The aviation industry in Tanzania can now breathe a sigh of relief with a vat exemption following a recent government law reform aimed at providing a tax break. This reform in tax rules in Tanzania is designed to stimulate the growth of the interconnected aviation and tourism sectors, which collectively contribute billions of dollars to the Tanzanian economy. With a strong bond between these industries, aviation plays a crucial role in bringing in visitors, while tourism creates demand and fills seats, generating substantial foreign currency revenue.
During the presentation of the 2023/24 budget in Dodoma’s Parliament, Dr. Mwigulu Nchemba, the Finance and Planning Minister, proposed a significant amendment to the law. The proposal aims to enforce a VAT exemption on the sale and lease of air charters. This development brings newfound hope to aviation and tourism stakeholders, offering them opportunities to expand their businesses and make substantial progress in comparison to other sectors of the economy.
“I propose to amend part I of the schedule to the Value added tax Act, Cap. 148 to include a VAT exemption on sale and lease of aircraft, aircraft engine or parts by a local operator of air transportation” Dr. Mwigulu said in his budget speech.
This implies that the government wants to undo the measure taken in the financial year 2022/23 on supply of air charter services, as it seeks to align with the efforts of reviving tourism industry along with the invaluable move of President Dr. Samia Suluhu Hassan of promoting Tanzania as a tourism and investment destination, through the Royal Tour film.
Dr. Mwigulu in his own words said: “The VAT exemption measure intend to support the growth of Aviation industry and reduce business and investment cost”.
The Tanzania Air Operators Association (TAOA) board Chairman, Captain Maynard Mkumbwa welcomed the government move, saying it offers enormous opportunities for the key economic industry to grow by leaps and bounds.