It is crucial and almost inescapable to seek sound legal assistance prior to setting up any private investment in Tanzania, let alone a foreign private investment. This is because there are written and unwritten requirements to be complied with by investors and which may not be ordinarily known to lay persons.
This article is my two cents to foreign investors on two trustworthy and legally recognized persons to aid in setting up a business enterprise in Tanzania from its infancy to its perpetual existence.
In my personal experience, a limited company is the most suitable form of business organization to establish as opposed to sole proprietorship or partnership. It is understandably wise to completely exclude or limit liability of foreign owners. Besides, sole proprietorship is not an option open for foreign investors.
Tanzania Investment Center ( the "TIC").
The TIC is a statutory body, a creature of the Tanzania Investment Act of 1997 CAP 38 R.E. 2002 as amended from time to time (the "TIA") established under section 4 of TIA. It is also an agent of the Government of Tanzania yet capable of being sued and suing on its own name.
TIC is fundamentally pro-investors and encourages and assists investors, both local and foreign, to invest in Tanzania by liaising with other relevant government authorities, agencies or registries.
One reputable name the TIC has coined for itself is a "one-stop center" for investors. This basically means all necessary permits e.g. work, residence permits; licences e.g. trading licence, industrial and business licenses and registrations such as patent registration, company registration are done under one roof. However, because of limited resources that the TIC has compared to the requests that they receive, investors are obliged to also rely on legal service providers to obtain these licenses, permits and registrations. Furthermore, smart investors need to consult with a lawyer in order to understand the type of registrations they would fall under and the legal implications of their licenses, etc. The TIC does not provide the legal advice related to structuring a sound investment in Tanzania.
There exists many investment opportunities available in Mainland Tanzania which include construction, tourism, human resources development, transportation and energy, agriculture and livestock, manufacturing, broadcasting and telecommunications, natural resources, financial institutions, infrastructure and of recent sport betting and entertainment.
All the above require permits, licenses or approvals from relevant government authorities which TIC may facilitate in obtaining them on behalf of the foreigner at a considerable fee. However, where the investor wants to save time, consulting a legal adviser, who may or may not work together with the TIC, is almost a necessity. The General functions of the TIC, include but are not limited to, the following:
- To initiate and support measures that will enhance the investment climate for investors
- To advise investors upon the availability or suitability of partners in joint-venture projects
- To identify investment sites or land for investment.
- To assist all investors in obtaining all necessary permits, licenses and all other matters required by the law for a person to set up and operate an investment;
- To provide and administer investment sites or land
In order to enjoy the rights and protection under the TIA, a foreign investor must have a Certificate of Incentive issued for a duration of three years and renewable for another term of two years.
Prior to the application of this Certificate of Incentive, an investment wholly owned by a foreigner must have an investment capital of not less than Tanzanian shillings equivalent to United States Dollars Five Hundred Thousand (USD 500,000) and if locally owned, the minimum investment capital is not less than Tanzanian shillings equivalent to United States Dollars Three Hundred Thousand (USD 300,000). These amounts are deployed over a period of three to five years.
If the above criterion is met, a foreign investor may apply for the certificate with attachments prescribed under TIA.
Advantages of TIC
- It is a one-stop centre for obtaining all permits, licences and approval requirements for foreigners and their businesses.
- It gives incentives i.e. in granting land for investment use for foreigners, tax exemptions e.g. 0% import duty on raw materials and 10% on semi processed goods among others, assist in linking foreign investors with other business partners through joint ventures, partnerships etc. Also incentives shall be subject to the applicable financial laws on the date of issue of the Certificate and the benefits so enjoyed shall not be amended to his detriment by any subsequent legislation.
- You can sue TIC on its own name for any dispute arising from breach of law or agreement by commencing arbitration proceedings at The International Centre for Settlement of Investment Disputes (ICSID) also since Tanzania is a member.
- An automatic initial immigration quota is granted to any start up business enterprises of up to 5 persons.
- A foreign investor may also apply for loans from any domestic bank up to the amount approved by the Bank of Tanzania.
We note that like all government institutions there are some common challenges faced by TIC. The notorious one is limited personnel. Due to the nature of applications for permits and approvals, they require a lot of documentation and thoroughness in order to have a complete application or else a foreigner may suffer deferment or rejection of his application at the relevant ministry/ authority. Therefore, with a limited personnel and high demands of investors, permits and approvals may take longer than anticipated.
What's your Alternative?
THE LAW FIRM.
A law firm may be an alternative to the TIC as well as the go-to person in all issues legal.
But first, you must be certain that you are engaging a legitimate advocate i.e. registered as a practicing advocate under Tanganyika Law Society for the case of Tanzania mainland. This is verifiable by asking for an Identification Card which must be up to date or a search through the Tanganyika Law Society official website.
To be more comfortable that your work is handled by many hands, you may also wish to indulge a reputable firm.
Essentially, a lawyer or reputable firm is the best option to work out all your legal needs, be it applications for permits approvals or licenses. After all, there isn't much difference in what TIC does in terms of applications for these permits that a lawyer cannot do however, while the TIC does not give legal advice in terms of your investment, a reputable law firm will do that and ensure that you are going for the right registrations and licensing. A lawyer may effectively advise on how to reduce tax liabilities or apply for tax exemptions or reliefs from relevant authorities. Additionally, a lawyer may advise on numerous issues beyond the scope of getting permits and approvals and tax reliefs unlike TIC which focuses on the investment per se. Furthermore, TIC are not always up to date with legislative changes that impact an industry while a law firm or a lawyer most certainly is.
In the foregoing, nothing is unachievable if it is legal when a law firm, such as Shikana Law Group, is engaged because the paramount duty of lawyers is to protect his client's interests.
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.
