TerraLex Cross-Border Guide to Cross-Border Guide to Business Investment in Africa

There are various investment methods and vehicles available in the United Republic of Tanzania. These are:

a. Companies: Investors can establish either private or public companies limited by shares or by advancing loan capital to the entity.

b. Branch office: Companies registered in foreign jurisdiction can register a place of business in Tanzania and operate as a branch of the foreign company.

c. Partnerships. Two or more persons can enter into an agreement to jointly conduct business and investment through a common name without forming a separate legal entity.

d. Sole proprietorships. An individual who is a natural person who wish to conduct business in their own names or a registered business name.

The most common legal vehicle used in the United Republic of Tanzania is a private company with limited liability.

The principal laws in this regard are: a. The Investment Act [Cap 38 of 2023]. This law is aimed at protecting foreign investment in Tanzania.

b. The Companies Act [Cap 212 of 2002]. This law provides for the incorporation, registration, organisation and management of companies, the capitalisation of profit companies and the registration of offices of foreign companies carrying on business within the united Republic of Tanzania.

c. The Business Names (Registration) Act [Cap 213 of 2002]. This law provides for registration of business names for partnerships and sole proprietorship.

d. The Constitution of the United Republic of Tanzania of 1977 as amended. The Constitution of the United Republic of Tanzania.

Registration of all business entities is done through an online registration system (ORS) of the Business Registration and Licensing Agency (BRELA).

Company Registration: Registration of companies include reservation of a company name where necessary. Thereafter, filing details of the shareholders, directors and company secretary objectives and share structure according to the memorandum and articles of incorporation.

The following documents are required for registration purposes: Memorandum and Articles of Association, consolidated form generated by the system, a declaration of compliance and an integrity form along with certified copies of passport IDs. There is a requirement that a company should have at least two directors.

Branch: For branch offices, a foreign company having its place of business in Tanzania through an application in the online registration system by submitting the registration documents used in registering the foreign company together with information pertaining to the place of business and resident representative of the company.

Business name registration: Business names registration applies to both partnerships and sole proprietors. The registration process involves filing of the owners and business information in the online registration system together with submitting a form

Generally, there is no limitation or capital requirement in establishing business or companies in Tanzania. However, to qualify for certificate of Incentives from TIC the threshold is USD 500,000.00. There are also other sectoral specific limitations such as mining, petroleum construction.

Tanzania is subject to exchange control regulations that regulate foreign inward investments and externalisation of funds and value from South Africa. To ensure that inward investments, profits, and interest can be externalised an investor requires the approval of the Bank of Tanzania for inward investments. This is largely just an administrative process and approval is generally granted subject to limits on interest rates that can be charged. The regime is set out in the FX Act of 1992 and the Exchange Control Regulations promulgated under this.

In the case of outward remittances, dividends and profits to foreign shareholders, local banks and financial institutions are required to obtain supporting documents depending on the purpose for which such remittance is made. Such documents include audited financial statements, dividend payment notices indicating declared dividends or profit to be repatriated, and approval of the board of directors or shareholders for payment of the said dividends in addition to documents confirming payments of all relevant taxes in respect of such dividends or profit.

The FX Regulations 2022 continue to require the registration of foreign loans with a tenure exceeding 365 days. Such loans are required to be registered with the BoT and assigned a Debt Registration Number (DRN).

There is no legal requirement that a foreign company should have a local director.

No

In terms of the Companies Act of 2002, every company incorporated or registered in Tanzania as a branch of a foreign company has an annual filing obligation with the Registrar of Companies, also called the Business Registrations and Licensing Agency (“BRELA”).

In the case of a locally incorporated company (local subsidiary), the requirement is to file an annual return in the prescribed form, accompanied by a copy of the audited accounts (except for those companies exempt from an audit obligation in terms of the Act).

Other statutory reports include:

• Income Tax Returns
• VAT Tax Returns
• Service Development Levy Returns

• The Employment and Labour Relations Act, 2004.
• The Non-Citizens (Employment Regulation) Act, 2015.
• The Employment and Labour Laws (Miscellaneous Amendments) Act, 2015.
• The Employment and Labour Relations (Code of Good Practise) Rules, 2017.
• The Employment and Labour Relations (General Regulations), 2017.

