Are you thinking about tapping into the African market? Are you undecided on which African country you could take your business to? Well, Tanzania is a place you could start from. The East African country is mostly known for its enormous forest space with great attractions like Africa’s highest mountain, Kilimanjaro, and the Serengeti National Park.
While many visit the country to experience the rich culture, nature, and the people, you could visit to explore the various business opportunities the Tanzanian market presents. You probably are now thinking about how to start a business in Tanzania? Well, please read further and find out about starting a business in Tanzania as a foreigner in 2021 with everything you need to know to help you on this journey.
Types of business that can be established
One of the first actions to take when starting a business is to develop a business plan. Having a business plan serves as a compass and gives you a clear picture of where your business is, what you need to do to build it, and where you will be in the near or far future.
Included in your business plan could be your preferred location for setting up your company. Since you’re here reading this, hopefully, you have decided on Tanzania. If so, that is a great decision you have made because Tanzania is a great market to invest in. There are so many business opportunities in Tanzania that present excellent prospects for both citizens and foreigners.
The most salient out of these sectors include tourism, finance, mining, energy, and agriculture. Having a business in any of these sectors and at major markets like the capital Dodoma, Arusha, or Dar es Salaam will be greatly rewarding.
You could start a restaurant business, a financial service solution outlet, travel agency, hotels or guest house, retail or wholesale supplier, organic food exports, and construction. These are amongst fast-moving businesses in Tanzania. You could also consider food processing, aviation, tobacco manufacturing, tea and coffee production, rental services, or a water re-fill center.
You could also run a list of foreign companies in Tanzania as well local ones so you can have an informed view of what the market requires and fill in a gap you may notice.
How to Establish a local company in Tanzania
With a minimum of about two people and a maximum of about 50 people, you can start a company in Tanzania and most parts of the world. Seek advice from legal or accounting experts on how to draft Memorandum and Articles of Association document. You will need this during your business registration process.
Poorly organized documents prolong the process of registration. That is why seeking help from professionals is a wise choice you should consider. All documents prepared for registering your business should follow a simple format and be presented in the English language.
The Business Registration and Licensing Authority (BRELA), in an attempt to simplify the process, has made available a user-friendly approach for developing a Memorandum and Articles of Association document.
As a foreign investor, you have the option of registering your new business as a local company or limited liability company (LLC).
According to the Tanzanian Companies Act No. 12 of 2002, starting a company in Tanzania involves sending an application to BRELA, specifically the Registrar of Companies office. This application is meant to get you a Certificate of Incorporation. Only then will your business be regarded as a local company.
Before setting up a local business in Tanzania, you should, amongst other things; have considered the names of individuals that may present themselves as first directors of the business, names of not less than two shareholders, overall approved capital, initial share allocation, the consideration of local content in your business and three potential company name options, because your first choice name could be unavailable.
How to Establish a foreign company
And on how to register a foreign company in Tanzania. Suppose you already have a registered company and don’t intend to register as a local business in Tanzania, yet want to have a business existence(a branch) there. In that case, you can apply to be registered as a foreign company.
This way, your already registered company would be allowed to run as an extension of the one you have away from Tanzania.
To get this authorization, you’ll need to send an application to register a foreign company to the Registrar of Companies at BRELA. If approved, BRELA will offer your company in Tanzania a Certificate of Compliance.
Please do well to address the following issues before sending in your application.
- Your company should have at least one local representative, preferably a Tanzanian.
- You should have a translated Memorandum and Articles of Association.
- You should prepare all recent financial reports or accounts of your company overseas.
- Determine your desired place of business; and acquire hin depth information about the area.
General Post Compliance issues to be adhered to after starting a business.
It is one thing to start the business, and it’s another to keep it running. One general rule in business management is adherence to requisite rules and regulations in a particular jurisdiction and industry. Here are some areas you would need to ensure compliance once you start your business.
Tax identification number
You’re required to submit an application at the Tanzania Revenue Authority (TRA) for a tax identification number (TIN) once you’re through registering your company, whether as a local or foreign business in Tanzania;
Having a tax identification number is required of every business in Tanzania for the payment of taxes.
Tax clearance certificate
You’re also expected to request for a Tax Clearance Certificate(TCC) from the TRA. This certificate basically shows that your business doesn’t owe the TRA any taxes, has met all tax obligations, and is up to date with tax payment.
Your new business in Tanzania is likely prone to withholding tax resulting from, for example, a lease agreement or a stamp duty. You need this if you want your business license to be approved. And that brings up the next compliance issue to address.
Application for Business license
After you apply for and receive your TIN and Tax Clearance Certificate, you should apply for a business license.
