Dar es Salaam GMT +3
EY
Street address:
Mail address: Tanhouse Tower, 4th Floor P.O. Box 2475
Plot No. 34/1 — Ursino South Dar es Salaam New Bagamoyo Road Tanzania Dar es Salaam Tanzania
Executive and immigration contacts
Silke Mattern +255 (22) 292-7868
Email: silke.mattern@tz.ey.com
Innocent E. Alex +255 (22) 292-7868
Email: innocent.e.alex@tz.ey.com
Eva Mwangoka +255 (22) 292-7868
Email: eva.mwangoka@tz.ey.com
A. Income tax
Who is liable. Residents are subject to income tax on worldwide income. Nonresidents are subject to tax on Tanzania-source income only. A resident person is also subject to income tax if such resident person is an agent of a nonresident person or a beneficial owner through whom such nonresident person receives any income, whether directly or indirectly, from business or investment that accrues or is deemed to accrue in Tanzania.
An agent of a nonresident person or of a beneficial owner includes a person in Tanzania who meets any of the following conditions:
• He or she is employed by or on behalf of a nonresident person or a beneficial owner.
• He or she has a business connection with a nonresident person or a beneficial owner.
• He or she is in receipt of any income, whether directly or indi rectly, from or through a nonresident person or a beneficial owner.
• He or she is a trustee of a nonresident person, and includes any other person who, whether a resident or nonresident, has acquired by means of a transfer a capital asset located in Tanzania.
Individuals are considered residents if they meet any of the following conditions:
• They are present for 183 days or more in the year of income.
• They are present for an average of 122 days or more in the year of income and in each of the two preceding years of income.
• They have a permanent home in Tanzania and are present for any length of time during the year of income.
• They are employees or officials of the government of Tanzania and are posted abroad during the year of income.
Foreigners (non-citizens) are taxed on their worldwide income after they have been residents for a total of two years during their lifetime.
Income subject to tax. The taxation of various types of income is described below.
Employment income Taxable employment income includes any compensation for employment received in cash, plus the value of employer-provided benefits. For employees, employer-provided housing is valued at 15% of gross salary less the amount of rent paid. Annual directors’ fees payable to directors, other than fulltime service directors, are included in employment income. A full-time service director is a person in a managerial position who serves full time at a corporation.
Nonresidents are taxed on employment income that is sourced in Tanzania at a rate of 15%.
The value of other benefits is also included in employees’ income. These benefits include the payment of utility expenses, tuition expenses and the services of a watchman or gardener. An education allowance provided by employers to their expatriates’ or local employees’ children under 18 years of age is taxable income. Taxable benefits are included in taxable employment income.
The following benefits are specifically exempt from tax:
• The traveling costs for passage of the taxpayer, spouse and up to four children, if the individual is domiciled more than 20 miles from his or her place of employment and performs services for the employer only
• Cafeteria services on the business premises that are available on a nondiscriminatory basis
• Contributions to approved pension funds and provident funds
• The value of medical services granted on a nondiscriminatory basis to a full-time employee or a director providing full-time services, the spouse and four children
• Benefit for use of motor vehicle if the employer does not claim any deduction or relief with respect to the vehicle
Directors’ fees. Directors’ fees paid to directors other than fulltime service directors (see Employment income) are subject to tax at a rate of 15% for residents and nonresidents. Directors who are not full-time service directors are members of the board of direc tors of a company.
Self-employment and business income. Self-employment and business income is taxed at a rate of 30%.
Investment income. The following nonresident withholding taxes apply.
Income Rate (%)
Dividends 5/10 (a)
Interest 10 (b)
Royalties 15
Rent 10 (c)
Premiums and similar consideration 10/15 (d) Pension or retirement annuities 10/15 (d)
(a) The 5% rate applies to shares quoted on the Dar es Salaam Stock Exchange. (b) Interest derived by a person from government bonds of not less than three years issued and listed on the Dar es Salaam Stock Exchange from 1 July 2021 is exempt from income tax.
(c) The 10% rate applies to both residents and nonresidents.
(d) The 10% rate applies to residents, and the 15% rate applies to nonresidents.
Taxation of employer-provided stock options. Currently, Tanzania does not have a tax regime for stock options. It is suggested that professional advice be obtained regarding the taxation of stock options.
Capital gains. Capital gains derived from the sale of real property by individuals not engaged in business are subject to tax at a rate of 10% for residents and 20% for nonresidents. Gains from the sale of shares and securities listed on the Dar es Salaam Stock Exchange are exempt if the shareholding (alone or together with associates) is less than 25%.
Deductions
Deductible expenses. For expenses to be deductible from employ ment income, an employee must generally establish that the expenses were incurred wholly and exclusively in the production of income. This is a narrower standard than that required for deductible expenses for self-employed persons (see Business deductions).
Business deductions Expenses directly related to accrued busi ness income, including the cost of goods sold and sales and admin istrative expenses, are allowed as deductions.
Rates. Tax is levied on monthly income at the rates shown in the following table.
