1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

TA N Z A N I A
I N V E S T M E N T C L I M A T E
I nvestment Incentive s
In August 1997 the National A s s e m b ly repealed the National
I nvestment (Promotion and Protection) Act of 1990 and
enacted the Tanzania Investment Act (1997) to replace it.
I n c e n t i ves under the new Act are :
• Favourable investment allowances and deductions on
industrial buildings, plant and machinery and on agricultural
e x p e n d i t u re.
• Total exemption from import duty and sales tax on import e d
c apital assets for projects relating to mining, i n f r a s t r u c t u re (i.e.
road construction, b r i d g e s , r a i lw ay s , a i r p o rt s , generation of
e l e c t r i c i t y,water serv i c e s ,back-up services to mining) and EPZs.
• Import duty for investment in other sectors of the economy
is five percent on the pro j e c t ’s imported capital assets.
• Straight line accelerated depreciation is allowed on cap i t a l
go o d s .
• T h e re is unlimited/indefinite carry - over of all business losses
against future pro f i t s .
• A ny ap p roved investment has the right to employ up to five
fo reign nationals on it pro j e c t .For mining, h oweve r, the amount
of fo reigners which can be employed is not limited.
• Investors are at liberty to export both capital and pro f i t s
outside of Ta n z a n i a .
• T h e re is a 20 year tax holiday for certain mining activities.
I n c e n t i ves for companies investing in oil ex p l o r a t i o n :
• Long exploration periods of four (initial), four (first extension)
and three (second extension), totalling 11 ye a r s .
• Relative ly large exploration are a s .
• Maximum Tanzania Pe t roleum Development Corporation
(TPDC) participation is capped at 20 perc e n t .
• Corporate income tax and royalties paid for by T P D C.
• T h reshold rates of return for A dditional Profit Tax at 20
p e rcent for first tranche and 30 percent for the second tranche.
• Separate incentives in order to encourage deep sea (gre a t e r
than 200m water depth) are under consideration by the
government and T P D C.
I nvestment is treated favo u r a b ly under Ta n z a n i a ’s corporate tax
s y s t e m . M a ny tax incentives relate dire c t ly to capital outlay s ,
f rom full write-off for clearing and planting of agricultural land in
the year of inve s t m e n t ,to extensive depreciation allow a n c e s .
E x p o rt incentive s :
At present exporters are benefiting from the liberalisation of
e x p o rt licensing, and the duty drawback scheme. A fe a s i b i l i t y
study for the establishment of EPZs in Tanzania was carried out
during 1996, and the draft regulations and organisation of EPZs
a re under pre p a r a t i o n .
Z a n z i b a r:
The government of Zanzibar offers the same incentives to
i nve s t o r s . F u rt h e r m o re, EPZs are in place in Zanzibar and
companies established in EPZs are offe red 10 years corporate
tax holiday and duty exemption on imports of raw materials and
c apital equipment.
Ta x a t i o n
M e a s u res have been implemented to combat tax evasion and to
s t reamline customs pro c e d u re s .
Corporate tax:
30 perc e n t
Individual tax: ( m a x i mum rate) 35 perc e n t
Withholding tax on dividends and
p rofit-sharing tax for non-re s i d e n t s : 10 perc e n t .
A new value-added tax was introduced in 1997, replacing the
old sales tax, at a rate of 20 perc e n t .
E x c h a n ge contro l s
Fo reign exchange controls we re re m oved by the Fo re i g n
Exchange Act (1992),and Bureau de change regulations of 1992,
and Tanzania accepted the obligations of the IMFs A rticle VIII in
1 9 9 6 . Residents are now permitted to hold fo reign curre n c y
a c c o u n t s . C apital transfers are however still subject to ap p rov a l
by the Bank of Ta n z a n i a .
To ensure eventual repatriation of cap i t a l ,all inward inve s t m e n t s
into Tanzania should be re g i s t e red with the Tanzania Inve s t m e n t
C e n t re. I nvestments in Zanzibar should either be re g i s t e re d
with the Zanzibar Investment Promotion Agency or Zanzibar
F ree Economic Zones A u t h o r i t y. I nvestors are allowed to re t a i n
100 percent of their net fo reign exchange earnings for purposes
of remittance of dividends, p rofits and settlement of external
o b l i g a t i o n s . B o rrowing of funds from local banks by nonresidents
is allowe d .
Institutions invo l ved in investment pro m o t i o n
The Tanzania Investment Centre, established in 1991, p ro c e s s e s
i nvestment proposals and assists investors with ap p l i c a t i o n
p ro c e d u re s . Their mandate is to be the focal point for the
implementation of the National Investment Policy and to
p ro m o t e, c o o rdinate and monitor domestic and fo re i g n
i nve s t m e n t s .
Zanzibar operates a separate Investment Promotion A g e n c y
( Z I PA) which was established in 1991. To benefit from the
i n c e n t i ve schemes offe red by Zanzibar, i nvestors should contact
Z I PA first.
I nvestment code
The Tanzania Investment Act (1997) outlines provisions and
i n c e n t i ves for investment in areas of national priority.
E x t e n s i ve guarantees are provided to investors under the
I nvestment Promotion Centre ’s Certificate of A p p rov a l ,such as
guarantees re g a rding ownership of pro p e rt i e s ,dispensation of
a s s e t s , repatriation of income and others. Tanzania is also a
member of MIGA and ICSID.
I nvestments in Zanzibar are regulated by the National
I nvestment Promotion Act of 1986 (under rev i s i o n ) ,o u t l i n i n g
p rovisions and incentives for investments in areas of national
p r i o r i t y. The Economic Zones Act (1992) governs EPZs. I n
a ddition to the guarantees provided by Ta n z a n i a , Z a n z i b a r
guarantees against compulsory acquisition by gove r n m e n t ,
except on payment of full compensation.
I N V E S TM E N T
O P P O R T U N I T I E S A N D
P R O J E C T S
I nvestment Opport u n i t i e s
The government has identified the fo l l owing priority areas fo r
i nve s t m e n t : m a nu f a c t u r i n g ,a g r i c u l t u re, p e t roleum and mining,
c o n s t r u c t i o n ,t r a n s p o rt ,transit trade, computer and other high
t e c h n o l o gy businesses, tourism and natural re s o u rc e s .
I nvestment opportunities in Zanzibar include: l a b o u r- i n t e n s i ve
industries and assembly plants, construction and housing, h o t e l
and tourism, t r a n s p o rt by sea and air, human re s o u rc e
d evelopment schemes, transit trade and warehousing and offs
h o re activities.
P ro j e c t s
U n fo rt u n a t e ly we we re unable to obtain a list of projects fo r
i nve s t m e n t .
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