Service Levy in Tanzania: the 0.25% Turnover Tax
The service levy is charged by local government authorities on the net turnover of businesses operating in their area. Since 1 July 2025 the rate is a flat 0.25% for every authority, and it replaced a system in which each council set its own rate up to a ceiling.
The short answer: The service levy in Tanzania is 0.25% of a business's net turnover, paid quarterly to the local government authority where it operates. It is charged on turnover rather than profit, and the base excludes VAT and excise duty.
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
Tanzania Service Levy Calculator
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What the service levy is
The service levy is a local tax, not a national one. It is imposed by the local government authority where a business operates, on that business's net turnover, and it funds local services and infrastructure. Because it is charged on turnover rather than profit, a business pays it whether or not it made money in the quarter.
The 0.25% rate, and what changed
The Finance Act 2025 amended the Local Government Finance Act to fix the rate at 0.25% of net turnover. Before that, authorities could set any rate up to a maximum of 0.3%, which allowed sector arrangements such as the 0.2% some banks applied. Those arrangements are no longer supported by law: the discretion that permitted them is gone, so the 0.25% applies across the board.
| Period | Rate | Basis |
|---|---|---|
| Before 1 July 2025 | Up to 0.3%, set by each authority | Local Government Finance Act |
| From 1 July 2025 | 0.25% for every authority | Finance Act 2025 |
| Bank arrangement before the change | 0.2% | No longer permitted |
Who must pay, and where
A business that operates in a local authority area and meets the council's registration requirements is liable for the levy in that area. Register with the authority where the business operates, keep the turnover records that support each quarter's return, and reconcile the revenue in your accounts with the revenue you declare. The Act and the council's by-laws set the detail; the practical rule is that the levy follows the business location, not the owner's home or the bank's branch.
What the levy is charged on
Net turnover — and the compliance point is what "net" excludes. The base is turnover excluding excise duty and value added tax, so a business that has collected VAT on its sales does not pay the levy on the VAT element. Reconcile the revenue in your accounts with the revenue you declare in the levy return, and keep a note of any differences: that reconciliation is what an auditor will ask for.
How the quarterly levy works
The rate is fixed, so the arithmetic is simple: multiply the quarter's net turnover by 0.25%. The table shows what that means at common turnover levels, and the annualised column is what the same quarter would cost if it repeated four times.
| Quarterly net turnover (TZS) | Service levy at 0.25% (TZS) | Annualised if repeated (TZS) |
|---|---|---|
| 10,000,000 | 25,000 | 100,000 |
| 50,000,000 | 125,000 | 500,000 |
| 100,000,000 | 250,000 | 1,000,000 |
| 500,000,000 | 1,250,000 | 5,000,000 |
Paying it, quarter by quarter
The levy is paid quarterly to the authority. In practice the first two months of a quarter are calculated on actual turnover and the final month on an estimate, so the return is filed without waiting for the quarter to close. Diarise the four filing dates your council sets: late payment attracts fines and interest, and the estimate for the final month is trued up when the quarter's actual figures are known.
Penalties, interest and records
Late payment attracts fines and interest from the local authority, and the exposure grows the longer a quarter is left unfiled. Keep the sales records, the VAT and excise workings, and a copy of each return, because the council can ask how the declared turnover was reached. If a quarter was overstated, correct it through the council's process rather than carrying the error into the next return.
Service levy is not VAT and not presumptive tax
Three different charges are easy to confuse. VAT is a national tax on taxable supplies, administered by TRA, and it is excluded from the service levy base. The service levy is a local charge on net turnover, paid to the council. Presumptive tax is an income tax on a small trader's turnover, administered by TRA, and it applies to individual traders within its own turnover bands. A business can be within more than one of these at the same time, so work each one on its own base.
Common mistakes
The recurring errors are mechanical: including VAT in the levy base, treating the levy as a profit tax and omitting it in a loss-making quarter, assuming the old 0.2% bank rate still applies, and filing late because the quarter-end estimate was left until the last day. A fifth is using the wrong authority when the business has moved or opened a branch; the levy follows where the business operates, so confirm the registration with the council that charges it.
What Grace's 100,000,000 TZS quarter attracts
A quarter's net turnover of 100,000,000 TZS attracts 250,000 TZS in service levy at 0.25% — that is 1,000,000 TZS if the same turnover repeats all year. The base is net turnover excluding excise duty and VAT. The calculator below will do it for your own quarterly turnover.
Grace runs a wholesale business in Njombe and files the levy every quarter. Her turnover for one quarter was 100,000,000 TZS.
Results are estimates provided for information only and do not constitute financial, legal or tax advice. Consult a qualified professional before making financial decisions.
Related guides
Service Levy in Tanzania: the 0.25% Turnover Tax FAQs
Is the service levy a national tax or a local one?
A local one. The local government authority where the business operates charges it on net turnover, which is why a loss-making quarter can still attract it.
Is the service levy on profit or turnover?
Turnover — specifically net turnover excluding excise duty and VAT. It is not a tax on profit, so a loss-making quarter can still attract it.
How often is it paid?
Quarterly, to the local government authority where the business operates, with the last month of each quarter estimated.
Do banks still pay 0.2%?
No. The Finance Act 2025 removed the discretion that allowed sector-specific rates, so the banking arrangement is no longer supported by law.
Is service levy charged on VAT?
No. The base is net turnover excluding VAT and excise duty, so the VAT a business collects is not part of the levy base. Reconcile the figure you declare with the revenue in your accounts.
What happens if a business pays the service levy late?
Late payment attracts fines and interest from the local authority. The exact penalty is set by the local government legislation and the council's demands, so confirm the amount with the authority that charges the levy.
Can a loss-making business owe service levy?
Yes. The levy is charged on net turnover, not profit, so a quarter with a loss can still attract the 0.25%. That is why it belongs in cash-flow planning even when the business is not profitable.