Violet Vallaya
Tanzania has unveiled proposed amendments to its Income Tax Act, aiming to capture a slice of the growing digital economy. The centerpiece of the proposal is a 3% withholding tax on income generated from cryptocurrency transactions, as per local media reports.
Presented by Finance Minister Hon. Dr. Mwigulu Lameck Nchemba Madelu, the plan introduces a withholding tax on profits obtained from trading digital assets. This tax burden will fall on digital platform owners and facilitators handling crypto transfers and exchanges. These entities, designated as withholding agents, will be responsible for collecting the 3% tax and remitting it to the Tanzania Revenue Authority (TRA).
The proposal further extends its reach to foreign-operated digital platforms facilitating crypto transactions in Tanzania. These platforms will be required to register with the TRA under the Simplified Tax Regime, ensuring they contribute to the nation’s tax coffers.
Additionally, the Tanzanian government is setting its sights on another digital revenue stream: content creation. The plan outlines a 5% withholding tax on income earned by resident businesses engaged in digital content creation. The government expects this tax to bolster reserves, with the proposed measures estimated to generate significant tax revenue. The government anticipates collecting 465 million Tanzanian shillings (roughly $174,000) from crypto transactions and a further 968 million shillings from digital content creation.
This move toward crypto taxation coincides with the Bank of Tanzania’s exploration of central bank digital currency (CBDC). The government’s focus on crypto regulation highlights its desire to manage potential risks associated with digital assets while adapting to evolving financial trends.
With these proposed amendments, Tanzania joins a growing number of countries seeking to regulate and tax the cryptocurrency sector. The ultimate impact of these measures on Tanzania’s digital economy remains to be seen, but it represents a clear attempt to navigate the complexities of the digital age and secure a share of the revenue it generates.
