Tanzania: Commercial Law In Tanzania

Last Updated: 20 December 2018
Article by Adams & Adams

GENERAL INFORMATION

The United Republic of Tanzania comprises Tanganyika, on the African mainland, and the islands of Zanzibar and Pemba. Tanganyika lies on the east coast of Africa and is bordered by Kenya and Uganda to the north; Rwanda, Burundi and Democratic Republic of the Congo to the west; and Zambia, Malawi and Mozambique to the south. The islands of Zanzibar and Pemba lie off the east coast of Tanganyika.

Area: 947 300 km2

Population: 41.9 million

Capital: Dodoma (largest city Dar es Salaam)

Currency: Tanzanian shilling

GDP: USD 62.2 billion (2010)

Internet domain: .tz

Languages: wahili, English (official languages)

Working week: Monday – Friday

Exports: Raw cotton; cashew nuts; gold; coffee

Imports: Industrial raw materials; construction materials; consumer goods; transport equipment; crude oil

COMPANY LAW

Business vehicles

There are three forms of companies commonly used by foreign investors:

  • A company limited by shares.
  • A company limited by guarantee.
  • An unlimited company.

Companies may be private or public. The minimum number of shareholders required for incorporation is two and the maximum is 50, excluding persons who become shareholders by virtue of being employees of the company. The minimum number of directors required for a company is two.

Private companies may enter into any types of commercial activities; however, they are prohibited from making any invitation to the public to purchase its shares or debentures. In the event that it is wound up and its assets are insufficient to cover its liabilities, the liability of its shareholders is limited to the amount left unpaid on their shares.

Incorporation

The following steps need to be taken in order to incorporate a company:

  • An application needs to be submitted for clearance of the proposed company name at the Business Registration and Licensing Authority (BRELA).
  • The following information is then filed with the Business Registration and Licensing Agency: memorandum and articles of association, regulatory forms, name of the local company to be incorporated, names of the initial shareholders, names and addresses of the initial directors and the physical address of the proposed registered office.
  • Application need to be made to the Tanzania Revenue Authority of a taxpayer identification number (TIN).
  • A business licence from the regional trade office (depending on the nature of the business) will be required. Businesses such as banks, insurance companies, contractors, hotels and most professions must have specific licenses in addition to the business licenses.

After obtaining name clearance the process of incorporation takes approximately 7 working days.

Regulatory Reporting

All companies need to submit annual returns which must be done in the prescribed form. Audited balance sheets form a part of the returns. Foreign companies are required to file only audited balance sheets of their companies.

Share capital

A limited private company has a share capital and is formed or incorporated for purposes of carrying on business to derive a profit. Currently, the minimum required authorised capital for a private company other than banks, insurance companies and other financial institution is approximately USD 15.

Management

The minimum number of directors required for a company is 2 of any nationality. The company secretary similarly does not need to be local.

Are local shareholders required?

Subject to the exchange control restrictions and sector specific laws, ownership of a company by foreigners and companies is generally not restricted. Most business activities are open to foreign investors. In a few sectors such as shipping agencies, insurance, telecommunications and broadcasting, ceilings have been placed on foreign shareholdings by licensing authorities.

Branch Company

A foreign company is allowed to conduct business in Tanzania after being certified by the Companies Office that, it has complied with the requirements of Tanzanian company law.

The following documents have to be filed with BRELA:

  • Certified copies of memorandum and articles of association, charter or statue.
  • Notice of the location of the registered office in the country of origin.
  • List and particulars of directors of the company.
  • Persons resident in the country who are the representatives of the company.
  • A statement of all subsisting charges created by the company, not being charges comprising solely of property situated outside Tanzania.
  • A statutory declaration made by a director or secretary of the company, stating the date on which the company's place of business in Tanzania was established, the business that is to be carried on and, if different from the registered name of the company, the name under which that business is to be carried on.
  • A copy of the most recent accounts and related reports of the company.

