SETTING UP BUSINESS IN TANZANIA 2023

General Aspects

Tanzania is a country located in East Africa with a rich cultural heritage, abundant natural resources, and a diverse population. It is known for its rich wildlife and a home to many natural wonders, including Mount Kilimanjaro, the Serengeti National Park, and the Ngorongoro Conservation Area. Its people are friendly and welcoming, making it a popular destination for tourists from around the world.

Bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of Congo to the west, and Zambia, Malawi, and Mozambique to the south, it also has a coastline on the Indian Ocean to the east. It is the fourth most populous country in Africa with a population of over 60 million people, with Swahili being the official language and English being widely spoken as a business/ official language.

Legal Forms of Business Entities

Tanzania’s economy is predominantly agricultural, with more than 80% of the population engaged in farming. The country is also rich in natural resources, including gold, diamonds, and natural gas. Tourism is also a significant contributor to the economy, with millions of visitors each year coming to see Tanzania’s wildlife and natural beauty.

Tanzania is a democratic republic, with a president as the head of state and government. The nation has a diverse cultural heritage, with over 120 ethnic groups, each with its language and traditions. The country is known for its music, dance, and art, with traditional and modern styles blending together to create a unique cultural identity.

In Tanzania, there are several legal forms of business entities that one can choose from when starting a business. The most common legal forms of business entities in Tanzania are:

Legal form Feature Remarks

Sole Proprietorship It is the simplest form of business entity, set up by a single natural person, where an individual operates a business on their own. In this form of business, the owner has unlimited liability for the debts contracted by the firm and obligations of the business.

Suitable for small businesses and start-ups. The requirements for starting a sole proprietorship may vary depending on the location and nature of the business but the common requirements are:

• Business Name, the Business Registration, Tax Registration, Business Permits, Business Bank Account and Business License which is obtained from the local government authorities where the business is located. The requirements for obtaining a business license may vary depending on the location and nature of the business.

Partnership A form of business entity that requires at least two partners with a personal commitment who agree to carry on a business together. In this form of business, the partners share the profits, losses, and liabilities of the business including all private assets.

Requirements are similar as in Sole Proprietorship and also includes a Partnership Agreement.

Limited Liability Company (LLC)

A business entity that provides limited liability protection to its owners. In this form of business, the owners are known as members, and their liability is limited to the amount of their investment in the company.

Similar requirements as in Sole Proprietorship must be met including:

• Memorandum and Articles of Association to be filed with the Business Registration and Licensing Agency (BRELA); and Minimum Share Capital which must have a minimum share capital of TZS 1 million. This can be contributed by the shareholders of the LLC.

Further, the Business Name must be a unique name that is not already registered by another company or individual. The name must also not violate any trademark laws.

Public Limited Company (PLC)

Non-Governmental Organization (NGO)

A form of business entity whose shares are publicly traded on a stock exchange in compliant with various legal and regulatory requirements.

An NGO is a non-profit organization that operates independently of the government. NGOs are commonly used to provide services to communities and to address social issues.

Requirements are similar to LLC form of business.

Ideal for community/ social based activities. Registration requirement depend on the nature of organization’s activities but must also include a constitution. Once application and required documents are approved by the Registrar of NGOs and necessary fees paid, other activities that will follow include obtaining a tax exemption, opening a bank account and other necessary permits and licenses.

Cooperative A business entity owned and operated by its members (of not less than 10), who share in the profits and benefits of the business. Cooperatives are commonly used in agriculture and other industries where small-scale producers band together to gain access to markets and resources.

To register a cooperative, it is firstly required to identify a need or opportunity in the community that can be addressed through a cooperative and gather a group of at least ten members who share the same interests and goals.

Other requirements include preparation of bylaws of the cooperative, obtaining necessary permits and licenses depending on the type of business activities and opening bank account.

Organizational Questions/ Business Registration Process

Topic Feature

Sole Proprietorship Registration

1. Conduct a Business Name Search to ensure that the proposed name is not already taken.

Remarks

1. Business name search can be done online through the Tanzania Business Registrations and Licensing Agency (BRELA) website

2. Preparation and Submission of necessary Documents.

3. Payment of relevant fees for Registration Fees and other charges.

4. Issuance of Business License and the sole proprietorship is officially registered.

5. Post-Registration: After registration, the sole proprietorship is required to register for tax purposes with the Tanzania Revenue Authority.

1. Conduct a Business Name Search to ensure that the proposed name is not already taken.

2. Draft a partnership agreement.

3. Obtain Tax Identification Number (TIN).

4. Preparation and Submission of necessary Documents including a completed Partnership Registration Form, certified copies of the partners’ IDs or passports, the partnership agreement, and the TINs of all partners.