There are two types of visas that are required for foreign businesses looking to invest and conduct business in Tanzania. Resident/Work Permit Classes A (Investor or Self Employed: USD 1000) and B (Non-citizen in profession of prescribed professions: USD 500).

To access the Online System for application of Work/Residence Permit, applicants are required to visit the Prime Minister's Office - Policy, Parliament, Coordination, Labour, Youth, Employment and Persons with Disability official website; OR the Immigration Department official website which will allow them to start application process. The following is a complete application process for Work and Residence Permit:

1. Applicant is required to register to the Online Work/Residence Permit Application System using his/her existing email or create a new email.
2. The applicant will then be required to create an account in the System by filling his/her names and details of a company or institution that seeks to employ him/her.
3. In the same window, the applicant is required to create a password which will be used to log into the System any time when applying for a new permit and making follow up on already submitted application.
4. Then the applicant will submit the details by clicking the SUBMIT button and the account shall be created.
5. The Applicant will then be in a position to log in the OWAIS and continue filling out an Online Work/Residence Permit Application Form.
6. After filling out the Application Form, the applicant will submit the same electronically by clicking the SUBMIT button.

After making payment for Residence/Work Permit fee, the applicant will receive a notification, which requires him/her to report to the nearest Immigration Office for fingerprint and photo capture (enrolment process).

The Land Act under Section 20 forbids foreigners from owning land personally but through a legal entity i.e., a company the entity. A foreign company with a certificate of incentive from the Tanzania Investment Centre can however acquire land as a derivative right for investment purpose.

Tanzania has bilateral investment treaties with 18 countries, and seven investment agreements with regional economic blocs. The country is also a signatory to global investment instruments such as the International Centre for Settlement of Investment Disputes (ICSID) Convention, the New York Convention, and the UN Guiding Principles on Business and Human Rights.

Foreign investors that are granted certificate of incentives by the Tanzania Investment Centre are intitled to various incentives under the Investment Act which include Fiscal and Non-Fiscal incentives.

Fiscal incentives: Import duty and VAT exemption on project capital/deemed capital goods such as machinery and equipment.

Non-Fiscal incentives: Permission to hire up to 10 foreign employees without restrictions on immigration quota, derivative right on land.

Foreign entities operating in Tanzania are subject to several taxes. Here are some of the key taxes that foreign entities are liable to pay: Corporate Income Tax: Non-resident corporations are taxed on income derived within Tanzania. The tax rate is 30% for resident corporations and permanent establishments of non-resident corporations12. Value-Added Tax (VAT): VAT is chargeable on all taxable goods and services supplied in, or imported into, Tanzania. The standard VAT rate is 18% in mainland Tanzania and 15% in Tanzania Zanzibar. However, certain goods and services may be eligible for zero rating. Withholding Tax: Non-residents are subject to withholding tax on certain types of income derived from Tanzania. The rate of withholding tax varies depending on the nature of the income.

The key competition laws in Tanzania include the Tanzania Investment Act, 2022 and The Fair Competition Act. The Tanzania Investment Act of 2022 provides a comprehensive framework for investment in the country. While it focuses on investment promotion and facilitation, it also includes provisions related to competition. The Fair Competition Act,2003 establishes the Fair Competition Commission which is an independent government agency responsible for enforcing competition laws and promoting fair business practices in Tanzania.

The Fair Competition Commission regulates, promotes, and protects effective competition in trade and commerce and protects consumers from unfair and misleading market conduct. Its functions include the following:

• Carrying out inquiries, studies, and research into matters relating to competition and the protection of the interests of consumers.
• Studying government policies, procedures, programs, legislations, and proposals for legislation to assess their effects on competition and consumer welfare and publicizing the results of such studies.
• Investigating impediments to competition, including entry into and exit from markets in the economy as a whole or in particular sectors and publicizing the results of such investigations.
• Investigating policies, procedures, and programs of regulatory authorities to assess their effects on competition and consumer welfare and publicizing the results of such studies.

Yes. The Arbitration Act of 2020 recognizes both local and international arbitration as a dispute resolution mechanism apart from the ordinary court adjudication.

Tanzania has also ratified multiple international agreements related to arbitration including the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID).

