Complete Guide to Starting a Sole Proprietorship in Tanzania

Tanzania strives to level up its economy from low-income to lower-middle by 2025. And private sector engagement is the core of its development plan. As per the World Bank report, Tanzania’s Gross Domestic Product (GDP) is expected to reach 4.5-5.5% in 2022. It presents an ideal window of opportunity for entrepreneurs to set up their businesses in Tanzania. 

Tanzania has favorable investment opportunities in agriculture, information technology, environment and energy, health, construction, consumer goods, financial services, textiles, mining, tourism & transportation. No laws or regulations limit or prohibit foreign investment. 

Individuals can swiftly start a business here, be it a partnership, a limited guarantee corporation, a private limited company, or even a sole proprietorship in Tanzania. 

Here is a guide on incorporating a sole proprietorship for entrepreneurs looking to register as self-employed in Tanzania and run a business as a sole trader or independent contractor. 

Do You Have to Register Your Sole Proprietorship in Tanzania? 

Setting up a sole proprietorship refers to a business arrangement where a single individual handles all the company’s profits and liabilities. This business model works well for single business owners or independent contractors looking to start their venture. 

With a sole proprietorship, business owners can work from anywhere, have various names for various trades, and engage in commercial activities. The flexibility of these working conditions attracts business owners to opt for this structure. 

Individuals wanting to start a new venture can register a sole proprietorship in Tanzania with the Business Registrations and Licensing Agency (BRELA). Independent contractors or sole traders who want to name their business and obtain a business license and a Tax Identification Number must register a sole proprietorship in Tanzania. 

Business owners can register a sole proprietorship in Tanzania regardless of nationality. To enroll as a sole proprietorship in Tanzania, one must obtain a registration certificate, a Tax Identification Number (TIN), and a business license. In addition, foreign workers are required to have a Residence Permit Class A and a Certificate of Incorporation from BRELA to set up a business in Tanzania. 

Benefits of Sole Proprietorship in Tanzania

Setting up a sole proprietorship in Tanzania benefits single business owners, independent contractors, or sole traders. Here are some of the standout benefits of a sole proprietorship. 

• Government support: The government of the United Republic of Tanzania welcomes private investment on a large scale. In this context, setting up a sole proprietorship in Tanzania is relatively free from governmental control, except where necessary licenses are required to operate. 

• Easy setup: Setting up a sole proprietorship in Tanzania is relatively easier than starting any other type of business. Moreover, it costs less to start a sole proprietorship. This feature favors sole traders, independent contractors, and new entrepreneurs as it is financially less straining. 

• Tax benefits: When establishing a sole proprietorship, owners are liable to pay personal income tax only on their profit. Corporate taxes are higher than the tax rates applicable to personal income. With a sole proprietorship, business owners have to pay taxes according to the tax rates for personal income. 

• Ease of winding up: If proprietors want to stop their sole proprietorship, they can do so as smoothly as they started a business. If there are partners involved in a sole proprietorship, then they are shielded from the losses because of the partnership agreement. 

• Flexibility: The owners of a sole proprietorship have the freedom to work from anywhere and have as many trade names as they wish. Furthermore, the proprietor can sign any legal document, take part in legal operations, sign a power of attorney, etc., without any restrictions. 

• Ease of maintaining finances: Although it is advisable to keep their personal and business accounts different, proprietors can also operate from one bank account. Moreover, they are not obligated to maintain their financial records and file an annual account. 

Documents Required for Registering Your Business in Tanzania

Here is a list of the documents needed before starting the registration process for a sole proprietorship in Tanzania. There are other documents required during the procedure, too. However, they are obtained during various steps in the process of registering. 

• Certified Memorandum and Articles of Association: While registering a company in Tanzania, applicants must have an accredited memorandum and articles of association. The memorandum of association defines the purpose and the fundamental conditions under which a company can function. Whereas Articles of Association mention the rules and regulations under which a company can attain its objectives.
• Identity proof: Identity proof is required on various occasions while establishing a business in Tanzania. It is needed while registering a notarized lease agreement, obtaining a business license, and wherever the business owner is required to be present in person. 

