Tanzania Budget 2026 reshapes extractive sector fiscal framework

On 11 June 2026, when the Tanzanian Minister for Finance, Hon. Ambassador Khamis Mussa Omar, delivered the country’s National Budget Speech, the landscape for investment in the extractive industries fundamentally changed.

Exemptions

A major reform for this sector is the proposed amendment of the Income Tax Act to recognise tax exemptions granted under Framework Agreements entered into between the Government and mining investors. This is intended to enhance investor confidence by reinforcing the Government’s aim to honour fiscal commitments made under approved investment agreements and eliminate the existing delays on the basis that a Government Notice (GN) has not been issued. Standard operating procedures will now be developed to govern the granting of such exemptions.

The Budget also introduced parallel amendments to formally recognise VAT exemptions granted under cabinet-approved mining Framework Agreements (Agreements) and introduce standard operating procedures for their implementation. This addresses a recurring challenge in the mining sector, where VAT exemptions provided under the Agreements have not always been implemented/utilised on the basis that such exemptions must be granted through a GN or express statutory provision.

The Minister has also proposed amending the Excise (Management and Tariff) Act to recognise excise duty exemptions granted under the Agreements. There is also an amendment to the Road and Fuel Tolls Act, Cap. 220 to recognise the tax exemption provisions stipulated in the Agreements. The objective is to accelerate the execution of joint venture mining projects across the country by establishing standard operating procedures to guide the granting of these exemptions.

The Minister has also proposed reducing the proportion of undistributed profits that may be treated as a deemed distribution under section 33A of the Income Tax Act from 30% to 15%. If enacted, the amendment would provide additional flexibility for businesses, including mining companies, seeking to reinvest profits into their operations rather than distribute them to shareholders, without fundamentally altering the operation of the deemed dividend regime. A key question remains unanswered as to whether this provision also applies to local entities with foreign shareholding or it only applies to local entities with local shareholdings. Considering that many mining operations rely on foreign direct investment, clarification of this point is essential.

These amendments are aimed at boosting investor confidence and improving efficiency for mining companies by recognising tax, VAT, excise duty, and fuel toll exemptions directly under Framework Agreements. This will reduce costly delays (like waiting for GNs) and legal disputes.

Administrative layers and levies

Mining houses must also prepare to navigate broader changes that introduce new administrative layers and costs. For instance, proposed amendments to the Land Act will provide for the distribution of 20% of land rent revenue, splitting 10% to the Ministry of Lands and 10% to local government areas to strengthen cooperation and improve land surveying and land rent collection. While this may benefit investors in real estate, those operating in the agriculture, manufacturing, mining and infrastructure sectors, where land due diligence and acquisition timelines often affect transaction completion, should expect an increased focus on land rent compliance.

Further, amendments to section 6 of the Planning Commission Act will establish a procedure for evaluating national development projects using technical, financial, environmental and economic criteria, including climate change impact assessments. As a result, in sectors such as energy, transport, water, mining infrastructure and industrial zones, climate impact assessment may become a more visible part of project preparation.

Road tractors for semi-trailers under HS Codes 8701.21.90, 8701.22.90, 8701.23.90 and 8701.24.90 are also being placed on the negative list of goods that are not eligible for tax exemption under the Investment and Special Economic Zone Act. This change may affect logistics companies, manufacturers, mining companies, construction companies, agro-processors and SEZ operators that rely on semi-trailer fleets by increasing project logistics costs.

The state is also implementing aggressive tariff mechanisms to force local industrial growth, targeting raw mineral exports. Under the Export Tax Act, CAP 196, an export levy of 10% of the FOB value of the cargo or TZS 200 per kilogram, whichever is higher, will be imposed on quartz minerals under HS Code 25.06 and feldspar under HS Code 2529.10.00.

Mineral Research Fund

The Minister has also proposed the Ministry of Minerals establish a Mineral Research Fund. The fund will be capitalised by retaining 10% of gross mineral revenue collections by the Ministry of Finance. The retained funds will be deposited into a dedicated account at the Bank of Tanzania, and expenditure will require prior authorisation from the Paymaster General.

The proposal appears to create a revenue retention mechanism rather than a new direct levy on mining companies. The measure directs part of the mineral revenue already collected by the Ministry into a dedicated research fund. The legal position will depend on the wording of the Finance Act and any mining or public finance amendments used to establish the fund.

A dedicated fund can support geological research, mineral data, sector studies, laboratory capacity, mapping and research linked to value addition. Better geological and sector data can reduce early-stage exploration risk and support better project selection by both Government and private investors.

The potential business impact is positive if the fund improves the quality, reliability and availability of mineral data. Mining investors often price geological uncertainty into their investment decisions. Better research can improve investor confidence, support exploration, and help Government negotiate and monitor mining projects from a stronger technical position. Local universities, laboratories, drilling companies, geologists and technical consultants may also benefit if the fund supports research partnerships and sector studies. The main legal and regulatory issue is fund governance.

The proposal will need a clear legal basis for revenue retention, a definition of gross mineral revenue collections, rules on eligible expenditure, audit requirements, reporting obligations and approval timelines.

Conclusion

The 2026 Budget moves Tanzania towards a state-driven industrial policy that rewards mining companies investing long-term under Framework Agreements, penalises those that currently rely on raw material exports and tax-free logistics, and introduces new layers of tax compliance for those operating in the sector.