Monthly taxable income
Tax on lower Rate on Exceeding Not exceeding amount excess TZS TZS TZS % 0 270,000 0 0 270,000 520,000 0 8 520,000 760,000 20,000 20 760,000 1,000,000 68,000 25 1,000,000 128,000 30
Presumptive income tax may apply to income received by indi viduals from businesses generating annual gross turnover of up to TZS100 million. The assessments are based on annual turnover and vary depending on whether the taxpayer maintains complete or incomplete records for the business. The following are the amounts of these assessments.
Complete records
Annual turnover Amount Exceeding Not exceeding of tax TZS TZS TZS 0 4,000,000 0 4,000,000 7,000,000 3% of the turnover in excess of 4,000,000 7,000,000 11,000,000 90,000 + 3% of the turnover in excess of 7,000,000 11,000,000 14,000,000 230,000 + 3% of the turnover in excess of 11,000,000 14,000,000 100,000,000 450,000 + 3.5% of the turnover in excess of 14,000,000
Incomplete records
turnover
exceeding of tax
4,000,000
4,000,000 7,000,000 100,000 7,000,000 11,000,000 250,000 11,000,000 14,000,000 450,000 14,000,000 100,000,000 Not applicable
Nonresidents. Nonresident individuals are subject to tax on total (business, investment and employment) income derived in Tanzania at a rate of 30% (previously 20%). However, for nonresident indi viduals who derive only employment income in Tanzania, the employment income is taxed at a rate of 15%.
B. Other taxes
Estate and gift taxes. Tanzania does not impose estate or gift tax.
Skills Development Levy. The Skills Development Levy (SDL) is payable by employers who have 10 or more employees. The SDL rate is 4%. It is imposed on gross emoluments, excluding bene fits in kind.
C. Social security
Tanzania does not have a comprehensive social security system. However, the following pension funds are available:
• The National Social Security Fund (NSSF) for employees in the private sector.
• The Public Service Social Security Fund (PSSSF) for employ ees in the public sector and employees who were in other previ ous funds (Parastatal Pension Fund [PPF], Government Employees Pension Fund [GEPF] and Local Authorities Pension Fund [LAPF], which were repealed by the PSSSF Act, 2018). The PSSSF Act is effective from February 2018.
For NSSF, the employee and employer each contribute 10% of monthly gross emoluments, provided that the employee joins the fund before reaching 40 years of age. A refund of contributions made may be claimed in full when the employee ceases to con tribute to the fund. In exceptional cases, membership in the fund may continue after the employee reaches 50 years of age, but in all cases, membership ceases at 60 years of age.
For PSSSF, employees contribute 5% of basic salary, and the employer contributes 15%.
No ceiling applies to the amount of salaries subject to social security contributions in Tanzania.
D. Tax filing and payment procedures
The statutory tax year for individuals is the calendar year. Tax is withheld from employees under the Pay-As-You-Earn (PAYE) system within seven days after the end of each calendar month. Employers must file returns specifying taxes withheld within seven days after the end of the month to which the tax
relates. All employees are required to obtain a Tax Identification Number.
Individuals who do not have employment income from a resident employer (that is, not under the PAYE system) but have income or profit earned either from investment or business (consultancy) are required to pay and file provisional tax every last working day of March, June, September and December. In addition, a final return is due six months after the end of the respective financial year.
E. Tax treaties
Tanzania has entered into double tax treaties with the following countries.
Canada India South Africa Denmark Italy Sweden Finland Norway Zambia
F. Entry visas and passes
Foreign nationals must have visas to enter Tanzania, unless they are nationals of countries whose citizens are exempted from the visa requirement. These countries include most British Commonwealth countries, South Africa and member countries of the East African Community, which includes Kenya, Rwanda and Uganda.
A detailed list of the countries whose citizens are exempted from the visa requirement for entry into Tanzania is provided under the third schedule to the Immigration (Visa) Regulations 2016.
At the point of entry into Tanzania, visitors with valid passports may receive visas for social or tourist purposes.
Foreigners intending to visit Tanzania to attend meetings or estab lish business contacts must first obtain business visas. These visas are issued for various reasons, such as making feasibility studies, establishing professional and business contacts, and making arrangements for investment. The validity period can vary from 3 months to 12 months (for a multiple-entry visa).
Visas and passes, including the business visa and business pass, are issued to foreigners who enter Tanzania and engage in lawful activities, such as business activities, trade activities, profes sional activities, special assignments or temporary assignments. They are valid for a maximum of 90 days.
To receive a visitor’s visa and pass, a foreign national must have a valid passport and a return ticket for exiting Tanzania and must prove that he or she has adequate financial means for the period of the visit.
G. Work and residence permits and self-employment
Foreign nationals wishing to be employed in Tanzania must obtain both a work permit and a residence permit. Work permits enable foreign nationals to work in Tanzania. The residence permits allow foreign nationals to live in Tanzania for specific pur poses, including employment. The permits are issued initially for a period of up to two years and are renewable after two years up
to a maximum period of 60 months. In exceptional cases, an extension can be granted beyond this period if the company proves it has an investment of great value to Tanzania. The for eign assignee must apply for the work permit and residence per mit separately before entering Tanzania, with the application for work permit being the basis for the residence permit. Work per mit and residence permit applications must be accompanied by a succession plan for training a local to fill the position of the foreign national once the foreign national ceases to be employed in Tanzania.