COMPETITION LAW

Law

  • Fair Competition Act 8 of 2003.

The Act is enforced by the Fair Competition Commission and Fair Competition Tribunal, based in Dar es Salaam.

Mergers

A merger is notifiable where the following threshold is met:

  • The merging parties' combined annual turnover or asset value exceeds USD 460 750.

A merger may not be implemented prior to the necessary approval having been obtained from the Fair Competition Commission.

Restrictive Practices

The Act regulates both horizontal and vertical restrictive practices. In addition to prohibiting such practices where they are likely to result in a substantial lessening or prevention of competition, certain practices are specifically prohibited, for example, bid rigging, price fixing and the division of markets.

Abuse of Dominance

The Act prohibits the abuse of a dominant position.

Sanctions

Following a determination that a firm has breached a provision of the Act, the Fair Competition Commission may impose a penalty of not less than 5% but not exceeding 10% of the firm's annual turnover.

CONSUMER PROTECTION

Consumer protection is regulated by the Fair Competition Act, 2003 (FCA). The FCA's primary purpose is to regulate competition law in Tanzania. However, the FCA is also replete with certain fundamental consumer rights.

From a consumer protection perspective the FCA regulates, among other things, the following aspects:

  • Misleading and deceptive conduct.
  • Unfair business practice.
  • Manufacture's obligations toward consumers.
  • Warranties.
  • Product safety and product recall.
  • Implied conditions in contracts.

DATA PROTECTION

Tanzania does not currently have any promulgated data protection laws. However, there are constitutional privacy protection provisions as well as legislation regulating the interception and monitoring of communications which, jointly provides a fairly regulated framework of personal data protection issues.

For purposes of data protection and privacy the most relevant legislative provisions provide that:

  • Every person is entitled to respect and protection of his person, the privacy of his own person, his family and of his matrimonial life, and respect and protection of his residence and private communication.
  • Licensed communications services providers are prohibited from disclosing any information received from their customers.
  • If a licensed communications services provider discloses a data subject's personal data, without any legal basis, he commits an offence and shall, on conviction, be liable to a fine of not less than USD 2 800, or to imprisonment for a term not less than twelve months, or to both.

DISPUTE RESOLUTION

Court structure

There are 2 forms of Magistrate's Courts in Tanzania; the lower form, known as a Primary Magistrate's Court, and the higher form, the District Magistrate's Court. The High Court of Tanzania has jurisdiction over all civil and criminal matters in Tanzania as well as having appellate, extended, revision and supervisory jurisdiction over all subordinate Courts. Specialised divisions of the High Court exist in the form of the Commercial, Labour and Land divisions of the High Court. The Court of Appeal of the United Republic of Tanzania is the superior court of Tanzania and has the jurisdiction to confirm, reverse or vary any decision made by the High Court. Although in statute, a Special Constitutional Court exists, it has never convened.

Security by foreign litigants

Where it appears to a court that a plaintiff resides out of Tanzania and does not possess sufficient immovable property within Tanzania, the court on its own accord, or on the application of any defendant, may order the plaintiff to give security for the payment of all costs incurred and likely to be incurred by any defendant.

Costs

In most cases, the successful party is awarded costs. The court may order that security for costs be provided. The amount and time for payment are set by the court. Factors that the court will consider when awarding costs depend on the complexity of the matter, and its nature and importance.

Alternative dispute resolution

Arbitration is recognised in Tanzania but is considered to be underdeveloped. There are 2 principal arbitration bodies, both with their own set of arbitral rules: Tanzania Institute of Arbitrators (TIA) and the National Construction Council (NCC). The Arbitration Act, 2002 is the statutory authority for arbitration and the Civil Procedure Code contains a set of arbitration rules. The New York Convention came into force in Tanzania on 12 January 1965.

EMPLOYMENT LAW

Governing legislation

Employment and Labour Relations Act, 2004.

Particulars of employment

A contract shall be in writing if the contract provides that the employee is to work outside the United Republic of Tanzania.

