Tanzania Revenue Authority: Mandatory 30-Day VAT Refund Timeline Introduced

• Tanzania's budget introduces a mandatory 30-day timeline for VAT refunds.
• The government will now face statutory interest if it fails to pay on time.
• Pending VAT refunds reached $650 million by 2025, causing financial strain on businesses.
• The reform aims to improve cash flow and reduce investment costs for companies.
• Investors can model returns with greater accuracy, making capital easier and cheaper to deploy.

By imposing a binding obligation on the Revenue Authority to refund within 30 days, the government aims to improve cash flow and reduce investment costs for companies.

Tanzania's recent budget has introduced a mandatory 30-day timeline for VAT refunds, backed by statutory interest if the government fails to pay on time. This reform is significant because it addresses one of the biggest friction points in Tanzania's investment story: delayed VAT refunds that have long acted like an invisible tax on businesses. By imposing a binding obligation on the Revenue Authority to refund within 30 days, the government aims to improve cash flow and reduce investment costs for companies. According to Anthony Chamanga, Chief Development Manager of the Tanzania Horticultural Association, sustained VAT refund delays had led to 'dire financial straits' for some companies, with legitimate credits trapped in the system and quietly eroding business finances.

For years, Tanzania has struggled to attract private capital due to administrative dysfunction. The tax code imposed serious penalties on businesses that underpaid, but set no equivalent consequences for the Revenue Authority when it failed to refund on time. This asymmetry gave the TRA little institutional incentive to act urgently, resulting in a backlog of pending refunds that reached $650 million by 2025. The Presidential Commission on Tax System Reforms identified VAT refunds as a structural barrier to investment targets, and President Samia Suluhu Hassan's administration has taken steps to address this issue.

The introduction of the 30-day VAT refund timeline is a critical step towards making Tanzania an attractive destination for investors. With the country's reliance on external financing falling sharply, attracting private capital has become a fiscal imperative. The reform will improve cash flow, reduce investment costs, and support fleet expansion, as noted by Rahim Dossa, Vice Chairman of the Tanzania Truck Owners Association. This development may require lawyers to advise clients on the implications of the new VAT refund timeline, including assessing potential cash flow improvements and reduced investment costs.

This development may require lawyers to advise clients on the implications of the new 30-day VAT refund timeline, including assessing potential cash flow improvements and reduced investment costs. Compliance officers should also be aware of the statutory interest that will now apply if the government fails to pay VAT refunds on time.

Source: Original reporting via Briefly