VAT exemption for Air Taxis now extended to 2026

Tanzania through the national Treasury intends to extend the period for value added tax exemption onto air charter services.

Operators get three more years for the tax holiday, a move which seems to rub the people in the local aviation industry the right way.

Lauding the government for the long-anticipated step, the Board Chairperson for the Tanzania Air Operators Association (TAOA) Captain Maynard Mkumbwa, said the move will also boost the country’s tourism sector.

In addition to unlocking potential in the struggling air transport services, the extension of VAT exemptions further binds the symbiotic relation between the tourism and the aviation industries.

It was pointed out here that chartered flights and tourism happen to be intimately related.

 Tourism depends on the aviation industry to both bring visitors into the country as well as taking them around their chosen destinations.

On the other hand, a vibrant tourism industry usually creates demand and guarantees enough clients for the air transport providers.

A bill supplement issued on 20 January 2023, proposes an extension of the VAT exemption in the provision of air charter services to 30 June 2026.

It thus effectively repels the previously set deadline of December 30, 2022.

Part IX proposes to amend the VAT Act, Cap. 148, whereby item 22 of the schedule is amended to extend the VAT exemption on air charter services to facilitate a growth trajectory in the tourism industry.

The Bill Supplement, the Written Laws (Miscellaneous Amendments) Act. 2021, reinstates the exemption and postpones its removal to the first day of July 2026.

It was observed during a meeting of stakeholders that removing the exemption would have inflicted negative implications on the country’s leisure travel sector

With the extended exemption, air service providers get enough breathing space to regain their standing and further develop both the aviation and tourism sectors.

Both industries were badly affected by the Covid-19 pandemic which hit the entire globe for two consecutive years.

“The restoration of Value Added Taxation on air charter services would have badly stifled the aviation and tourism sectors in the verge of recovery,” points out Captain Mkumbwa who is also the Managing Director of Coastal Aviation.

Originally air charter services were treated as exempt supplies as provided in both the VAT Act, 1997 and its 2014 version.