Business Environment

Tanzania: Business Environment

Accounting Rules

Tax Year

The year of income for tax purposes is the calendar year; however, a company may apply to use its own accounting period consisting of 12 months.

Accounting Standards

International Financial Reporting Standards (IFRS) are required for both domestic and foreign public interest entities. These include: Listed companies, banks and financial institutions, insurance companies, pension funds, utility companies, commercial government agencies, mutual funds, savings and credit cooperative organisations, cooperative societies, and securities brokers. Companies with less than 100 employees and capital investment of less than TZS 800,000,000 can choose between full IFRS Standards and IFRS for SMEs Standards. Government business entities meeting these two conditions are required to use International Public Sector Accounting Standards (IPSASs).

Accounting Regulation Bodies

NBAA

Accounting Reports

The presentation and preparation of financial statements should be performed in accordance with the Companies Act of 2002. Financial statements must include:

Statement of Financial Position
Statement of Profit or Loss and Other Comprehensive Income
Statement of Distribution
Statement of Cash Flows
Statement of Changes in Shareholder’s Funds
Notes to Financial Statements

Publication Requirements

Pursuant to the Companies Act of 2002, all companies are required to publish financial statements, in English or Swahili. Statements have to comply with regulations prescribed by the Ministry of Finance and Planning of Tanzania or the National Board of Accountants and Auditors (NBAA).

Professional Accountancy Bodies

NBAA , National Board of Accountants and Auditors

Certification and Auditing

According to the Companies Act of 2002, all companies must undergo an annual audit. The audit needs to be conducted by a qualified Certified Public Accountant (CPA) whereas the Auditors and Accountants (Registration) Act No. 33 of 1972 further stipulates that audits must be conducted by a member of the National Board of Accountants and Auditors (NBAA) who holds the qualification of CPA in Public Practice (CPA—PP).

Accounting News

Tax Rates

Consumption Taxes

Nature of the Tax: Value Added Tax (VAT)
Tax Rate: 18%
Reduced Tax Rate: No reduced rates apply; however, many items are exempt or zero-rated.
Exempt items include agricultural, horticultural or forestry machinery for soil preparation or cultivation, except lawnmower or sports ground rollers and parts; agriculture, beekeeping and fishery implements; agriculture inputs; crop agricultural insurance; dairy equipment; medicine or pharmaceutical products not including food supplements or vitamins supplied to the government entities; articles designed for people with special needs; educational materials; health care services; transportation of persons by any means of conveyance other than taxicab, rental car or boat; petroleum products and equipment for natural gas; intermediary services; import of goods by a registered and licensed explorer or prospector for exclusive use in oil, gas or mineral exploration or prospection activities, if also relieved from customs duties; educational services; immovable property; tobacco not stemmed or stripped; preparations of a kind used in animal feeding; fertilized eggs for incubation; a motor vehicle designed for use by persons with disability; importation of an ambulance by a registered health facility; financial services for which no consideration is charged.
Exports of goods and services are subject to a zero rate of VAT. The supply of goods to a tourist or visitor by a licensed duty-free vendor who holds documentary evidence that the goods have been removed from Tanzania is also zero-rated. The supply of ancillary transport services for goods in transit through mainland Tanzania is zero-rated where the service is an integral part of the international transport service and in respect of goods stored at the port, airport or a declared customs area for not more than 30 days while awaiting onward transport.
Other Consumption Taxes: Tanzania is a member of the East African Customs Union, and as such, applies a common external tariff, and does not levy customs duties on intra-union imports. Tanzania is also a member of the Southern African Development Community Customs Union; however, tariffs are not fully harmonised between these two unions.
Excise duties are levied on a wide range of products as well as telecommunication and financial services. They are either collected at a flat rate per unit or at rates varying between 5% and 50%.
A fuel levy is charged on petroleum and diesel (TZS 413 per litre), in addition to a petroleum levy on petroleum diesel and kerosene (at TZS 100 per litre).
The cost, insurance and freight (CIF) value of all imports is subject to a 1.5% railway development levy and customs processing fee of 0.6% of the FOB value.
Gaming activities are taxed at a maximum of 25% and gaming prize winners are taxed at a maximum of 15% on the amount or value of the winnings.