1. Business name search can be done online through the Tanzania Business Registrations and Licensing Agency (BRELA) website

2. Business Registration Form can be obtained from the BRELA website, and a Taxpayer Registration Form from the Tanzania Revenue Authority (TRA). Completed documents are then submitted to BRELA office for processing which can take up to a minimum of 14 day depending on the complexity. Partnership Registration

2. A partnership agreement outlines the terms of the partnership including the duration of the partnership, the capital contributions of each partner, and the profit-sharing ratio.

3. TIN is processed for each partner from the Tanzania Revenue Authority (TRA) before registration.

5. Payment of relevant fees for Registration Fees and other charges.

6. Receive a certificate of registration.

7. Post-registration: After registration, the partnership entity is required to register for tax purposes with the Tanzania Revenue Authority and obtain a business license from the relevant local authority.

4. Business Registration and submission can be completed online through the BRELA website. Limited

Liability Company (LLC)

1. Reserve a company name. The name should be unique and not similar to any other registered company in Tanzania.

2. Obtain a Memorandum and Articles of Association.

3. Obtain a Tax Identification Number (TIN).

4. Complete the online registration form on the BRELA website.

5. Payment of relevant fees for Registration Fees and other charges.

6. Obtain a Certificate of Incorporation: This is issued by BRELA and confirms that the company is legally registered.

7. Register for other necessary permits and licenses.

1. This can be done online through the Business Registration and Licensing Agency (BRELA) website.

2. Memorandum and Articles of Association outlines the objectives and rules of the company and can be gotten from a lawyer or company formation agent.

3. A ax Identification Number (TIN) is obtained from the Tanzania Revenue Authority (TRA) and is required to register the company.

4. Application requires provision of company name, registered address, details of shareholders and directors, and other relevant information.

5. Registration fees varies depending on the share capital of the company.

6. Certificate of Incorporation is issued by BRELA and confirms that the company is legally registered.

7. Depending on the nature of business, additional permits and licenses from other government agencies may be needed.

Public Liability Company (PLC)

Registration

Non-Governmental Organization (NGO)

Registration

Registration of a Public Liability Company (PLC) in Tanzania follow similar steps as of a Limited Liability Company (LLC).

After obtaining a Certificate of Incorporation from BRELA, it is required to publish a notice of incorporation. This is a requirement for PLCs, and it should be published in at least one newspaper of national circulation in Tanzania.

1. Conduct a Business Name Search to ensure that the proposed name is not already taken.

2. Draft the constitution.

3. Register the organization.

4. Obtain a Tax Identification Number (TIN).

5. Payment of the registration fee.

6. Obtain a Certificate of Registration.

7. Open a bank account.

8. Register for other necessary permits and licenses.

1. Business name search can be done online through the Tanzania Business Registrations and Licensing Agency (BRELA) website

2. The constitution is a document that outlines the objectives, structure, and management of the organization.

3. The constitution along with a filled application form, and other relevant documents are submitted to the Registrar of NGOs at the Ministry of Home Affairs.

4. TIN is obtained from the Tanzania Revenue Authority (TRA) and is required to register the NGO..

5. Business Registration fee varies depending on the nature of the NGO.

6. A Certificate of Registration issued by the Registrar of NGOs at the Ministry of Home Affairs and confirms that the organization is legally registered.

7. You need to open a bank account for the NGO and obtain a bank reference letter.

8. Depending on the nature of the NGO work, you may need to obtain additional permits and licenses from other government agencies.

1. Conduct a feasibility study.

2. Hold a preliminary meeting.

3. Draft the by-laws.

4. Register the cooperative.

5. Obtain a Tax Identification Number (TIN): This is done through the Tanzania Revenue Authority (TRA) and is required to register the cooperative.

6. Payment of the registration fee.

7. Obtain a Certificate of Registration: This is issued by the Registrar of Cooperatives at the Ministry of Agriculture and confirms that the cooperative is legally registered.

8. Open a bank account.

9. Register for other necessary permits and licenses.

1. A feasibility study is conducted to determine the viability of the cooperative and its potential impact on the community.

2. A preliminary meeting is held to discuss the formation of the cooperative and elect a steering committee to oversee the registration process.

3. The by-laws outline the objectives, structure, and management of the cooperative.

4. The by-laws, a filled application form, and other relevant documents are submitted to the Registrar of Cooperatives at the Ministry of Agriculture.

