Starting a Business In Tanzania

Business Opportunities in Tanzania

Tanzania has the second-largest economy in East Africa and a consistent development trajectory due to its expanding trade and investments. The country’s political integrity has a considerable positive impact on foreign direct investments. The total amount of trade flows, which accounts for 42% of Tanzania’s GDP, demonstrates the importance of foreign commerce to the country’s economy. The government recently passed several reforms to promote foreign investment, including changes to the tax code and creating an investment promotion committee. 

If you plan to set up a business in Tanzania, the most promising sectors include ICT, Infrastructure, and Agribusiness. A great opportunity exists for American firms to investigate software devices that might support the growth of local enterprises. The government has significantly invested in infrastructure projects like highways, airports, and railroads. 

Additionally, this opens up the potential for American businesses to market their innovations in these global economies. Over 75% of Tanzanians are still employed in agriculture, which remains the country’s primary economic activity. There is a huge potential for American businesses to provide innovations in agriculture here in an endeavor to produce more.

This page will give you a deep insight into the company registration process in Tanzania and how to start a business in Tanzania.

Benefits of Starting a Business in Tanzania

Tanzania is increasingly being included in organizational expansion plans across various industries. Over time, Tanzania has developed into a top-tier corporate climate graduating from low-income status to a lower-middle-income country (as of July 2020). 

The advantages of setting up a business in Tanzania are numerous, some of which are listed below:

• The plethora of investment incentives by the government for foreign investors
• A simple business setup process 
• A politically stable country to invest in
• Excellent business prospects in various industries
• Readily available labor market 
• Special economic zones which offer incentives like 100% VAT exemption on utility 

Requirements for Starting a Business in Tanzania

If you plan to set up a business in Tanzania, you must know the company registration process. If you are unsure or doubtful about the same, here are the crucial steps you need to know about the requirements to start a business in Tanzania:

• Certificate of Compliance: Companies incorporated outside of Tanzania’s mainland and entering the nation as branches of such foreign firms are given certificates of compliance by BRELA. To get authorization, companies need to send an application to BRELA, and once approved, a Certificate of Compliance is offered to the company.
• TIN for Foreigners without NIDA ID: Companies must have Taxpayer Identification Number (TIN) issued by Tanzania Revenue Authority (TRA). To get a TIN, the company/ employer must have a National Identification Number from the National Identification Development Authority. Foreign nationals can directly contact the TRA regional office to get a TIN. 
• Company TIN Number: Every company planning to establish itself in Tanzania must have a Company TIN. Each shareholder/ director must register for the TIN to pay taxes. The TIN is issued by Tanzania Revenue Authority (TRA) to the company with the incorporation certificate.  
• Tax Clearance Certificate: Every business planning to set up business in Tanzania must obtain relevant licenses from BRELA. Before this, you need a tax clearance certificate that can be obtained from the respective tax regions in which it is registered. Companies must submit a written application and tax compliance proof. 
• Business License: Any company operating in Tanzania must obtain a business license from the Business Registrations and Licensing Agency (BRELA)  and Municipal/ City Council.

1. 1. Two sorts of grants are available for business registration: specific and general business licenses. Municipal/City Councils and the Business Registrations and Licensing Agency (BRELA) are responsible for issuing general business licenses. BRELA issues ‘Business License Group A’ and ‘Industrial Licenses’ for which companies can apply online. 
   2. Sectoral licenses for particular businesses are issued by regulatory agencies such as the Engineer Registration Board, Drug Authority, Ministry of Tourism, etc.

• National Social Security Scheme: To start a business in Tanzania, employers must register themselves and their employees with NSSF. Employers must submit a registration request and obtain the social security number. 
• Certificate of Compliance with the OSHA Chief Inspector: Any business or person in Tanzania who owns, operates, or occupies a factory or other workplace must acquire a Certificate of Compliance from the OSHA Chief Inspector. After business registration, OSHA will inspect after the workplace that has been registered. These inspections could include general, facility, or product assessments, depending on the type of firm.
• Share capital: Any sum may be used to form a corporation as its authorized share capital, provided that it meets the general minimum capital requirement of at least TZS 20,000. Special share capital requirements exist for several industries, such as the banking, insurance institutions, and financial sectors, outlined in the applicable legislation.

Types of Business Structures in Tanzania

You can opt for one of the following companies if you want to start a business in Tanzania:

Sole proprietorship –

• Sole proprietorship is the easiest and most cost-efficient. 
• As there is only one owner, decision-making is more straightforward.
• Tax is applicable on the personal income rate rather than a corporate tax. 