Corporate Taxes

Company Tax: 30%
Tax Rate For Foreign Companies: A Tanzanian resident is taxed on worldwide income, whereas non-residents are taxable on Tanzania-source income at the standard rate.
A permanent establishment is also subject to a tax on "repatriated income", which applies at a rate of 10%
A company is considered resident for tax purposes if it is incorporated or formed under the laws of Tanzania or if the management and control of its affairs is exercised in Tanzania.
Capital Gains Taxation: Capitals gains are included in taxable income and are subject to the standard corporate rate of 30%, with an instalment payment due before title to the investment asset can be transferred (10% for residents and 20% for non-residents).
Main Allowable Deductions and Tax Credits: Revenue expenditures which incurred wholly and exclusively in the production of income are eligible for capital allowances, with some statutory exceptions. For capital expenditures, there are specific tax depreciation allowances. Depreciation allowance rates vary between 5% (buildings) and 100% (plant and machinery). Goodwill does not qualify for depreciation allowance. Start-up expenses can be deducted as long as they meet the general deduction criteria. Interest charges are deductible on an accrual basis. Bad debts can be deducted after proving that all legal steps have been taken to pursue payment. Charitable contributions to approved institutions, education funds and local government authorities (to support community development projects) are deductible up to 2% of the taxable income (same as for those to fight the COVID-19 epidemic). Fines, penalties, and taxes are not deductible. Operating losses can be carried forward indefinitely. However, losses can only be offset against profits from similar business (i.e. losses from agricultural income can only be offset against profits derived from agricultural income - losses from one mining licence area can only be offset against profits from the same mining licence area, etc.). Losses of long-term contracts can be carried back up to a year, provided that the contract is completed and a person has unrelieved losses for that period or a previous period that is attributable to the long-term contract.
Other Corporate Taxes: While there is no inheritance or estate tax, properties are subject to an annual tax at flat rates on their value. If the property is unvalued, a flat fee of TZS 12,000 (normal building) or TZS 60,000 (per storey for a storey building) is levied instead.
Companies are subject to a city service levy, which is collected by municipalities. The levy is chargeable 0.3% on the annual turnover. Regardless of their location, companies are also subject to a business license fee, which ranges between USD 15 and USD 10,000 per annum.
Land and share transfers are subject to stamp duty.
Social security contribution amount to 20% of the gross wage, and are generally split equally between employer and employee. A 4% skills and development levy and a workers' compensation fund tariff (at 0.6% of cash sums paid) also apply.
Other Domestic Resources: Tanzania Revenue Authority; Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

	Tanzania	Sub-Saharan Africa	United States	Germany
Number of Payments of Taxes per Year	59.0	36.6	10.6	9.0
Time Taken For Administrative Formalities (Hours)	207.0	284.8	175.0	218.0
Total Share of Taxes (% of Profit)	43.8	47.3	36.6	48.8

Source: Doing Business - Latest available data.

Individual Taxes

Tax Rate

Individual income tax - Residents in Mainland Tanzania
Less than TZS 270,000	0%
TZS 270,000 - 520,000	8%
TZS 520,000 - 760,000	TZS 20,000 + 20% of the amount in excess of TZS 520,000
TZS 760,000 - 1 million	TZS 68,000 + 25% of the amount in excess of TZS 760,000
TZS one million and above	TZS 128,000 + 30% of the amount in excess of TZS 1 million
Individuals with business turnover not exceeding TZS 100 million per year	Specific presumptive income tax rates apply

Allowable Deductions and Tax Credits: No personal allowances are available. However, a deduction is allowed for retirement contributions made to approved retirement funds.
Normally, individuals may claim a deduction for expenses incurred wholly and exclusively in the production of business or investment income.
Special Expatriate Tax Regime: Income tax is payable by individuals resident in Tanzania (other than short-term residents) on their worldwide income. "Short-term" residents and non-residents are taxable on income from a Tanzanian source, at a flat rate of 15% on employment income. Non-resident individuals generally are subject to tax at 20% on their total income from other Tanzanian sources.
An individual is resident in Tanzania if he/she: has a permanent home in Tanzania and visits the country during the year, or he/she is present in the country for either 183 days in the year or an average of 122 days per year in the relevant year and the preceding two years.
An individual is a short-term resident at the end of any income year if during the whole of one’s life one has been resident in Tanzania for not more than two years in total.
The disposal of an investment with a Tanzanian source is subject to tax at a rate of 10% if disposed by a resident and 30% if disposed by a non-resident.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: See the list of Tax Conventions signed by Tanzania
Withholding Taxes: Dividends: 5% (paid by a DSE-listed company)/10%; Interests: 10%; Royalties: 15%.

Sources of Fiscal Information

Tax Authorities: Overview of Tanzania's tax measures in response to Covid-19
Tanzania Revenue Authority
Other Domestic Resources: Tanzanian Investment Center

Intellectual Property

National Organisations: Business Registrations and Licensing Agency (BRELA)
Regional Organisations: Tanzania is a member of the African Regional Intellectual Property Organization (ARIPO) and the World Intellectual Property Organization (WIPO).

Legal Framework

Independence of Justice: The independence of the judiciary is guaranteed by the Article 107 of the Tanzanian Constitution. As such, courts have freedom and are required "only to observe the provisions of the Constitution and those of the laws of the land". The Tanzanian judiciary has been ranked relatively free by the World Economic Forum (Judicial Independence Index). It is ranked 68th out of 137 countries (World Economic Forum Global Competitiveness Index 2017-2018).
Equal Treatment of Nationals and Foreigners: Equality before the law and the right to fair trial are guaranteed by the Article 13 of the Tanzanian Constitution.
The Language of Justice: Court rulings are made in English (Despite the fact that the official language of Tanzania is Swahili).
Recourse to an Interpreter: Court interpreting services are available in Tanzania (mainly in Swahili and English).
Sources of the Law and Legal Similarities: The Tanzanian legal system is based on the English Common Law, which derives from its British colonial legacy. However, unlike the unwritten British constitutional system, Tanzania has a written constitution, which is the first source of law. The Statutes or Acts of Parliament are the second source of law. Case law is the third source, followed by Received Laws, customary and Islamic law (that is applicable to Muslims).
Checking National Laws Online: Library of Congress - Tanzania Legal Guide
Law Reform Commission of Tanzania - Court of Appeal Judgments

Standards

National Standards Organisations: TBS, Tanzania Bureau of Standards
Integration in the International Standards Network: The Tanzania Bureau of Standards (TBS) is a full member of the International Standards Organisation (ISO) and the African Organisation for Standardisation (ARSO).
Classification of Standards: Tanzania's standards regime consists of compulsory and voluntary standards. As of 2018, Tanzania has 633 compulsory standards that are applicable to various commodities and food items. The full list can be consulted here.
Online Consultation of Standards: The list of compulsory, voluntary and draft standards can be consulted here.
Certification Organisations: TBS Tanzania Bureau of Standards

Business Practices

General Information
Opening Hours and Days: The work week is Monday to Friday and office hours are generally between 08:00 and 17:00. Government offices tend to close earlier, at 15:30. In Zanzibar, business and government are closed Friday afternoons.

Public Holidays

New Year's Day	1 January
Zanzibar Revolution Day	12 January
Good Friday	Last Friday before Easter
Easter	End of March - April
Easter Monday	First Monday after Easter
Karume Day	7 April
Union Day	26 April
Labour Day	1 May
Eid El Fitr/End of Ramadan	Varies according to the lunar calendar
Saba Saba Day	7 July
Nane Nane (Farmer's) Day	8 August
Eid El Haj	Varies according to the lunar calendar
Mwalimu Nyerere Day	14 October
Maulid Day	Varies according to the lunar calendar
Independence Day	9 December
Christmas Day	25 December
Boxing Day	26 December

Holiday Compensation: Public holidays falling on Saturday or Sunday are not compensated.

Periods When Companies Usually Close

Easter Holiday	End of March - April
Christmas	End of December

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