5. TIN is obtained from thee Tanzania Revenue Authority (TRA) and is required to register the cooperative.

6. Registration fees varies depending on the type of cooperative..

7. A Certificate of Registration is issued by the Registrar of Cooperatives at the Ministry of Agriculture and confirms that the cooperative is legally registered.

8. You need to open a bank account for the cooperative and obtain a bank reference letter.

9. Depending on the nature of business, additional permits and licenses from other government agencies may be needed.

Organizational Questions/ Bank Account; Transfer of Capital/ Goods and Machinery

Topic Feature Remarks

Bank Account Foreigners who wish to open a bank account need a valid passport or any other valid form of identification recognized by the Tanzanian government, a resident permit, work permit or student permit (depending on the status in the country), a recent utility bill or other documents to prove current local address, a reference letter from the company or employer and an initial deposit of funds. To open a bank account for business, the requirements include;

• Certificate of incorporation or business registration documents.

• A valid tax identification number (TIN).

• A business license.

• A company resolution authorizing the opening of the bank account.

• A recent utility bill or other documents to prove the current local business address.

• A valid identification documents for all authorized signatories of the account.

• An initial deposit.

Transfer of Capital To transfer capital, supporting documentation, including investment certificates, bank statements, and other relevant documents must be provided. Capital can be moved in and out of Tanzania following compliance with local laws and regulations.

1. Inward Capital Transfer: To transfer capital into Tanzania, foreign investors are required to obtain an investment certificate from the Tanzania Investment Center (TIC).

2. Outward Capital Transfer: To transfer capital out of Tanzania, investors must provide proof of the source of funds and comply with foreign exchange regulations according to The Bank of Tanzania.

3. There are Exchange Controls that limit the amount of foreign currency that can be transferred in and out of the country.

4. There are also Tax obligations when transferring capital in and out of Tanzania.

An initial deposit of funds is to activate your account. The amount of the deposit required varies depending on the bank and the type of account you wish to open.

Once the bank account is approved, a bank account number and other details that can be used to access account will be issued.

1. The Tanzania Investment Center (TIC) is responsible for issuing the certificate and facilitating the investment process.

2. The Bank of Tanzania is responsible for regulating foreign exchange transactions in the country.

3. Tanzania operates a system of exchange controls that limit the amount of foreign currency that can be transferred in and out of the country that must be adhered to.

4. Capital gains tax, withholding tax, and other taxes may apply depending on the nature of the transaction.

Transfer of Goods and Machinery Transferring goods and machinery in Tanzania involves following certain procedures and complying with relevant laws and regulations.

1. All goods and machinery imported or exported to or from Tanzania must go through customs clearance.

2. Proper documentation is required for the transfer of goods and machinery.

3. Permits and Licenses.

4. The goods and machinery must be transported using a licensed transport provider, and the transport provider must comply with relevant safety and security regulations.

5. Inspection: Some goods and machinery may require inspection by government agencies to ensure compliance with safety and quality standards.

Visa, Work and Residence Permits; and Employment

Topic Feature

Documentation required include invoices, bills of lading, packing lists, and certificates of origin. The documents must be accurate and complete to avoid delays in the customs clearance process.

Depending on the type of goods and machinery being transferred, permits and licenses may be required from relevant government agencies. For example, the Tanzania Food and Drugs Authority issues permits for the importation of pharmaceuticals and medical equipment.

Remarks

Visa Foreign nationals who wish to enter Tanzania must obtain a visa. The application process for a Tanzania visa can be done online through the Tanzania Immigration Services Department website, or in person at a Tanzania embassy or consulate. The application requirements may vary depending on the type of visa and the applicant’s nationality.

Work permit Nationals from all other countries need a work permit to work legally in Tanzania, except investors and share holders.

Residence Permits Foreigners who wish to reside in Tanzania for an extended period of time, such as for employment, business, investment, or study purposes, must obtain a residence permit.

before the current permit expires.

Residence permits in Tanzania are valid for two years and can be renewed before the current permit expires.

Labour law

• Labour law in Tanzania is governed by the Employment and Labour Relations Act, 2004 and its subsequent amendments, which regulate the relationship between employers and employees.

• The maximum working hours in Tanzania are eight hours per day and 45 hours per week. Employees are entitled to one rest day per week and annual leave of at least 28 days. Statutory limits on working time are part of extensive health and safety regulations. Employees who work more than their normal hours are entitled to overtime pay at a rate of at least 1.5 times their normal hourly rate.

• The minimum wage in Tanzania is set by the government and varies by industry and region. Employers are required to pay their employees at least the minimum wage. Employers must pay their employees equally for equal work, regardless of gender, race, religion, or nationality.

