The Tanzania Investment Act of 2022

S/N

The New Act

The Old Act

Investment capital for a Tanzanian investor reduced

The New Act has reduced the minimum investment capital threshold for a business owned by a Tanzanian from USD 100,000 to USD 50,000.

Added functions for the NISC and TIC

The New Act has added some functions of the NISC to include approving incentives for strategic investors and specific strategic investors.

Additional members of the NISC include:

a) the Minister responsible for the constitution and law; and

b) the Minister responsible for policy and coordination.  

Added functions of the TIC include:

a) implementation and coordination of efforts to improve the country’s image and investment climate as well as investment promotion in Tanzania;

b) keeping records of all investors and investments in general;

c) initiating and maintaining a database of Tanzanian investments abroad;

d) dealing with complaints relating to investment; and

The added functions for the NISC and the TIC were not provided under the Old Act.

Establishment of an integrated electronic system (section 8)

The New Act mandates the TIC to establish an integrated electronic system for investment promotion and facilitation. The system will enable efficient data integration between all the relevant regulatory authorities involved in issuing appropriate licences, permits, approvals and consents required by investors.

Removal of the automatic immigration quota incentive

The New Act provides that every commercial institution that has been granted a certificate of incentive will be permitted to employ foreign workers up to the number specified in the law governing foreign worker employment.

The Old Act accorded an automatic quota of five (5) expatriates who an investor could employ during the start-up period.

Removal of time to appeal to the Minister (section 18 (6))

The New Act has removed the time limitation to appeal in relation to an investor's rejected application for permit or approval. All appeals concerning permits and approvals will be guided in accordance with the specific laws governing the said licences and approvals and such appeals may be addressed to the relevant Minister.

In the Old Act the timeline was seven (7) days.

Clear timeframe for an issued certificate of incentive

The New Act stipulates a clearly defined timeframe in which incentives attached to a certificate will remain active. Section 20 of the New Act provides that:

a) financial incentives shall be active for a period not exceeding five (5) years from the date issued; and

b) non-monetary incentives shall be active throughout the project implementation period.

The New Act further provides that upon formal application with underlying reasons, the life of a financial incentive certificate can be extended for another period determined by the TIC.

Furthermore, the New Act provides that the TIC can cancel an incentive certificate if:

a) the certificate was obtained through fraud or false information;

b) the certificate holder violated any of the conditions for provision of incentives;

c) the certificate was transferred to another person or investment without TIC’s permission;

d) the certificate holder has not started implementing the project within the first two (2) years of its issuance without valid reasons; or

e) the certificate holder has not submitted annual information on the implementation and development of the investment project for two (2) consecutive years.

The timeframe and disqualification criteria above were not covered in the Old act. As such, investors should be keen to avoid violation of the conditions provided in the New Act.

Added requirements for investors under strategic investment or special strategic investments (section 23)

The New Act has added more requirements for a commercial enterprise to be considered a strategic investment if it:

a) creates at least one thousand (1,000) local jobs with a sufficient number of senior positions on projects that do not require advanced and modern technology;

b) is capable of increasing exports by at least 50% of the goods produced;

c) has the ability to stimulate production by establishing economic incentives in various social and economic sectors;

d) improves technical skills by introducing new technologies to Tanzanians; and

e) has the ability to produce goods or provide services required for development in social and economic sectors based on priorities at that time.

Please note, commercial enterprise is considered a strategic investment if:

• it is a business owned by a local with a minimum investment capital of not less than USD 20 million; and
• it is a business wholly owned by a foreign investor or a JV with a minimum investment capital of not less than USD 50 million.

Higher fines for non-compliance

Access to international arbitration (section 33)

The New Act has granted foreign investors access to settle disputes with TIC or the Government through arbitration. The decision to utilise local or foreign avenues has been left for parties to a dispute to agree mutually.

The New Act has promoted the settlement of disputes amicably through negotiation. Parties are free to utilise local and international avenues for dispute settlement where they fail to arrive at a consensus through negotiation.

The New Act specifically states that parties are free to settle their disputes:

in accordance with Tanzanian arbitration laws;

in accordance with the International Centre for the Settlement of Investment Disputes (ICSID); or

within the framework of any bilateral or multilateral agreement on investment protection agreed to by the Government of Tanzania and the Government of the country from which the investor originates.

Protection of the existing certificates of incentives (section 37)

In spite of the Old Act being repealed, agreements entered into under the Old Act and certificates of incentives issued under the Old act will continue to be valid until the end of the period under which the owner or beneficiary was entitled.

The above provision has the following effect:

• a person with a certificate of incentive issued under the Old act cannot claim any benefits, immunity or incentives under the New Act until the expiry of the original certificate;
• any matter pending before the TIC prior to the coming into force of the New Act shall not be affected;
• a commercial entity that has complied with any of the minimum investment capital requirements under the Old act shall be considered valid under the New Act; and
• benefits of an agreement entered into before the coming into force of the New Act shall not be affected

The Old Act did not provide for a transitional period.