Limited Liability Company (LLC)-

• A limited liability company (LLC) is a distinct legal entity that exists independently from its shareholders. 
• Each shareholder’s obligation to pay the debts and liabilities of an LLC is only as much as their share capital contribution. 
• LLC must have at least two shareholders and two directors, who may be from any country. 
• There is no stipulation for a minimum paid-up share capital. 
• The most popular legal form foreigners choose to register their businesses is an LLC, which is ideal for incorporating small businesses with straightforward shareholding structures.

Public Company – 

• In Tanzania, a public corporation is one whose shares are open to public trading. 

• Such a corporation must have at least two directors and seven shareholders, one of whom must be a Tanzanian native and hold at least a 40% ownership position.
•  To establish a public corporation, US$300,000 in share capital must be invested. A public company is the best option if someone wants to raise money or list their business on Tanzania’s national stock exchange.

Partnership –

• It is easier for companies to form a partnership as it is simpler to form, run, and manage.
• Setting up costs are lower
• Decision-making is more straightforward, like a sole proprietorship 

Branch – 

• A branch office of a foreign company from another country may be established in Tanzania. 
• It could be utilized to conduct domestic and commercial operations.

Other than these significant business structures, companies can also go for the following:

• Representative office: For promotional or market research objectives
• Co-operative societies: When ten or more people form democratically controlled organizations to achieve the need for social, cultural, professional, religious, and economic benefit. 
• Non-governmental organizations: Excellent for voluntary, non-profit sharing organizations. 
• Company limited by guarantee: Good for companies that are limited by guarantee. It intends to promote investment, commerce, trade, or other investments. 

Company Registration Process

Step 1: Choose the category of business entity.

The first step is to select the business-appropriate Tanzanian entity. Companies can opt for partnership, sole proprietorship, or LLC, depending upon your idea of business.

Step 2: Pick a business name

Regardless of their legal structure, companies need to register company names in Tanzania with the Business Registration and Licensing Agency (BRELA). If the name is unique and available, companies will get name clearance from BRELA. 

Step 3: Get a notarized compliance certificate

Getting a certified compliance statement is next. The incorporator should do this by going to a notary to have the declaration of compliance notarized.

Step 4: Request Certification

Applying for a Certificate of Incorporation at the Tanzania Investment Center is in the fourth stage. Here, the person appointed as Director in the Articles of Association (AOA) should submit the following documents: 

1. 1. The company’s first directors, secretaries, and proposed registered office location
   2. Declaration of Compliance with Regards to Company Registration Application. 

Step 5: Proposed Articles of Association and Memorandum

The next step is drafting Memorandum and Articles of Association.  A Memorandum of Association essentially serves as a detailed declaration of the company’s objectives. The Articles of Association help as a written statement of the managerial structure and procedures.

Draw the Memorandum and Articles of Association (MAA) and submit it to BRELA along with form 14A. 

Step 6: Apply for a Taxpayer ID Number (TIN)

When applying for TRA, the TIN application must also be accompanied by the Memorandum and Articles of Association and the Certificate of Incorporation. The limited corporation must complete the TIN registration forms in the following ways to request a TIN certificate:

1. 1. Application for the business
   2. Application for each director and shareholder

Once you have a TIN, TRA shall open a tax file for your business. 

Step 7: Apply for a business license

Registering for a business license with the Ministry of Industry and Trade (MIT) and Local Government Authorities is the seventh stage (LGAs). Depending on the type of business, either MIT or LGAs will issue the license. The following documents are required::

1. Certificate of incorporation
2. Evidence of a suitable business location
3. Memorandum and Articles of Association (MAA)
4. Identification Number for Taxpayers 
5. Evidence of citizenship in Tanzania (if applicable)

Step 8: Finish the Value Added Tax (VAT) Registration process

Businesses with an average initial capital of $50 million in the first six months and $100 million in the first year must register for VAT. To get the necessary paperwork for registration, one must go to the TRA office or TRA official website.

Step 9: Become a Workmen’s Compensation Insurance applicant

The following action is to enroll in workers’ compensation insurance through the National Insurance Corporation or another insurance company. Employers must submit the Workmen’s Compensation Tariff Proposal Form for this to the Tanzania Insurance Regulatory Authority (TIRA) and Workers Compensation Fund (WCF) (TIRA). Tanzania’s Mainland Employers must all enroll with the Fund. Any employer before July 1, 2015, must register with the Fund by July 1, 2015; any employer after July 1, 2015, must enroll with the Fund within thirty (30) days of hiring their initial employee.