• Employers are required to provide a safe and healthy work environment for their employees. This includes providing appropriate safety equipment, training, and first aid facilities.

• Termination of Employment: Employers must follow certain procedures when terminating an employee’s contract, including providing notice and severance pay. The minimum notice period for termination of employment is one month. A special law for protection against unfair termination offers great protection for employees.

• Employees have the right to form and join trade unions, and employers are prohibited from discriminating against employees based on their union membership.

Social system

The National Social Security Fund (NSSF), a government-run social security scheme, provides social security coverage to employees in the formal sector of the economy. Both the employer and employee are required to make contributions to the NSSF. The current contribution rate is 20% of the employee’s gross monthly salary, with the employer contributing 10% and the employee contributing 10%. The NSSF provides retirement benefits to its members who have reached the age of 55 and have made contributions for at least 180 months.

Employers are also required to make contributions to the Workers Compensation Fund (WCF) on behalf of their employees. The WCF is responsible for compensating employees who are injured or disabled as a result of their work. The current contribution rate is 1% of the employee’s gross monthly salary.

Taxation

There are several types of business taxes that companies are required to pay.

Tax Feature

Corporate Income Tax Corporate Income Tax is a tax levied on the income earned by companies registered in Tanzania. The tax is imposed on the profits that a company makes during a financial year, after deducting any allowable expenses. The current Corporate Income Tax rate in Tanzania is 30%.

Remarks

Withholding Tax The current Withholding Tax rate in Tanzania is 15%. This means that 15% of the payment made to a non-resident is deducted at source and remitted to the TRA.

Withholding Tax applies to a wide range of payments made to non-residents, including dividends, interest, royalties, management and technical fees, and payments for services such as consulting, advertising, and marketing.

Value Added Tax (VAT)

Withholding tax is deducted at source from payments made to nonresidents for services rendered in the country. The tax is deducted by the person or entity making the payment and remitted to the Tanzania Revenue Authority (TRA).

Value Added Tax (VAT) in Tanzania is a tax on the value added to goods and services during the production and distribution process. The current VAT rate in Tanzania is 18%.

Excise Duty Excise Duty in Tanzania is a tax on certain goods produced or consumed within the country, such as tobacco products, alcoholic beverages, soft drinks, and other luxury goods. The current Excise Duty rates in Tanzania vary depending on the type of product and its value.

Capital Gains Tax Capital Gains Tax in Tanzania is a tax on the profit earned from the sale or transfer of a capital asset, such as property, shares, and other investments. The current Capital Gains Tax rate in Tanzania is 20%.

Businesses that are registered for VAT are required to charge and collect VAT on their sales, and can also claim back any VAT they have paid on their purchases. This means that VAT is a tax on the final consumer, as it is ultimately included in the price of the goods or services they purchase.

The purpose of Excise Duty is to generate revenue for the government and to discourage the consumption of certain goods that are considered harmful to public health or the environment. It can also be used as a tool for regulating the market and protecting local industries.

The tax is paid by the seller of the asset and is usually due at the time of sale or transfer to generate revenue for the government and to ensure that individuals and businesses pay their fair share of taxes on the income earned from capital gains. It also helps to discourage speculative investment and to promote long-term investment.

Stamp Duty This is a tax on certain documents and transactions, such as contracts, agreements, deeds, and property transfers. The current Stamp Duty rates in Tanzania vary depending on the type of document or transaction.

The purpose of Stamp Duty is to generate revenue for the government and to ensure that certain legal transactions are properly documented and registered. It can also be used as a tool for regulating the market and preventing fraud.

Businesses and individuals that are party to a document or transaction subject to Stamp Duty are required to pay the tax and obtain a stamp duty certificate. The stamp duty certificate serves as proof that the tax has been paid and is usually required for the document or transaction to be legally recognized.

Pay As

You Earn (PAYE)

This is a tax deducted from the employee’s salary or wage by the employer and remitted to the Tanzania Revenue Authority (TRA) on their behalf. The current PAYE rates in Tanzania range from 0% to 30%, depending on the employee’s income level.

Employers in Tanzania are required to register for PAYE and to deduct and remit the appropriate amounts of tax on behalf of their employees. They are also required to file regular PAYE returns and to keep accurate records of their transactions.

This guide has been prepared by SITUS LAW an independent member of Antea

Situs Law

Kida Plaza, 1st Floor, Mwai Kibaki Road, Dar es Salaam, Tanzania

Tel.: +255 756 623 642 info@situslaw.co.tz

https://www.situslaw.co.tz/

SETTING UP BUSINESS IN TANZANIA

This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it.

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