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Business And Investment
Tanzania's Legal System
Tanzania's legal system is based on English common law, together with the 1977 Union and 1985 Zanzibar constitutions.
The principal forms of business organisations in Tanzania are sole proprietors, partnerships, joint ventures, incorporated companies and registered branches of foreign companies.
In addition to approvals required to establish business entities, certain other licences may be required, depending on the nature of the business. These include a Business Licence, Industrial Licence, Certificate of Registration of a Factory, Fishing Licence, as well as the relevant Mining Licences.
Taxation
Income tax in Tanzania is administered under the Income Tax Act 1973 ("the Tax Act") by the Commissioner of Income Tax in Dar es Salaam, plus another nineteen regional offices including Zanzibar. The Tax Act applies to income derived by individuals, corporations and partnerships.
The two key elements that give rise to a liability to Tanzanian tax are residence and source. Thus, the assessable income of a resident of Tanzania includes income derived from all sources whether in or out of Tanzania, whilst the assessable income of a non-resident of Tanzania includes income derived from all sources within Tanzania.
Income tax is imposed on an annual basis with the year of income being 1 January to 31 December. Tax returns are paid in Tanzanian Shillings.
In general, the Tanzania Revenue authority (TRA) is unwilling to give advance rulings on proposed transactions. A foreign investor introducing a major project that is of particular importance to the Tanzanian economy may qualify for specific tax concessions, but these would be negotiated with the Minister of Finance through the Tanzania Investment Centre.
Double Taxation Treaties
The operation of the Tax Act for both residents and non-residents is subject to the provisions of the various double taxation agreements that Tanzania has entered into with other countries that provide relief from double taxation. Such agreements often contain their own rules for determining the source of different types of income.
Double taxation agreements have been signed with Canada, Denmark, Finland, India, Italy, United Kingdom, Norway, Sweden, and Zambia. Tanzania is also in the process of negotiating treaties with several other countries including Belgium, Burundi, Iran, Lebanon, Malaysia, Mauritius, Pakistan, Rwanda, and Uganda.
Indirect Taxes
A number of indirect taxes apply in Tanzania. The main indirect taxes include:
Housing Levies
Withholding Tax
Import Duties
Sales Tax
Stamp Duty
Entertainment Tax
Value Added Tax (VAT)
VAT came into operation in Tanzania on 1 July 1998. It is charged at the rate of 20% on any supply of goods or services in mainland Tanzania where it is a taxable supply made by a taxable person in the course of or in furtherance of any business carried on by him. The VAT on taxable supply of goods or services is payable at the end of a prescribed accounting period or at any time which the Commissioner may prescribe.
VAT on importation of taxable goods or services from any place outside mainland Tanzania is charged and payable in accordance with the Act and the procedures applicable under the Customs Laws for imported goods is applied in respect of VAT imports.
Any person whose taxable turnover exceeds, or the person has reason to believe will exceed, 20 million Tanzania shillings per annum must apply to register.
Investment Incentives
The Government of Tanzania has recognised the importance of effective incentives for mobilising appropriate foreign and local investment. Accordingly, Tanzania offers a well balanced package of incentives to investors whose projects are awarded a Certificate of Incentives as issued by the Tanzania Investment Centre (TIC) under the Tanzania Investment Act, 1997. The incentive package already in place as provided under the Tanzania Investment Act, 1997 includes:
Reduced rates of import duties and sales tax on all capital goods necessarily required for an approved enterprise and imported for use solely and exclusively in such approved enterprises;
Reduced rate of Withholding Tax on Dividends;
Unconditional transferability in freely convertible currency of net profits, foreign loans, royalties, fees, charges in respect of foreign technology, remittance of proceeds and payment of emoluments and other benefits to foreign employees working in Tanzania;
Entitlement to an initial automatic immigrant quota of up to five persons during the start-up period;
Accessibility to credit facilities from domestic financial institutions up to the limit established by the Bank of Tanzania;
Investment Guarantees
Investments in Tanzania are guaranteed against nationalisation and expropriation. Tanzania is a member of both the International Centre for the Settlement of Investment Disputes and the World Bank's Multilateral Investment Guarantee Agency (MIGA).
Any disputes arising between the Government and investors shall be settled amicably through negotiations or may be submitted for arbitration before the above international organisations. At this juncture, there are four options for arbitration open to the parties:
arbitration in accordance with the rules and procedures of the International Centre for the Settlement of Investment Disputes;
within the framework of the bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties;
arbitration in accordance with MIGA; or
in accordance with any other international machinery for settlement of investment disputes agreed upon by the parties.
Opportunities
Tanzania holds tremendous investment potential, and is drawing ever-increasing attention from international investors. Some of the lead investment sectors are:
Mining
Mining sector contributes about 2.3 per cent of the GDP, and is projected to account for 10 per cent by 2025 as stated in the ?Development Vision 2025?. It is one of the leading components in generating foreign exchange earnings within the non-traditional exports. Further is has great potentials for employment opportunities and spearheading for both the forward and backward linkage of the Tanzania's economy.
Petroleum
Despite being virtually unexplored, Tanzania has seen two world class gas discoveries. The country holds potential for significant petroleum discoveries, and currently companies from Canada, United Kingdom and Australia are undertaking extensive exploration programs.
Agriculture
Agriculture is the foundation of the Tanzanian economy. It accounts for about half of the national income, three quarters of merchandise exports and is the source of food and employment opportunities for about 80 percent of Tanzanians.
Smallholder farmers dominate agriculture in Tanzania and extensive opportunities exist for investors introducing capital, technology and markets.
Similarly, while livestock production is one of the major agricultural activities in Tanzania there is ample potential for expansion of this industry through better animal husbandry and addition of livestock.
Tourism
Tourism is a booming industry in Tanzania, with tourists flocking to the country's many game reserves and unspoilt beaches. The sector is anticipated to continue to grow substatially and provide numerous investment opportunities.
Manufacturing
Opportunities exist in agro-based industries, food processing and beverages, general processing and canning, textiles and leather goods, steel and metal engineering, cement and ceramics, electrical and electronic engineering, printing and publishing, pharmaceuticals, paints and automotive engineering.
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