How to Formalize Business in Tanzania
What Is Business Formalization?
Business formalization is transforming businesses operating in the informal sector into the formal sector. Describing the business formalization process requires knowledge of the business form in question. Business vehicles applicable in Tanzania include sole proprietorships, partnerships, Trusts, Societies, Cooperative Societies, Non-Government Institutions, and companies.
Business Forms available in Tanzania
- The sole proprietorship is most appropriate in the case of a single investor.
- A partnership is most appropriate where there is more than one investor.
- A cooperative society involves ten or more people in the proper vehicle.
- Non-government organization (NGOs) is appropriate for voluntary, autonomous, non-profit-sharing organizations.
- Company Limited by Guarantee is appropriate for companies limited by guarantee intending to promote commerce, investment, trade, or any other activity as prescribed in the government gazette.
- Limited Liability Company requires a minimum of two directors and two shareholders. It can be a private or public company.
- For the purpose of comparison, I also share steps for business formalization as per International Labor Organization (ILO).
Steps for Business formalization (as per ILO)
The International Labor Organization (ILO) presented the following dimensions as the steps that an entrepreneur goes through in formalizing the business.
- Registration and licensing with the national, provincial, and municipal authorities;
- Access to social security for the business owner and his/her employees;
- Compliance with the legal framework, including tax, social security, and labor laws;
Steps for Business Formalization in Tanzania
Business formalization in Tanzania as a transformation process is not different from the rest of the world as it requires passing through some authorities. The general steps include the following: –
- Registration with Business Registration and Licencing Agency (BRELA).
- Obtaining a Business License from the Local Government Authority,
- For specific items requiring sector industry permission, one needs to obtain permission from the respective authority mandated to oversee that particular product or service.
- Registration with Tanzania Revenue Authority (TRA) Tax Identification Number (TIN) Certificate.
Steps vary with the business form (also known as business vehicles) being registered.
How to Register Business in Tanzania
The Government of Tanzania mandated BRELA to register companies, partnerships, business names, and intellectual property rights such as patents of inventions, industrial designs, trade, and services. BRELA registers businesses in a business form of your choice. The available business forms include Sole proprietorship, Partnerships, and Companies. BRELA uses an online registration system that is simple, fast, and friendly.
Features of the BRELA’s Online Registration System
- Business name registration, change of particulars, paying annual maintenance fee, cessation, and data update.
- Company registration, change of particulars, filing company-related documents, and annual returns.
- Industrial License registration, change of particulars, filing annual progress report, and cancellation.
- Mark registration and filing mark-related documents.
- Patent registration and filing of patent or utility model-related documents
- Information services. Here you can apply for and extract of short or detailed information about the business.
How to Obtain a Business License in Tanzania
Obtaining a business license is mandatory to operate a formal business in Tanzania. Issuance of business licenses In Tanzania is vested in two authorities, namely the Business Registration and Licensing Agency. For Class “A” Business Licenses and Local Government Authorities (LGAs) for Class B Licenses.
What are the Pre-requisite for Obtaining a Business License in Tanzania?
For Any Entity to Obtain a Business License, it should have:-
- Acquired a Business Premise by Renting or Owning a Premise
- Register a Company or a Business Name to the Business Registration and Licensing Agency (BRELA)
- Register for Tax Identification Number (TIN) to Tanzania Revenue Authority (TRA)
- Register with the Sector Ministry/ Agency for the Permit to operate in the sector. Sector ministries include the Tanzania Communication Regulatory Authority (TCRA), Energy and Water Regulatory Authority (EWURA), Bank of Tanzania (BOT), and Tanzania Insurance Regulatory Authority (TIRA)
- Apply for a Business License at the Ministry of Industry Trade and Investment (MITI) of Local Government Authorities (LGAS)
- Pay for the Business License Fee depending on the type of Business Fee is paid through Bank
How do you register with the Tanzania Revenue Authority (TRA)?
- Visit nearby TRA offices (regional, district, or tax centers)
- Fill TIN application form to apply for Taxpayer Identification Number.
- If the individual has National Identity Number (NIN) the application can be made online by visiting TRA Website www.tra.go.tz. The applicant shall select Online TIN Registration, and follow the steps as the system directs.
- If the individual is requesting Business TIN, the Online TIN applicant must visit the physically nearby TRA office. He should submit a lease agreement/title deed, and an introduction letter from the Local Authority) to collect TIN certificates and provisional tax assessment and Tax Clearance).
- After obtaining the TIN certificate the applicant will be required to apply for a business license from the Trade office in the District, Municipal, City, and the Ministry of Trade and Industry depending on the type of business.
- The partners have to register for the firm at BRELA and acquire the certificate of registration.
- After being issued with the certificate the partners visit TRA along with the partnership deed. The Deed shows the number and names of partners with their respective distribution ratios.
- In applying for TIN the partnership firm shall apply for its certificate by submitting a copy of the certificate of registration obtained from BRELA, partnership deed, lease agreement/title deed, and introduction letter from the local authority.
- Each partner shall apply for the TIN certificate. In case any partner has already been issued a TIN certificate for another purpose he/she cannot make another application. The same TIN will be used.
Limited Liability Company
Starting a corporation requires a person to apply for incorporation from the Business Registration and Licensing Authority (BRELA). The Directors of the company will draw a Memorandum and articles of association. Submit the certificate of incorporation, lease agreement/title deed, and introduction letter from the local authority. The limited company shall apply for a TIN certificate by filling out TIN application forms as follows:
- Application for the company. The Certificate of incorporation shall be attached to the TIN application enclosed with the Memorandum and Articles of Association
- Application for each shareholder director. If the director has already been issued with TIN certificates for other purposes, cannot make another application,
- For Non-citizens, the law requires the directors to fulfill all immigration procedures. Furthermore, the applicant should obtain a business permit from the Immigration Department.
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