzania’s revenue and expenditure plans for the upcoming year. The aim is to improve revenue targets through various enhancements.
Under the proposed amendments, a 3% withholding tax would be imposed on income from digital asset trades. Digital platform owners and facilitators of crypto exchanges would be responsible for withholding this tax and remitting it to the Tanzania Revenue Authority.
Foreigners operating digital platforms for crypto transactions would need to register with the Tanzania Revenue Authority under the Simplified Tax Regime. Additionally, the government plans to tax income from digital content creation at a rate of 5% withholding tax for resident business entities.
The goal of these measures is to expand the tax base and ensure adherence to fair tax principles, with an expected increase in government revenue collection. These tax proposals come at a time when the Bank of Tanzania is exploring the possibility of central bank digital currency research.
The Governance and Economic Policy Centre has also emphasized the importance of regulating cryptocurrencies in Tanzania and other East African countries to manage risks and stay ahead of future monetary trends. By learning from the experiences of other countries with CBDCs, Tanzania hopes to adapt to the changing landscape of digital currencies.