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Expatriate Forums in Tanzania -> Tanzania Business & Tanzania Finance / Tanzania Jobs -> DOING BUSINESS IN TANZANIA / TANZANIA BUSINESS GUIDE
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PostPosted: Thu Mar 08, 2007 8:46 am    Post subject: DOING BUSINESS IN TANZANIA / TANZANIA BUSINESS GUIDE Reply with quote

DOING BUSINESS IN TANZANIA

STARTING A BUSINESS

STANDARDIZED COMPANY
Legal Form: Private Limited Liability Company
Minimum Capital Requirement: 20,000
City: Dar es Salaam

Registration Requirements:

Procedure 1. Apply for clearance of the proposed company name at the Registrar of Companies


Time to complete: 1 day

Cost to complete: no charge

Comment: Requesting for clearance of a proposed company name can be done by mail to the Registrar. Applicants submit a letter for name clearance after which the registry clears it after search.

The registry search is to establish:
a) The availability or non availability of the applied name, and
b) Desirability of the name.

Applicants are then advised if the name is available or not after which they prepare a Memorandum and Articles of Association and submit the same for registration process.

Where the Memorandum and Articles of Association are prepared and presented for registration, using an un-cleared name, search is done at the time of registration with a probability of rejection if the search reveals existence of a similar name in the register. Name clearance has been sped up with the computerisation of the registry.

Procedure 2. Apply for a certificate of incorporation and of commencement to Registrar of Companies

Time to complete: 7 days (maximum)

Cost to complete: TZS 206200

Comment: Registration Fee (As per the New Companies Act 2002)

Nominal Share Capital Registration Fee for;

Share capital between 20,000 to 500,000 Tshs. 50,000
Share capital between 500,000 to 1,000,000 Tshs. 80,000
Share capital between 1,000,000 to 2,000,000 Tshs. 100,000
Share capital between 2,000,000 to 3,000,000 Tshs. 120,000
Share capital between 3,000,000 to 5,000,000 Tshs. 150,000
Share capital between 5,000,000 to 10,000,000 Tshs. 180,000
Share capital between 10,000,000 to 30,000,000 Tshs. 200,000
Share capital between 30,000,000 upwards Tshs. 300,000

Filling Fee: Flat rate of Tshs. 45,000
Stamp Duty: The Original Memorandum and Articles of Association is charged Stamp Duty of Tshs. 6,200 and additional copies are charged Tshs. 5,000

A subscriber, secretary or a person named in the Articles of Association of the Company as director has to fill in the following forms: Form 1 (Particulars of Directors); Form 14 (Statement of Compliance with the Requirements of the Company Ordinance) and Form 15 (Notice of Registered Office of the Company). Upon lodging of the documents the certificate of incorporation is usually processed within 2-3 days after the certificate of incorporation. Registration forms are free. Business trade names (Cap 213) and companies (Cap 212) can only be registered in Dar es Salaam. A lawyer is not required, but using one is the standard practice. There are no standard articles of association, but one is free to adopt Table "A" of the Schedules to the Companies Ordinance. The fee for capital below 1 million should be 10%, but fee is negotiable.

Procedure 3. Order a company seal

Time to complete: 1day

Cost to complete: TZS 100

Procedure 4. Apply for TIN (Tax Payers' Identification Number) with the Tanzania Revenue Authority

Time to complete: 2 days

Cost to complete: no charge

Comment: No fee payable on registration of both VAT and TIN. However there is payment of provision Income Tax at this stage, which is about US$350 per quarter. This amount can be deferred until commencement of business. Tax registration has been fully computerised. It takes a minimum of 2 days for one to obtain TIN number depending on the number of request made to the Revenue Authority at a particular time.

Procedure 5*. Income tax officials inspect the office site of the new company

Time to complete: 1 day, included in procedure 4

Cost to complete: no charge

Procedure 6*. Apply for PAYE with the Tanzania Revenue Authority

Time to complete: 1 day (simultaneous with procedure 4)

Cost to complete: no charge

Procedure 7. Apply for business license from the regional trade officer (depending on the nature of business)

Time to complete: 7 days

Cost to complete: TZS 20000

Comment: The procedure has to be performed within 21 days of commencing business (they submit documents for approval also to the licensing board committee). Three signatures are collected from the town or planning officer, health officer, and trade officer. All but the trade officer will inspect the premises. Firm provides transport. Two-thirds of the license fee is paid up-front and the rest is due after 8 months. The business license also automatically registers the company for various taxes imposed by the Dar es Salaam City Commission, e.g. the development levy.

There is no charge for Companies with a turnover of less than Tshs 20,000,000 and certain health providers. A uniform fee of Tshs 20,000 was introduced for companies with turnover of over Tshs 20,000,000. The license category system was simplified and the number of licensed activities reduced to 2.

Procedure 8*. Have the land and town-planning officer inspect the premises and obtain his signature

Time to complete: 1 day, included in procedure 7

Cost to complete: transport cost, trivial

Comment: Firm provides transport.

Procedure 9*. Have the health officer inspect the premises and obtain his signature

Time to complete: 2 day, included in procedure 7

Cost to complete: transport cost, trivial

Comment: Firm provides transport.

