Unlocking opportunities: How to register with the Tanzania Investment Centre

Following the enactment of the Tanzania Investment Act, Act No. 10 of 2022 (the Act) and its subsequent regulations, the Tanzania Investment Regulations, GN No. 477 of 2023 (the Regulations) the Government of Tanzania made a vital step on investment for the promotion of economic growth.

Introduction

The Regulations introduce several changes to the investment landscape in Tanzania. A major key aspect in the current regulatory framework is the necessary procedure for registering with the Tanzania Investment Centre (TIC) as briefly analysed in this legal update, with significant implications for both local and foreign investors.

In this month’s legal update, we provide an overview of the procedures for registration with the TIC. This process plays a vital role in complementing the Act in ensuring investors follow the right path of procedures and necessary requirements for conducting investment operations in Tanzania. 

Registration

According to the Act, a business enterprise is allowed to register its investment with the TIC to obtain a certificate of incentives (COI). The investment includes the creation or acquisition of new business assets and includes the expansion, restructuring or rehabilitation of an existing business enterprise. 

The minimum capital requirement for registration of a business enterprise at the TIC is:

1. If wholly owned by a foreign investor or if a joint venture, not less than Tanzanian Shillings equivalent to USD 500,000; or
2. If owned by a Tanzanian, not less than Tanzanian Shillings equivalent to USD 50,000.

Application for new investment

An application for a new investment shall contain the following:

1. The name and address for the proposed business enterprise, its legal form, its bankers, the name and address of each director or partner and the name, address, nationality and shareholding of each shareholder;
2. The qualification, experience and other relevant particulars of the project management;
3. The nature of the proposed business activity and the proposed location where that activity is to be carried on;
4. The proposed capital structure or the amount of investment and the projected growth over the next five years;
5. Information on how the investment will be financed;
6. Evidence of sufficient capital available for investment; and
7. An undertaking that the project will be implemented as indicated in the projections of the project.

Application for rehabilitation or expansion

Where an application is for rehabilitation or expansion of an existing enterprise or both, it shall contain:

1. The name of the existing enterprise, its memorandum and articles of association;
2. The qualifications of the project management;
3. A statement of audited accounts for three previous years or any other prescribed period for a business enterprise which has not attained three years since its establishment;
4. The capital structure and projected growth over the next five years;
5. Financing of the rehabilitation or expansion project, together with evidence of availability of finances; and
6. An undertaking that the expansion or rehabilitation will be implemented as indicated in the projection.

Validity of the COI

A COI shall be:

1. Valid for a period not exceeding five years from the date of issuance for fiscal incentives; and
2. Valid for the entire period of the project implementation for non-fiscal incentives.

A COI may, upon application and presentation of sufficient reasons, be extended for a further period as the TIC may determine.

Incentives provided to investors

There are two types of incentives that investors can benefit from the TIC namely fiscal and non-fiscal incentives:

Non-fiscal incentives

1. By virtue of holding a COI, investors can secure protection against government-led nationalisation or expropriation. The shareholders shall not be compelled by law to cede their interest to any other person. There shall not be any acquisition, whether wholly or in part of the company to which the Act applies by the Government unless the acquisition is under the due process of law which makes provision for:
   
   a.  Payment of fair, adequate and promt compensation and authorisation for its repatriation in convertible currency, where applicable; and
   b.  Aright of access to the High Court of Tanzania or a right to arbitration to determine the investor’s interest or right and the amount of compensation to which they are entitled.
    
2. Additionally, the investor shall be guaranteed unconditional transferability through any authorised dealer bank in freely convertible currency of:
   
   a.  Net profits or dividends attributable to the investment;
   b.  Payments in respect of loan servicing where a foreign loan has been obtained;
   c.  Proceeds, net of all taxes and other obligations, in the event of sale or liquidation of the company or any interest attributable to the investment; and 
   d.  Payments of emoluments and other benefits to foreign personnel employed in Tanzania by the company.
    
