ey.com/globaltaxguides
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EY
Mail address:
P.O. Box 2475
Dar es Salaam
Street address:
EY House
Plot No. 162/1, Mzinga Way 14111
Oyster Bay Peninsula
Tanzania Dar es Salaam
Tanzania
Executive and immigration contacts
Donald Nsanyiwa
Bibiana Mkenda
Fredy Rugangila
A. Income tax
+255 (22) 292-4040/41/42
Email: nsanyiwa.donald@tz.ey.com
+255 (22) 292-4040/41/42
Email: bibiana.mkenda@tz.ey.com
+255 (22) 292-4040/41/42
Email: fredy.rugangila@tz.ey.com
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 indirectly, 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, as well as the value of any employer-provided benefits. For employees, the value of employer-provided housing is calculated at 15% of their gross salary, minus any rent paid by the employee. Annual directors’ fees payable to directors who do not provide full-time service are also included in employment income. A full-time service director is defined as a person who holds a managerial position and 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’ taxable income. These benefits include payments for utility expenses, tuition expenses and the provision of services by a watchman or gardener. An education allowance provided by employers for the children under 18 years of age of expatriate or local employees is considered taxable income. The value of these taxable benefits is included in the calculation of 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 who do not serve as full-time service directors are subject to a tax rate of 15% for both residents and nonresidents. Directors who are not engaged in full-time service are typically members of a company’s board of directors.
Self-employment and business income. Self-employment and business income is taxed at a rate of 30%.
Investment income. The following resident and nonresident withholding taxes apply.
Resident Nonresident Income Rate Rate
Dividends from Dar es Salaam Stock Exchange 5% 5%
Dividends from resident corporation to another resident corporation if the corporation receiving the dividend holds 25% or more of the shares in the corporation
(nonresident operator/charterer without permanent establishment)
Commission to agents by service providers on money transfer through mobile phones
for goods supplied to the government and its institutions by any person
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%.
Capital gains tax of 3% is also charged to resident persons who realize an interest in land or a building and do not have records of the asset’s costs. This tax is applied to either the income received from the sale or the approved value of the asset, whichever is greater.
Deductions
Deductible expenses For expenses to be deductible from employment 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 business income, including the cost of goods sold and sales and administrative expenses, are allowed as deductions.
Rates. Tax is levied on monthly income at the rates shown in the following table.
taxable income
Not exceeding
on lower Rate on
Presumptive income tax may apply to income received by individuals from businesses generating annual gross turnover of up to TZS100 million. Income derived by resident individuals who are independent professionals and providers of technical, management, construction and training services is not subject to presumptive income tax. 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
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 11,000,000 100,000,000 3.5% of turnover
Incomplete records
of turnover
Nonresidents. Nonresident individuals are subject to tax on total (business, investment and employment) income derived in Tanzania at a rate of 30% (previously 20%).
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 3.5%. It is imposed on gross emoluments, excluding benefits in kind.
Workers’ Compensation Fund. The Workers’ Compensation Fund (WCF) is payable by all employers. The WCF rate is 0.5%. It is imposed on basic salary plus fixed allowances paid to employees.
enable foreign nationals to work in Tanzania. The residence permits allow foreign nationals to live in Tanzania for specific purposes, including employment. The permits are issued initially for a period of up to two years and are renewable after two years up to five years. 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 foreign assignee must apply for the work permit and residence permit separately before entering Tanzania, with the application for work permit being the basis for the residence permit. Work permit 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.
Work permits. The following are the classes of work permits.
• A: Investors (self-employed)
• B: Non-citizens engaged in prescribed professions
• C: Non-citizens engaged in other professions
• D: Non-citizens engaged in approved religious or charitable activities
• E: Refugees
For Class B work permits, the prescribed professions are provided by the law. Regulation 3 defines prescribed professions to include medical and health care professionals, experts in oil and gas, and teachers and university lecturers in science and mathematics.
The fees and maximum time of working in Tanzania vary among the above work permit categories.
Residence permits. Class A, B, C, D and E residence permits are available.
Class A residence permits may be granted to a person who intends to enter or remain in Tanzania and engage in specified investor activities. The following are the categories of Class A residence permits:
• A-1: Professional artists and investors
• A-2: Diaspora investors
• A:3: Other sector industry investors
• A:4: Refugee investors
The eligibility requirements and fees vary among the above Class A residence permit categories.
A Residence Permit Class B is issued to a foreigner who possesses qualification or skills, preferably in highly technical occupations, that are not readily available in the local labor market. This covers foreigners with rare professions having specific employment by a specific employer and professionals working in government and private strategic projects. Application must be made prior to entry of the prospective employee into Tanzania.
The following are the categories of the Class B residence permits:
• B-1: Specific employment by specific employer
• B-2: Specific employment by specific employer (diaspora)
• B-3: Specific employment by specific employer (short-term residence permit)
• B-4: Specific employment by specific employee (relatives)