The following is a listing of the classes of work permits.
Class Type of permit Permit fee (USD)
A Investor and selfemployed 1,000
B Non-citizens engaged in prescribed professions 500
C Non-citizens engaged in other professions 1,000
D Non-citizens engaged in registered religious and charitable activities 500
E Issued to refugees Free
In addition, a USD50 fee for a Work Permit Register inspection is imposed.
The following is a listing of the classes of residence permits.
Class Type of permit
Permit fee (USD)
A Self-employed investors and small-scale business 2,050 to 3,050*
B Foreign employees 2,050
C Students, researchers, retired persons, missionaries, persons engaged in winding up their affairs and receiving medical treatment, and certain other persons 100 to 500*
* The fee depends on the sector of the economy in which the applicant is involved.
Investor permits. Class A work permits accompanied by residence permits are available to foreign investors. Applicants for Class A work permits must be foreign nationals intending to enter or remain in Tanzania to engage and invest in any of the following:
• A trade, business or profession
• Agriculture or animal husbandry
• Mineral prospecting
• Manufacturing
The applicant’s investment in Tanzania must be at least USD500,000. The applicant must have a strong financial background.
Employment permits. Class B work permits accompanied by a residence permit are available to foreign nationals engaged in prescribed professions, which include medical and health care professionals, experts in oil and gas, and university lecturers in science and mathematics.
Class C work permits accompanied by a residence permits are available to foreign nationals with specific offers of employment in Tanzania. The applicant must be a member of a profession recognized by Tanzania, and the government must be satisfied that the applicant possesses the necessary qualifications and skills and that his or her employment will benefit the country.
Offers of employment may be made by the following entities:
• Specific employers
• The Tanzanian government
Employers must apply for Class C work permits and residence permits for their foreign employees while the employees are out side Tanzania.
The Class D work permit is available to foreigners employed or engaged in registered religious or charitable organizations. The last category is Class E, which applies to refugees in Tanzania. Applications for Class E work permits are processed by the direc tor of refugee services who submits them to the Labour Commissioner, together with the director’s recommendations.
Steps for obtaining work permits. To obtain work permits, the employer must file for review and approval a completed applica tion pack with the Labour Commissioner at the Ministry of Labour, the Tanzania Investment Center (if the business is registered with the Tanzania Investment Center) or the Zanzibar Investment Promotion Authority. After the application is approved, the Ministry of Labour issues a work permit and rec ommendation letter, which is forwarded to the CommissionerGeneral of Immigration Services. Applications for work permits are initiated and completed through the online system.
Steps for obtaining residence permit. To obtain a residence permit, after obtaining a work permit from the Ministry of Labour, a foreign national must file for review and approval a completed application pack with the Commissioner-General of Immigration. After the application is approved and payment of the government fee is made, the immigration office issues a residence permit. Applications are completed online and, once approved, an appli cant is notified regarding the collection of the permit. The Immigration Department has issued a public notice providing that, effective from 31 July 2019, it will stop accepting manual applications.
A company that has its business registered with the Tanzania Investment Centre is granted a Certificate of Incentives, which entitles it to an automatic immigrant quota of up to five persons during the company’s startup period.
Self-employment. Foreign nationals wishing to engage in selfemployed activities in Tanzania must first obtain Class A residence permits. This permit entitles the holder to investment protection and enables him or her to take advantage of financial, economic
and other incentives, which are offered under the Tanzania Investment Act. Self-employed professionals, including doctors, lawyers, accountants, architects and engineers, must be licensed by the relevant professional bodies in Tanzania before they can be issued residence permits.
H. Family and personal considerations
Family members. Holders of valid work and residence permits may be accompanied by their spouses and children 18 years of age or younger. Any dependent wishing to take up employment in Tanzania must apply for both work and residence permits as prescribed above before commencement of employment.
Marital property regime. The marital property regime in Tanzania is one of community property. The regime is mandatory, and couples may not elect out without losing the privileges or inter ests arising from the joint marital property. The regime applies to all types of property interests arising during the marriage. A spouse’s separate property must be clearly identified when the spouse first becomes subject to the regime. The proceeds of sepa rate property always remain separate, unless the couple elects otherwise.
The regime applies to married heterosexual couples who solemnize their marriages in Tanzania and also to foreigners who establish marital domicile in Tanzania. Domicile is established by purpose fully making Tanzania the couple’s principal or sole permanent home. Tanzania law does not allow same-sex marriages.
In general, community property claims do not survive a per ma nent move to a non-community property country. Tanzania enforces community property claims brought between couples from non-community property countries who have established a new marital domicile in Tanzania.
Driver’s permits. Foreign nationals with international driver’s licenses or driver’s licenses issued in a British Commonwealth country may drive in Tanzania for a maximum period of three months, after which they must obtain a valid Tanzanian driving license. An applicant must take a driving test, including a written and physical examination.