Business

How to Formalize Business in Tanzania

What Is Business Formalization? 

Business formalization is a process of transforming the informal business enterprises into formal. It is the process of transforming businesses operated in the informal sector to the formal sector. The process involves among others; business licensing, business registration, tax payers registration via tax identification number certification popularly known as TIN number.

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;
  • Specific countries have specific steps all centering around these general steps presented by the ILO.

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 as follows:-

  • Registration with Business Registration and Licencing Agency (BRELA).
  • Obtaining 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.

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 service​. 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 patent or utility model related documents
  • Information services. Here you can apply for and extract of short or detailed information about business name, company, industrial license, mark or patent. You can also order Mark index review by Nice class that will be at your disposition for 3 days.

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.

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 to the Sector Ministry/ Agency for the Permit to operate in the sector
  • Apply for a Business License at Ministry of Industry Trade and Investment (MITI) of Local Government Authorities (LGAS)
  • Pay for the Business License Fee depending on the type of Business Fees is paid through Bank

Registration with Tanzania Revenue Authority (TRA)

Registration with TRA as a Taxpayer is a necessary condition for any person, partnership, and limited liability company which wants to start a new business. Essential steps for TRA registration for all categories include the following:

Individual
  • 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, select Online TIN Registration and follow steps as the system directs .
  • If the individual is requesting Business TIN, the Online TIN applicant must visit physically nearby TRA office (having lease agreement/title deed, introduction letter from local Authority) to collect TIN Certificate and provisional tax assessment and Tax Clearance).
  • After obtaining TIN certificate the applicant will be required to apply for business license from the Trade office in District, Municipal, City and the Ministry of Trade and Industry depending on the type of business.
Partnership
  • 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 which shows the number and names of partners with their respective distribution ratio.
  • In applying for TIN the partnership firm shall apply for its certificate by submitting the 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 TIN, in case any partner has already been issued with 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 the Certificate of incorporation from the Business Registration and Licensing Authority (BRELA). The Directors of the company are required to draw a Memorandum and articles of association and 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 TIN application forms as follows:

  • Application for the company. The Certificate of incorporation shall be attached to the TIN application enclosed with Memorandum and Articles of Associations when a person makes an application to TRA.
  • Application for each shareholder director, if any director has already been issued TIN certificates for other purposes, cannot make another application; instead, use the same tier.
  • For Noncitizens, the law requires the directors to fulfill all immigration procedures and obtain a business permit from the Immigration Department working under the Ministry of Home Affairs.

Formalization for Business Growth

Business growth is among many benefits of operating a formal business. Governments worldwide have the responsibility of making sure that their citizens get the required education and awareness on the benefits of operating formal businesses. For instance, the Government of the United Republic of Tanzania, through its Property and Business Formalization Program for Tanzania, Popularly known as MKURABITA, has been offering education sessions to small business owners before undertaking any formalization activity. Such training sessions get the blessings of the government official.

Features of a formal business

Despite the traditional features of following the legal framework (registration with BRELA, Licensing and Tax identification Certification) a formal business has more features that enhances the economic benefits of the owner and operator of the formal business.

  • Keeping proper business records.
  • Opening and maintaining a bank account for the business
  • Separating business assets from personal assets