3. According to the Act, investors shall be entitled, by holding a COI, to an immigration quota in accordance with the relevant laws governing the relevant laws governing matters of employment to non-citizens. According to the Non-Citizen (Employment Regulation) Act, 2015, investors shall be entitled to an initial immigration quota of up to 10 foreigners during the start-up period of the investment.
4. Also, by holding a COI, investors may obtain credit from domestic banks and financial institutions up to the limit established by the Bank of Tanzania in consultation with the TIC considering the amount of the foreign capital invested in the company. Consequently, investors shall ensure that the proceeds of that credit are used solely to carry out the activities specified in the loan application.

Fiscal incentives

1. Investors shall be entitled to the benefits which apply to the company under the provisions of the Income Tax Act [Cap 332 R.E. 2019] (as amended), the Customs (Management and Tariff) Act [Cap 403 R.E. 2019], the Value Added Tax Act [148 R.E. 2019] (as amended) or any other written law for the time being in force.
2. However, the fiscal benefits shall not extend to:
   
   a.  Non-utility vehicle classified under HS Codes 8702.10.19, 8702.90.19 and tariff heading 8703; 
   b.  Imported trailer classified under HS Code 8716.31.90 and 8716.40.90; 
   c.  A motor vehicle manufactured more than eight years before importation; 
   d.  Office equipment, stationeries, furniture, sugar, beverages, spirits, tiles, non-utility motor vehicles, crockeries, air conditioners, fridges, cutleries, beddings, cement, steel re-enforcement bars, roofing sheets, polyvinyl chloride (PVC) and high-density polyethene (HDPE) pipes with HS Code 3917.23.00 and 3917.21.00 respectively, imported trailers and electronic equipment; and
   e.  Telecommunication, except capital goods, for the installation of telecommunication towers.
    
3. It is important to note that import duty exemption granted to deemed capital goods shall be restricted to 75 per cent whereby the investor shall pay 25 per cent of the import duty due.

Additional fiscal and non-fiscal benefits

After the revision of the Act in 2022, additional fiscal and non-fiscal benefits are granted by the TIC to investors who are registered with the TIC and granted strategic or special strategic investment status.

A strategic investment is a business enterprise which is either:

1. Owned by a Tanzanian, with minimum investment capital of not less than Tanzanian Shillings equivalent to USD 20 million; or
2. Wholly owned by a foreign investor or is a joint venture, the minimum investment capital is not less than Tanzanian Shillings equivalent to USD 50 million.

A special strategic investment is a business enterprise that has a minimum investment capital of not less than USD 300 million.

A project registered with the TIC shall be regarded as a strategic investment once it has fulfilled the following criteria:

1. At least 1,000 local employment is created with a satisfactory number of senior positions in projects that do not require advanced and modern technology;
2. It has the capability to export at least 50 per cent of goods produced or produce import substitution goods;
3. It has the capability of stimulating production by establishing industrial parks in various social and economic sectors;
4. It improves technical skills by introducing new technologies to Tanzanians; or
5. It can produce goods or render services necessary for development in the social and economic sectors based on priorities at the time.

Moreover, a project registered by the TIC shall be regarded as a special strategic investment if it fulfils the following criteria:

1. An investment capital transaction is undertaken through a registered local financial and insurance institution;
2. At least 1,500 direct local employment is created with a satisfactory number of senior positions in projects that do not require high and sophisticated technology; and
3. Capability to significantly generate foreign exchange earnings, produce significant import substitution goods or supply of important facilities necessary for development in the social, economic or financial sector.

The application for the strategic and special strategic status must be in Form No. 1 as set out in the First Schedule to the Regulations and submitted to the Secretary of the National Investment Steering Committee (NISC) upon payment of the prescribed fee.

Conclusion

The Act and the Regulations have brought about significant alterations to the investment environment in Tanzania, particularly in terms of the registration process with the TIC. Prospective investors must satisfy specific criteria for registration, and upon approval, they can access a range of fiscal and non-fiscal incentives. Registration with the TIC opens a wide range of investment opportunities for investors in Tanzania, as well as a transparent investment environment and a supportive business climate.

If you have any further questions on the Tanzania Investment Regulations, please contact Tenda Msinjili or Barbara Mawalla.