Both local and Foreign Arbitral Awards are enforceable in Tanzania upon an application filed before a court of law, upon which the Court will declare the award as a Decree of the Court and thereby execution and enforcement follows the ordinary court procedures.

Investors in Tanzania are protected by several laws and regulations. One of the key legislations is the Tanzania Investment Act of 2022. This act, which replaced the previous Tanzania Investment Act No. 26 of 1997, provides clarity on various aspects of doing business in Tanzania1. It introduces changes such as reducing the minimum investment capital threshold for Tanzanian investors and adding functions for the National Investment Steering Committee (NISC) and the Tanzania Investment Centre (TIC). The act also establishes an integrated electronic system for investment promotion and facilitation.

In addition to the Tanzania Investment Act, other laws affecting facilitation and protection include the Public-Private Partnership (PPP) Act of 2014, as well as regulations related to the Export Processing Zones Authority (EPZA) and Special Economic Zones (SEZ). These laws aim to promote and protect investments in Tanzania.

Furthermore, Tanzania has entered into Bilateral Investment Treaties (BITs) with a number of countries to provide additional protection for investments3. These treaties offer legal safeguards and mechanisms for dispute resolution between investors and host countries.

South Africa is relatively open to foreign investment to drive economic growth, improve international competitiveness, and access foreign markets. The Department of Trade and Industry and Competition’s Trade and Investment: South Africa division assists foreign investors.

It actively promotes manufacturing in sectors where it believes South Africa has a competitive advantage and favors sectors that are labour intensive and with the potential for local supply chain development.

The investment climate in Tanzania has experienced significant changes in recent years. The country achieved lower-middle income country status in July 2020, following two decades of sustained economic growth. Tanzania’s solid macroeconomic foundation, sound fiscal policies, rich natural endowments, and strategic geographic position have fostered a diverse economy resilient to external shocks. The Government of Tanzania (GoT) welcomes foreign direct investment and has made reforms to improve the business climate and attract foreign investment.

Key highlights of the current investment climate in Tanzania include:

• Reforms and Commitment: President Samia Suluhu Hassan’s government has prioritized economic issues and committed to improving the business climate and attracting foreign investment. The government has engaged stakeholders, reviewed laws, and implemented changes to streamline processes and enhance the investment environment.
• Investment Legislation: The Tanzania Investment Act of 2022 provides clarity on various aspects of doing business in Tanzania. It introduces changes such as reducing the minimum investment capital threshold for Tanzanian investors and establishing an integrated electronic system for investment promotion and facilitation.
• Investment Protection: Tanzania has entered into bilateral investment treaties (BITs) with several countries to provide additional protection for investments. These treaties offer legal safeguards and mechanisms for dispute resolution between investors and host countries.
• Sector Opportunities: Tanzania offers opportunities across various sectors, including agriculture, mining, energy, infrastructure development, tourism, manufacturing, and services. The investment climate in Tanzania has experienced significant changes in recent years. The country achieved lower-middle income country status in July 2020, following two decades of sustained economic growth. Tanzania’s solid macroeconomic foundation, sound fiscal policies, rich natural endowments, and strategic geographic position have fostered a diverse economy resilient to external shocks. The Government of Tanzania (GoT) welcomes foreign direct investment and has made reforms to improve the business climate and attract.

Tanzania has been investing in infrastructure projects across the country, including transportation, energy, and telecommunications. These investments aim to improve connectivity, reduce transportation costs, and enhance access to basic services. For example, the government has undertaken projects such as the construction of roads, railways, ports, airports, and power generation facilities.

However, challenges remain in terms of the quality and reliability of infrastructure in Tanzania. The country needs to address issues such as inadequate power supply.

Investing in Tanzania comes with certain risks that potential investors should be aware of. Here are some key risks associated with investing in Tanzania:

Corruption and transparency: Corruption within the public and private sectors poses risks to citizens and investors. While the government has taken steps to combat corruption, challenges remain.

Increased Local Content Requirements: The government has implemented increased local content requirements, which may affect the operations and profitability of foreign investors.

Low Levels of Industrial Development: Tanzania’s industrial development is relatively low, which may limit investment opportunities in certain sectors.