• Residence Permit Class A: This applies only to foreign workers. They have to produce it at the time of obtaining a business license. 

• Notarized lease agreement: It is required while registering the lease agreement before securing a business license and the Tax Identification Number (TIN). Businesses must submit a copy of the lease agreement with stamp duty for the office.  

• Certified passport: A certified passport is required to get a Tax Identification Number.  

• Taxpayer’s evidence form: It is required along with the passport while getting a TIN.
• VAT registration certificate: Employers can get a VAT registration certificate from Tanzania Revenue Authority (TRA). 

• Proof of payment of land rent: Proof of payment of land rent is required along with the notarized lease agreement while registering the lease. 

• Title deed: The title deed is required while obtaining a business license. 

• Passport-size photos: Passport-size photos of all the employees are required while registering employees with the Social Security Scheme. It has to be submitted along with the member registration card (R 3A)

Other Criteria for Registering a Sole Proprietorship in Tanzania

Following the proper procedure while setting up a sole proprietorship in Tanzania will ensure that organizations complete the process as easily and quickly as possible. 

• As a business owner, you must familiarize yourself with the nature of your business. The business license fees vary according to the type of business activity. 
• As an entrepreneur, ensure that you have all the documents for land ready. The fee for registering the notarized lease agreement varies depending on the duration of the lease agreement. 
• A new bank account for a sole proprietorship in Tanzania is essential to separate personal and professional finances. It may also be required to obtain a business license. 

How to Register a Sole Proprietorship Company in Tanzania?

Here are five steps involved in registering a sole proprietorship in Tanzania. 

Step1: Registering the business name: 

• The first step in registering for a business name is an assessment of documents at the Business Registration and Licensing Agency (BRELA). Business owners must bring the application form for registering a business name (form 3). 
• Then, the applicants must pay the business name registration fees of TZS 50,000. 
• Next, the applicants must submit the application form and the receipt for paying fees at the BRELA. 

Step2: Registering the notarized lease agreement: 

• The lease agreement documents must be submitted to the Ministry of Lands, Housing, and Human Settlement Development. 
• Then, pay the NMB Ministry of Land Branch registration and stamp duty fees. The stamp duty fee is TZS 120. The registration fee for a lease agreement of fewer than five years is TZS 80,000, and for more than five years is TZS 120,000. 

Step3: Obtaining a Tax Identification Number:

• Submit the Tax Identification Number Request Documents to the Tanzania Revenue Authority. 
• Then, business owners will have to be present to give their biometrics, fingerprints, and photos. 
• After that, business owners will receive their TIN. 

Step4: Obtaining a business license: 

• A license registration form will be available at the Kinondoni Municipal Council. The cost of this form is TZS 1000. 
• After the documents are assessed, a business license fee has to be paid according to the business type. 
• Once the fees are paid, the business license request gets submitted. 
• A business license can be obtained from the Ministry of Industry, Trade, and Investment or the local municipality council where the business is located. 
• After that, the business owners will have their licenses. 

Step5: Registering employees with the social security scheme: 

• Submit a registration request at the National Social Security Fund. 
• All the employees have to participate in the photoshoot. 
• And then, the employees will have their social security numbers. 

Conclusion

Sole proprietorship in Tanzania is a suitable business model for individual contractors and traders to start a business. They can start with minimum requirements while still being a legitimate business owner with the flexibility to work from anywhere and have as many trade names as they want.

Once a proprietor has a team, additional responsibilities like payroll and team management are added. Outsourcing these tasks to a third-party firm that provides reliable solutions compliant with the local rules and regulations is a good option. 

Multiplier is a global employment solution that can manage payrolls and teams in more than 150 countries. The easy-to-use one-click payment solutions work well for employees and independent contractors working globally.