KEY POINTS
- Tanzania removed excise duty and VAT on electric and gas vehicles in its 2026/27 budget proposal.
- The government exempted VAT across the entire CNG production and distribution chain nationwide.
- Customs duty on electric vehicles was cut from 25 percent to 10 percent under the new proposals.
Tanzania is using its national budget to do what most African governments have been slow to do: make clean energy cheaper than the alternative.
Finance Minister Dr Khamis Mussa Omar presented the government’s revenue and expenditure proposals to parliament on June 11, unveiling a sweeping package of tax exemptions covering electric vehicles, compressed natural gas and the equipment needed to distribute and use both.
The measures are not incremental. They are structural. Tanzania is removing excise duty based on engine capacity on electric and gas vehicles. It is exempting value added tax on compressed natural gas used in vehicles and on the entire CNG production and distribution chain. It is cutting customs duty on electric vehicles from 25 percent to 10 percent.
What the exemptions actually cover
The VAT exemptions extend to CNG compressors, metering equipment, storage cascades, special transportation vehicles and dispensers. They also cover imported raw materials used to manufacture gas cylinders, including those fitted in vehicles.
Equipment used to convert petroleum fuel systems to gas or electric systems in vehicles is also exempt. Charging stations for electric vehicles, identified under a specific harmonized system code, will be imported without VAT. Electric batteries used by manufacturers and assemblers of electric vehicles and motorcycles will receive customs duty relief.
The government is also continuing discussions with existing automotive assembly plants in Tanzania to provide additional tax relief for electric vehicle assemblers. LPG smart meters imported by authorized distributors will receive a VAT exemption under the proposals.
The direction Tanzania is choosing
The package reflects a deliberate decision to use fiscal policy to change what vehicles Tanzanians buy and what fuel they use. Most of the cost barriers blocking EV and CNG adoption in East Africa are price-driven. Tanzania is using the budget to attack those barriers directly.
The government also confirmed customs duty relief for assemblers and manufacturers of domestic vehicles, including electric and gas-powered models, in line with East African Community assembly regulations introduced in 2025. The aim, as stated by the finance minister, is to reduce production costs and build a local manufacturing base around clean transportation.