The employer may provide a written statement to the employee stipulating the particulars of employment. The maximum probationary period permitted is 6 months.

Forms of contracts

  • Unspecified period of time.
  • Specified period of time for professionals and managerial cadre.
  • For a specific task.

Termination of employment / dismissal

  • The provisions of unfair termination of employment do not apply to employees with less than 6 months employment with the same employer.
  • Termination of employment includes:
  • A lawful termination of employment under the common law.
  • A termination by an employee because the employer made employment intolerable for the employment.
  • A failure to renew a fixed term contract on the same or similar terms if there was a reasonable expectation of renewal.
  • A failure to allow an employee to resume work after taking maternity leave.
  • A failure to employ an employee if the employer has terminated the employment over a number of employments for the same or similar reasons and has offered to re-employ 1 or more of them.
  • Termination of employment is unfair if the employer fails to prove that the reason for the termination was valid and fair related to the employee's conduct, capacity or compatibility or based on the employer's operational requirement and in accordance with a fair procedure.

Dispute resolution mechanisms and remedies

A dispute must be referred to the Commission for Mediation and Arbitration Act No. 7 established under section 12 of the Labour Institutions Act, 2004.

EXCHANGE CONTROL

There are certain exchange control regulations which apply in Tanzania but most restrictions were eliminated under the Foreign Exchange Act of 1992 in order to attract investment and simplify international transactions.

Exchange control regulations are largely dependent on the operations and activities concerned.

For example, in respect of capital transactions (foreign source loans) the relevant transaction documentation must be submitted for approval and the issuance of a Debt Record Number to the Bank of Tanzania.

All transactions in foreign currency are regulated by the Foreign Exchange Act which permits any person, resident or not, to hold any amount of foreign currency, to sell any amount of specified foreign currency to an authorised dealer and to open and maintain a foreign currency account with an authorised dealer.

In terms of the Investment Act of 1997, investors are guaranteed unconditional transferability through any authorised dealer in freely convertible currency of net profits, foreign loan service, royalties, fees and technology transfer fees, emoluments of foreign personnel and repatriation of capital, after taxes, on sale of investment. Generally, the repatriation of foreign currency from the country is not restricted.

TAX LAW

Income tax

Taxable income is obtained by adjusting income according to specific tax rules. All expenditures incurred wholly and exclusively in the production of income from any business or investment generally are deductible. Capital expenditures is subject to specific deprecation rates.

Types of taxable income

The types of tax payable include dividends tax, capital gains tax, corporate tax and branch remittance tax on foreign companies.

Tax rates

The company taxation rate is 30%. However, newly listed companies on the Dar es Salaam Stock Exchange that have issued at least 30% of their share capital to the public are subject to a 25% rate for 3 consecutive years from the date of listing. A company that has tax losses for 5 consecutive years is liable to a minimum tax at 0.3% on turnover for the fifth year.

Dividends received by a Tanzanian company from another resident company in which it holds at least 25% of the shares are subject to a 5% withholding tax, otherwise the rate is 10%. CGT is included in business or investment income and taxed at a rate of 30%. Withholding tax on dividends paid to a non-resident or a non-controlling resident are subject to a 10% withholding tax.

The tax rate is 5% where the dividends are paid to a resident company controlling 25% or more of the distributing company's shares and where dividends are paid to a resident or non-resident by a company listed on the Dar es Salaam Stock Exchange.

The withholding tax rate on interest paid to a resident or a non-resident is 10%, with an exemption available for certain interest paid to resident financial institutions. Withholding tax on royalties paid to residents and non-resident is 15%. Withholding tax on technical service fees paid by a resident mining company to a resident company is 5% and the rate is 15% if paid to a non-resident.

Double taxation treaties

Tanzania currently has double taxation agreements with Canada, Denmark, Finland, India, Italy, Norway, South Africa, Sweden and Zambia.

Published in April 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions