Registration of a Foreign Company in Tanzania

Introduction
In Tanzania, a foreign investor has two options for establishing a business in Tanzania; either register a new limited liability company (local company) or expand an existing foreign company into Tanzania. According to the Tanzanian Companies Act No. 12 of 2002, forming a new company requires applying to the Registrar of Companies at the Business Registration and Licensing Authority (BRELA) to obtain a ‘Certificate of Incorporation.’ This new entity will be treated as a local company and can either be a company limited by shares or by guarantee with share capital.

Alternatively, if the investor has an already registered company outside Tanzania and prefers not to establish a local entity, they can apply to register the foreign company in Tanzania. In this case, the foreign company will operate as a ‘branch’ of the parent company. To register this branch, an application must be submitted to BRELA’s Registrar of Companies. Upon approval, a ‘Certificate of Compliance’ will be issued allowing the foreign branch to legally operate in Tanzania.

Legal Framework

Foreign Companies must register as “branch offices” with the Business Registration and Licensing Agency (BRELA). This applies to companies incorporated outside Tanzania intending to carry out business within the country.

Requirements for Registration

To register a foreign company, the following documents must be submitted to BRELA,

1. Certified copies of the company’s certificate of incorporation from the home country.
2. A Memorandum and Articles of Association or equivalent constitutional documents.
3. A list of the company’s directors and secretaries, with their particulars.
4. The name and address of at least one individual resident in Tanzania authorized to accept legal notices on behalf of the company.
5. The company’s registered office address in Tanzania.
6. A statement of company affairs showing authorized capital and details of issued shares.

Application of Foreign Company in Tanzania

Prior to triggering an application to the Registrar of Companies for a Certificate of Compliance, one should make the following matters in order.

1. Local representative of the Foreign Company: This local representative is mandatory for purpose of receiving documents on behalf of the foreign company.
2. Translated Charter or statute or Memorandum and Articles of Association of the Foreign Company: One of these documents are part of the requirements for an application for a certificate of compliance. If at all any of these documents are not in English, the same must be translated into English by a certified translator.
3. Preparation of the latest Accounts or financial report document regarding the foreign Company: The prospective investor who is desirous of acquiring a certificate of compliance must make sure that the foreign company that needs existence in Tanzania must have latest Accounts indicating the financial status or condition of the company. If the same are not in place, then the same must be prepared by certified auditors of the company.
4. Place of business in Tanzania: The prospective investor should have detailed information of the place at which the branch will be situated in Tanzania once the Certificate of Compliance is acquired.

Key Post-Compliance Steps After Starting a Business

1. Register for a Tax Identification Number (TIN)

After registering a foreign company, you must apply for a Tax Identification Number (TIN) through the Tanzania Revenue Authority (TRA). This applies to both the company and any Tanzanian-resident shareholders or directors. If they already have a TIN, no new registration is needed.

2. Obtain a Tax Clearance Certificate

Once the TIN is issued, the company must apply for a Tax Clearance Certificate from the TRA. This certificate confirms that the company has no outstanding tax liabilities. It is crucial when applying for a business license and is often required for paying taxes like Stamp Duty and Withholding Tax for office leases.

3. Apply for a Business License

After getting the TIN, you must apply for a business license from either the Municipal Trade Office or the Ministry of Trade and Industry, depending on your business type. The specific licensing authority depends on the nature of the business and its location.

4. Register with Social Security and Workers Compensation Funds

It is mandatory to register with the National Social Security Fund (NSSF) and the Workers’ Compensation Fund (WCF).

5. Submit Returns for Foreign Employees

If your company hires foreign employees, you must submit a Return of Non-Citizen Employees to the Labour Commissioner twice a year, by June 30^th and December 31^st. This is a legal requirement for all companies employing expatriates.

6. Submission of Tax Returns to the Tanzania Revenue Authority (TRA)

Foreign Companies are required to submit various types of tax returns depending on their business activities, including:

1. Corporate Income Tax

• Foreign companies operating in Tanzania are subject to corporate income tax on profits earned from their Tanzanian operations. The standard rate is 30%.
• Branches of foreign companies are also taxed on their Tanzanian income at the same rate, with branch remittance tax applicable on profits sent abroad.

1. Withholding Tax

• Withholding tax applies to certain payments made by foreign companies, such as:
  • Dividends: 10% withholding tax
  • Interest: 10% withholding tax
  • Royalties: 15% withholding tax
  • Service fees paid to non-residents: 15% withholding tax

1. Value Added Tax (VAT)

• Foreign businesses involved in the supply of goods or services in Tanzania and registered for VAT must collect VAT at a rate of 18% on taxable goods and services. They are required to file monthly VAT returns.

1. Pay-As-You-Earn (PAYE)

• Foreign companies with employees in Tanzania must deduct PAYE from employee salaries and remit it to the TRA. The PAYE rates are progressive, ranging from 9% to 30%, depending on income levels.

1. Stamp Duty

• Applicable on certain transactions, including property leases, agreements and share transfers. The rate is typically 1% on share capital and up to 1% on lease agreements.

1. Skills Development Levy (SDL)

• A levy imposed on the gross monthly salary of employees, currently at 4%. It applies to businesses with more than four employees.

Licensing and Compliance

Foreign companies may need to obtain additional sector-specific licenses depending on the nature of their business. Companies operating in regulated sectors such as banking, telecommunications or mining must acquire relevant licenses from regulatory bodies.

Conclusion
Registering a foreign company in Tanzania requires compliance with legal, financial and administrative procedures. By following the outlined steps, foreign companies can legally establish their presence and operate in Tanzania’s growing economy.

Should you require assistance, Kindly reach out to our team directly at www.gerpatsolutions.co.tz info@gerpatsolutions.co.tz, Mob: +244 742 826 955