SETTING UP BUSINESS IN TANZANIA
General Overview of Tanzania
Tanzania, located in East Africa, is a nation renowned for its rich cultural heritage, diverse landscapes, and abundant natural resources. It is home to some of the world’s most breathtaking natural wonders, including Mount Kilimanjaro, the Serengeti National Park, and the Ngorongoro Conservation Area. With its warm and hospitable people, Tanzania remains a top destination for tourists from around the globe.
The country shares borders with 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. To the east, it boasts a scenic coastline along the Indian Ocean, providing access to major trade routes. Tanzania is the fourth most populous country in Africa, with a population exceeding 60 million. Swahili is the official language, while English is widely used in business and administrative affairs.
Economy
Tanzania has one of the fastest-growing economies in Africa, with a Gross Domestic Product (GDP) of approximately $85 billion (2023 estimate) and an annual growth rate of around 5-6%. The economy is primarily driven by agriculture, which employs over 80% of the population and contributes about 26% of GDP. Major agricultural exports include coffee, tea, tobacco, cotton, and cashew nuts.
The country is also rich in natural resources, particularly gold, diamonds, and natural gas. Tanzania is Africa’s fourth-largest gold producer, and mining contributes significantly to the national revenue. Other key industries include manufacturing, construction, and financial services.
Tourism plays a vital role in the economy, contributing around 17% of GDP and providing thousands of jobs. With millions of visitors annually, Tanzania’s wildlife parks, historical sites, and coastal attractions generate significant foreign exchange earnings.
In recent years, the government has prioritized infrastructure development, including road networks, railways, and ports, to support industrialization and trade. The country is also investing in renewable energy projects and digital transformation to enhance economic growth.
Government and Culture
Tanzania is a democratic republic, with a president serving as both head of state and government. The nation takes pride in its diverse cultural heritage, encompassing more than 120 ethnic groups, each with its own language, customs, and traditions. Tanzanian culture is deeply expressed through music, dance, and art, where traditional and modern influences merge to create a vibrant and unique national identity.
With its strategic location, growing economy, and rich natural and cultural assets, Tanzania continues to position itself as a key player in regional and global markets.
Legal Forms of Business Entities
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
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.
Remarks
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.
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. 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. 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. 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.
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 (CIT) 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%.
Annual returns must be filed with the Tanzania Revenue Authority (TRA) within six months after the financial year ends Quarterly advance tax payments based on estimated income.
Tax Incentives: Special Economic Zones (SEZs) and Export Processing Zones (EPZs) offer reduced tax rates and import exemptions. Mining, oil, and gas sectors have specific tax provisions, including stability agreements for long-term predictability.
Penalties: Late filing of returns and non-payment of corporate income tax attract penalties and interest. Tax audits ensure compliance, and underreporting or overstating expenses leads to additional assessments and fines.
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 is deducted at source from payments made to nonresidents that have no permanent establishment in Tanzania 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).
Remarks
CIT in Tanzania is a vital source of government revenue, and businesses must comply with tax laws to avoid penalties and take advantage of incentives
The tax regime in Tanzania offers incentives for specific sectors, such as agriculture, SEZs, and mining. Companies in these areas should strategically leverage these benefits to reduce tax liabilities. However, non-compliance can result in severe penalties, making it crucial for businesses to maintain accurate financial records and file timely returns.
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.