Employers can register with the Fund digitally at portal.wcf.go.tz or by correctly filling out and submitting registration forms WCR-1 and WCR-2 to the local Fund office or Labour office. 

Step 10: Register for a Social Security Number

Getting Social Security Registration Numbers from all necessary security programs is the eleventh and last stage in registering a company in Tanzania. You can visit the National Social Security Fund (NSSF) office with your identity proof and obtain your member ID card with your Social Security Number. 

Step 11: Become a member of the Occupational Safety and Health Administration (OSHA)

Any individual who owns a business must register with OSHA by submitting the application form and providing registration documents. The following is necessary for the application:

1. 1. Owner’s Name and Address
   2. Work type Number of employees in total

How Much Does it Cost to Incorporate a Company in Tanzania?

The following fees must be paid when registering a business or incorporating a company in Tanzania:

Are Foreigners in Tanzania on Certain Passes Allowed to Start a Business in Tanzania?

To set up a business in Tanzania as a foreign investor, one must obtain a business visa. Moreover, starting a business in Tanzania requires certain passes and permits for both investors and employees for company incorporation in Tanzania for investors and employees. The required permits are mentioned below: 

• Business visa: Foreigners will only receive one business visa, which they can use to enter the United Republic of Tanzania for the specified objectives:

1. 1. To carry out particular tasks, such as maintaining/repairing machines, conducting brief instructions, etc.
   2. To do professional duties such as account audits, etc.
   3. To carry out legal business per national laws.

• Multiple-entry visa: Tanzanian authorities grant this visa to those who regularly need to enter the nation, usually for business and investment interests. This visa’s duration is valid for three, six, or twelve months. 
• Short-term permit: Also known as STP, this permit is issued to foreign individuals in Tanzania for short-term assignments. However, STP can not be renewed. It should be surrendered to the Labor Commissioner.    
• Residence permit: Those who are engaged in work for three years can apply for a residence permit. After that, they can renew the permit (not exceeding two years). Companies can apply for either a residence permit Class A or a residence permit Class B. 

Government Assistance for Foreign-owned Businesses 

All investors registered with the Tanzania Investment Centre (TIC) are eligible to take advantage of 0% VAT benefits on exports and duty drawbacks on imports. Additional rewards include – 

• Access to all license, permit, and authorization services at the facilitation center of TIC.
• TIC grants incentives to companies investing in tourism, manufacturing, services, agriculture, real estate, transportation, energy, etc. However, foreign companies need to invest a minimum capital of USD 500,000.  
• Investment in the capital at 100% for the mining and agricultural actors
• A 10% import tax on semi-finished goods
• Tanzania is a part of the Multilateral Investment Guarantee Agency (MIGA), a division of the World Bank that handles foreign investment insurance, and the International Centre for Settlement of Investment Disputes (ICSID). For investors and lenders, MIGA provides assurances such as credit improvement and political risk insurance.
• A 50% capital allocation for buildings and equipment utilized in factories for manufacturing operations or in hotels for guest services. This proportion, which is only feasible in a product’s first year of use, complies with local income tax regulations.
• Companies established in Export Processing Zones (EPZA) are exempted from corporation tax, withholding tax, and other taxes (for ten years). VAT on utilities are also laid off along with wharfage charges.  
• You are eligible for some VAT deferment if your company employs project capital goods like real estate, structures, tools, and machinery.
• A method where excise duty paid on fuel purchased by specific firms is paid and refunded.
• Incentives are also offered to companies in Special Economic Zones (SEZ). However, it depends on the company type established. 
• The ability to transfer all profits, funds, and foreign currency made outside of Tanzania.
• Additionally, as part of the project holding the Certificate of Incentives, you have an inevitable permit to hire roughly five foreign nationals.
• According to the East African Community Customs Management Act, licensed hotels that import hotel equipment bearing the name and log of the facility pay a 0% import charge.

How Can Multiplier Help?

In Tanzania, starting a business might be challenging. You must adhere to the Tanzanian tax regimes and labor act while setting up a business. This is where you can collaborate with global EOR services like Multiplier to expand globally.  

Multiplier provides EOR services to handle the minute procedures of beginning a business efficiently. Any country where you intend to start your business has local regulations, registration requirements, and tax rules familiar to Multiplier’s in-house expert personnel.

You can start your business in Tanzania without setting up a business entity. You can test new markets for your growing companies and experiment with global professionals. Multiplier will help you generate employment contracts, maintain payroll, and support multi-country payments.