Procedure 10. Apply for VAT certificate with the Tanzania Revenue Authority

Time to complete: 4 days

Cost to complete: no charge

Comment: VAT registration takes 3-5 days if the intended company will have a threshold income of T.Shs.20 million. The procedure takes from 3 to 5 days

Procedure 11*. VAT/stamp duty inspection

Time to complete: 1 day, included in procedure 10

Cost to complete: no charge

Comment: Manufacturing firms can apply to the Commissioner for VAT for exemption of VAT on Capital Goods by filing in Form 225. The VAT registration and inspection takes 4 days.

Where the business per annum turnover is less than $20,000 the business has to register under stamp duty instead of VAT. The composition number gives the right to pay a lower stamp duty than otherwise (this explain the inspection).

Procedure 12. Register for the workmen's compensation insurance at the National Insurance Corporation or other alternative insurance policy

Time to complete: 1 day

Cost to complete: no charge

Comment: The employers may opt to take a policy of insurance in place of the workmen compensation claims. The insurance business is liberalised in Tanzania. To register for the workmen's compensation insurance, employers are required to fill out the "Workmen's Compensation Tariff Proposal Form". This form should be completed once the firm begins hiring employees and just before the firm becomes operational.

Procedure 13. Obtain registration number at the National Social Security Fund (NSSF)

Time to complete: 7 days

Cost to complete: no charge

Comment: It takes 1 week to obtain the registration number.

Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*).

FORMS OF BUSINESS ORGANISATION

Limited Companies

The provisions concerning limited companies are contained in the Tanzania Companies Ordinance Cap 212 which is modelled closely on the UK Companies Act 1948. Limited companies may be public or private.

A private company is prohibited from inviting the general public to subscribe to its shares, it cannot have more than 50 members, and its shares are not freely transferable between members.

A public company, as its name suggests, may offer its shares to the general public. There is no maximum number of members and its shares are freely transferable. Such a company is the equivalent of a corporation in many other countries.

Partnerships

The law relating to partnerships is largely contained under Partnership provisions in the Law of Contract Cap. 433.

A partnership is restricted to a maximum of 20 persons in general trading or 10 in banking business. If these numbers are exceeded the partnership must be registered under the Companies Ordinance.

Each partner is jointly and separately liable for all the debts incurred.

A partnership may be formed by any kind of agreement expressed or implied without any special formality but usually it is in writing.

If the partnership does not trade under the names of partners, the names must be registered under the Business Names Ordinance Cap 213.

Partnership Agreements do not have to be filed in any public registry and are not open to public inspection nor do they have to publish financial statements.

Partnerships are not required by law to appoint auditors although many larger partnerships do so in practice and the income tax authorities require that financial statements filed with them for tax purposes must be audited by authorised auditors.

The death, resignation or retirement of any individual partner dissolves a partnership unless, as is usual, the partnership agreement provides otherwise.

A limited partnership may be formed but it must be registered. The same maximum number of partners applies but at least one partner must be a general partner who is liable for all the debts for the firm without a limit.

Limited partnerships are governed by contract of law (Partnership Provisions Part X).

Branches of Foreign Companies

A company incorporated outside Tanzania may carry on business here through a branch. In order to establish a branch the following requirements should be fulfilled:

Approval of the company name from the Registrar of Companies must be obtained.

A certified copy of Memorandum and Articles of Association, Charter , statutes, or other instrument constituting or defining the constitution of the parent company must be filed with the Registrar. If the instrument is not written in English language a certified translation thereof is required.

A list containing the names and addresses, nationalities and occupations of its directors and company secretary.

The names and addresses of one or more Tanzanian residents who are authorised to accept legal notices on the company's behalf.

A statement of existing mortgages and charges created by the company in Tanzania if any.

The address of the company’s registered or principal office. In the event of any alteration being made in any instrument or in such address or in the directors or managers or in the name or address of any such person as aforesaid, the company should within three months of such alteration deliver to the Registrar a notice of alteration.

TAXATION

The Income Tax Act of 1973 lays out the basic regime under which corporations and individuals are taxed.

The corporate income tax rate in 2002 was 30% (down from 35%) of taxable profits. Withholding taxes include 15% for dividends, 15% for interest; 20% on management and professional fees; 20% on royalties, 20% on rents, 10% on aircraft leases; 3% or 20% on technical services and management fees in the mining sector, and 20% on remittances of profits by resident branches of foreign companies. Capital gains tax is levied at rates of 0-30%, but only on gains derived from the sale of premises.

Income taxes are levied on wages and salaries, profits, and rental income; rates vary from 7.5-30%. There is a Housing Levy of 4% of payroll and a Vocational Education Training Levy of 2% of gross payroll. There is a value-added tax (VAT) introduced in July 1998 with a standard rate of 17.5%, but subsequently raised to 20%. Exemptions from VAT include computers, tour operations, hospital equipment, and investments in educational equipment. Other taxes include a stamp duty on sales of 1.2%, a transport withholding tax of 2%, local government development levies, an entertainment tax (for non-VAT-registered taxpayers) and airport and seaport departure charges.
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