Depending on the kind of business you’re establishing, you can submit your business license application to the Ministry of Trade and Industry or the Trade office Municipal. The kind of business license you get is also dependent on your company’s intended operations.
Make sure you are very confident of the structure of your business and all it will entail, as this will help you decide which Authority to submit your application to.
However, some business licenses need prior certification or unique licenses from government bodies or other ministries before they can be issued a business license. A legal consultancy firm, for example, will need approval, license, and certification from the highest professional body, the Tanganyika Law Society (TLS).
Registration with Social Security Fund and Workers Compensation Fund (WCF)
You are also mandated to register your business with a Social Security Fund in Tanzania. The Public Service Social Security Fund (PSSSF) and the National Social Security Fund (NSSF) are the two main Social Security Funds viable in Tanzania.
You are also expected to sign up for a Workers’ Compensation Fund (WCF).
These are very essential as you will need them when applying for a work permit. A work permit becomes necessary when you have foreign partners and employees working with you or during any business operation.
Submission of Returns on employment of non-citizens at the Ministry of Labour
If your company has foreigners as employees, you must also submit to the Labour Commissioner a Return of Non-Citizen employees bi-annually. This submission is mostly due every 30th June and 31st December of a year.
Submission of Tax Returns to the Tanzania Revenue Authority (TRA)
Your business could be regarded as non-compliant if your company does not file for Income Tax Returns every other six months of every year of income.
Income Tax Returns are only received at the TRA once they clear the income tax evaluated by the Authority during your TIN registration. You’re to pay this determined tax quarterly or every four months of a year.
Business incentives granted in Tanzania.
Since your business will in a way contribute to the betterment of their economy, Tanzania does offer businesses, both foreign and local, some incentives to encourage further investment from other entrepreneurs.
All investors registered with the Tanzania Investment Centre (TIC) may enjoy zero VAT benefits on exports and import duty drawbacks. Other incentives include;
- Unlimited access to permit, licenses, and approval services at TIC’s facilitation center.
- 100% capital expenditure for the agric and mining actors.
- Tanzania is a part of the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA), a World Bank Foreign Investment Insurance arm. MIGA ensures guarantees such as credit enhancement and political risk insurance for investors and lenders.
- A ten percent Import Duty for semi-finished products.
- A zero percent Import Duty on computers and computer accessories, spare parts and raw materials for farming and livestock, medical and pharmaceutical products, and automobile goods in Completely Knocked Down (CKD) format, as well as project capital goods.
- If your business uses project capital goods such as property, plants, buildings, tools, and machinery, you’re entitled to some VAT deferment.
- A pay and refund system for excise duty paid on fuel bought by certain businesses.
- A 50 percent capital allowance for plants and machines used in a factory for manufacturing processes or used to provide services for visitors in a hotel facility. This percentage, which is only viable in the first year of use of a product, is in accordance with the Income Tax Laws in the country.
- The right to transfer a hundred percent of profits, capital, and foreign exchange earned outside Tanzania.
- You also have an unavoidable permit of employing about five foreigners under the project holding Certificate of Incentives.
- Zero percent import duty for licensed hotels that import hotel equipment that bear the name and log of the facility; under the East African Community Customs Management Act.
How much does it cost to register a company in Tanzania?
Depending on how you want your business registered, the process can take between one week to 10 weeks.
According to data on BRELA’s website, you should expect to pay about TSHS 300,000 if you are registering as a company not having a shared capital and about TSHS 66,000 for the filing fee of your application.
How do I start a business in Tanzania?
Assuming you have already covered all you need to do in the form of a business plan.
The next line of action will be registering your business and applying for appropriate licenses for operation. You will deal with authorities like the Business Registration and Licensing Authority (BRELA), Ministry of Industry and Trade (MIT), the Tanzania Revenue Authority (TRA), and Local Government Authorities (LGAs).
Expect to encounter procedures such as application for clearance of proposed company name, application for a declaration of compliance, application for a certificate of incorporation, application for a tax identification number (TIN), application for a business license, and an application for a VAT certificate.
Which business is profitable in Tanzania?
Doing business in Africa, particularly Tanzania efficiently can indeed fetch you huge returns. You’ll be able to achieve this faster when the business you venture into is one of maximum profit. There are several of those, but you can consider having a business in food processing and agriculture, construction and real estate, computer and internet services, or tourism and hospitality.
Can a foreigner open a bank account in Tanzania?
Absolutely. Particular foreigners can open a bank account in Tanzania, either in Tanzanian shillings, U.S. dollar, and even in some cases, Euros.
Although requirements are dependent on the bank you choose, you’re generally expected to have your residence or work permit, some passport-size photos, a copy of your job appointment letter, and enough money for an initial cash deposit.