You Can Now Provide Employee Accommodation Without Losing Input VAT – Court of Appeal Clarifies

You Can Now Provide Employee Accommodation Without Losing Input VAT – Court of Appeal Clarifies

One of the most debated VAT disputes between taxpayers and the Tanzania Revenue Authority (TRA) has finally been settled by the Court of Appeal of Tanzania.

The central issue has always been whether accommodation expenses incurred for employees fall within the meaning of “entertainment” under the VAT law, thereby making the related input VAT non-deductible.

BACKGROUND

Under section 68(1) of the VAT Act, 2014 (now section 72(1) of the VAT Act, Cap. 148 R.E. 2023), a taxable person is generally entitled to claim input VAT incurred in the course of its economic activity and for the purpose of making taxable supplies.

However, section 68(3)(a) of the VAT Act restricts input VAT claims on expenses used to provide “entertainment.” The Act defines entertainment to include food, beverages, amusement, recreation, or “hospitality of any kind.”

TRA has consistently maintained that accommodation falls within the phrase “hospitality of any kind,” and therefore input VAT incurred on accommodation expenses is not deductible.

EARLIER DECISIONS

Over the past few years, this issue has been considered by the Tax Revenue Appeals Board and the Tax Revenue Appeals Tribunal.

In Maurel & Prom Exploration Production Tanzania Limited versus Commissioner General (TRA), Tax Appeal No. 90 of 2023 where we represented the taxpayer, the Tribunal held that food and accommodation provided to employees working at remote operational sites were essential business expenses and could not properly be classified as entertainment.

Similarly, in Tanzania Breweries Public Limited Company versus Commissioner General (TRA), Consolidated Tax Appeals Nos. 88 and 90 of 2023, the Board held that accommodation costs incurred for employees in the course of business do not fall within the meaning of entertainment under section 2 of the VAT Act. The Board observed that accommodation is not specifically listed in the statutory definition of entertainment and does not belong to the same class as food, beverages, amusement, or recreation. However, the Tribunal later overturned the Board’s decision in Tax Appeal No. 120 of 2024.

THE AGGREKO CASE

The same position was later adopted by the Tribunal in Aggreko International Projects Tanzania Branch versus Commissioner General (TRA), Tax Appeal No. 74 of 2024.

In that case, the Tribunal held that the phrase “hospitality of any kind” was broad enough to include accommodation expenses. It therefore concluded that input VAT claimed on accommodation costs incurred for technicians working at Barrick mine sites was not deductible under section 68(3)(a) of the VAT Act.

The dispute eventually reached the Court of Appeal in Civil Appeal No. 175 of 2025 between Aggreko International Projects Limited Tanzania Branch versus Commissioner General (TRA).

On 20 May 2026, the Court of Appeal overturned the Tribunal’s decision.

The Court held that accommodation expenses incurred for employees do not amount to “entertainment” within the meaning of the law. According to the Court, accommodation provided to employees working at remote operational sites serves a legitimate business purpose and cannot be treated in the same way as food, beverages, amusement, or recreation.

The Court further emphasized that tax statutes must be interpreted using the plain meaning rule and applied the ejusdem generis principle in interpreting the phrase “hospitality of any kind.”

Importantly, the Court observed that the restriction on entertainment expenses was intended to apply to luxury or personal consumption expenses such as meals, refreshments, amusement, and recreation, rather than essential business costs incurred in the course of economic activities.