Depreciation Methods and Tanzania Tax Classes
Depreciation spreads the cost of an asset across the years it earns income for. There are three common ways to do it, and then there is the way Tanzania's tax law requires — and the two are not the same number, which is a frequent source of confusion in accounts and tax returns.
The short answer: Tanzania's tax allowance is a pooled declining balance by asset class: 37.5% for computers, cars and construction equipment, 25% for heavy vehicles and plant, 12.5% for office equipment, 5% for buildings and 100% for agricultural plant.
Filed under Business & VAT
Maintained by David M at Delta Tech Solutions · Figures last checked 19 September 2026 · Next check due 19 March 2027
Content updated 24 October 2026
What depreciation is, and what it is not
Depreciation allocates the cost of an asset to the periods that benefit from it. It is not a valuation of the asset and it does not set money aside: the cash left when the asset was bought. The depreciable amount is the cost less whatever the asset is expected to be worth at the end of its life.
Three ways to spread the cost
Straight line charges the same amount every year, which suits assets that wear evenly. Declining balance charges a fixed percentage of the remaining book value, so the charge is heaviest in year one and falls thereafter — a better match for vehicles and computers that lose value quickly. Sum of years' digits front-loads the charge by weighting it to the remaining life, and sits between the two.
Tanzania's tax allowance is set by class, not by choice
For tax in Tanzania you do not pick a method. Each depreciable asset goes into an Income Tax Act class pool and attracts that class's rate on a declining balance, computed on the pool rather than on the individual asset.
| Class | Rate | Typical assets |
|---|---|---|
| 1 | 37.5% | Computers and data handling equipment; cars, buses and minibuses under 30 seats; goods vehicles under 7 tonnes; construction and earth-moving equipment |
| 2 | 25% | Buses from 30 seats; heavy trucks and trailers; locomotives; vessels and aircraft; plant and machinery used in agriculture or manufacturing |
| 3 | 12.5% | Office furniture, fixtures and equipment; any asset not in another class |
| 4 | Deleted | No longer in the Act |
| 5 | 20% | Buildings and structures used in agriculture, livestock farming or fish farming |
| 6 | 5% | Other buildings and structures of a permanent nature |
| 7 | 1 ÷ useful life | Intangible assets, rounded down to the nearest half year |
| 8 | 100% | Agricultural plant and machinery, generators and distribution equipment; an EFD bought by a trader not registered for VAT; mineral and petroleum exploration equipment |
Why the two figures differ
Because the tax allowance is pooled, selling one asset out of a pool reduces the pool rather than producing a gain or loss on that asset, and buying another adds to it. The result is that a business's accounting depreciation and its tax depreciation rarely match in any given year — which is why the difference is tracked rather than reconciled away.
Straight line against declining balance on 10,000,000 TZS
A 10,000,000 TZS asset over 5 years costs 2,000,000 TZS a year on the straight-line method, and 2,500,000 TZS in the first year on a 25% declining balance — less each year after that. For tax in Tanzania you do not choose: the asset goes into an Income Tax Act class pool and attracts that class's rate. Class 7 is the exception to pooling: an intangible asset is written off over its own useful life rather than in a pool with others.
A haulage firm in Mbeya bought a 10,000,000 TZS trailer. What it puts in its accounts and what the tax calculation uses are two different numbers, and this is where that shows up.
Disposal and the balancing charge
When a pooled asset is sold, the proceeds reduce the pool rather than creating a gain or loss on that individual asset. If the pool is still positive, the remaining balance continues to be written down at the class rate. If the proceeds exceed the pool, the excess is a balancing charge and is brought into income. That is why a business cannot simply compare the sale price with the original cost: the tax result depends on the pool balance at the time of disposal, and the accounting profit on the sale is a separate figure.
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Depreciation Methods and Tanzania Tax Classes FAQs
What depreciation rate applies to a computer in Tanzania?
37.5% a year, because computers fall in Class 1 of the Income Tax Act's Third Schedule.
Can I choose straight line for tax?
No. The tax allowance is a pooled declining balance at the rate the Act fixes for the asset's class. Straight line, declining balance and sum of years' digits are accounting choices.
What happened to Class 4?
It was deleted from the Act and no longer applies.
How are intangible assets treated?
They are Class 7, written off at a rate of 1 divided by the useful life, rounded down to the nearest half year, and held in their own pool.