INTRODUCTION
The Government of Tanzania through the Central Bank Governor, has issued the new Foreign Exchange Regulations with effect from 13th May 2022. The new regulations were issued through the Government Notice No. 294 of 13th May, 2022 replacing the previous Foreign Exchange Regulations that were issued under Government Notice No. 629 of 1998. Besides, the new Regulations also revokes the Foreign Exchange (Listed Securities) Regulations, 2003 (G.N. No. 227 of 2003). The new regulations sets the new requirements and standards on dealing with foreign Currency and gold in Tanzania as well as matters relating to current account transactions such as exporting and importing transactions and also international remittances of funds. Further, the regulations also sets requirements for capital account transactions on matters relating to Inward and Outward direct investment and purchase of real assets by residents, Borrowing from abroad and payment of Interest rates, charges and conditions for foreign loans accommodation. Among he new aspects brought by the Regulations is the fostering of the regional integration in particular the East Africa Community (EAC) and the Southern Africa Development Community (SADC) by easening the restrictions in participating government securities transactions. The regulations also stipulates the powers of the Central Bank in monitoring and enforcement as well as the Powers of the Governor in granting exemption, where necessary.
This publication therefore, reviews and highlights the salient features including the new compliance and regulatory requirements brought about the regulations.
DEALING WITH FOREIGN CURRENCY AND GOLD
The Foreign Exchange Regulations, 2022 (G.N. No. 294 of 2022) (“the New Regulations”) allows any person, whether resident or non-resident to hold, sell or purchase any amount of foreign currency from a bank, financial institution or bureau de change but also open and maintain a foreign currency account with a bank or financial institution in Tanzania. Likewise, the regulations allows any person to remit through a Bank or Financial Institution such amount of foreign currency for a specified purpose; and also import into, or export from Tanzania any amount of currencies of contiguous (neighboring) countries.
However, the Regulations limits the Purchase of foreign currency beyond US$ 10,000 (or equivalent) for the purpose of traveling outside Tanzania. In the event a person enters or leaves Tanzania while in possession of foreign currency exceeding US$ 10,000 is required to declare to the Customs authorities at the time of arrival or departure in compliance with the Anti-Money Laundering (Cross Border Declaration of Currency and Bearer Negotiable Instruments) Regulations, 2016.
Further, Regulation 3(5) prohibits a resident, other than a Bank or Financial Institution to open or maintain an account outside Tanzania except authorized by the Central Bank Governor or where such account is for settlement of securities in the prescribed territory.
In the event a person is an exporter from Tanzania, the Regulations requires the sale of foreign currency to be done through a Bank or Financial Institution where the Exporter maintains bank account relationship.
Banks and financial institutions are also prohibited from trading of foreign currency with international foreign currency brokers but rather with fellow Banks and Financial counterparts.
In relation to dealing with Gold, the regulations restrict dealing with Gold in terms of buying, borrowing, selling, lending or holding unless authorized by the Central Bank Governor.
EXPORT TRANSACTIONS
It is the requirement of the new Regulations that export transactions are done through Banks or Financial Institutions and that the exporter must have Bank account in Tanzania.
Moreover, the Regulations also set the timeline of 7 days within which an exporter is required to furnish the Bank or Financial Institution with all relevant export documentation after completion of customs export procedures. More importantly, is the payment period of 90 days set by the regulation upon which the exporter must receive the payment for that export transaction. In the event the payment has not been received or delayed beyond 90 days then, the Regulation requires the exporter to furnish the reason for such delay and expected time of payment to the respective Bank or Financial institution for onward submission to the Central Bank. Such procedure must be done in a prescribed manner in accordance with the regulations. Likewise, where a Bank or Financial Institution receives payment that is less than what is stated on the documents then shall require the exporter to provide reasons for that, and that information must equally be submitted to the Central Bank within 7 days.
The Regulations equally prohibits an exporter from any act which involves or is associated with underpricing of export of goods or services or remission/payment of exports proceeds to Tanzania. Also, set off is also prohibited. That means, where export transaction involves affiliate companies or entities, then the exporter shall ensure that there is no offsetting of financial claims between these entities.
IMPORT TRANSACTIONS
It is the requirement of the regulations that payment of imports of goods or services must be made through Bank or a Financial Institution unless where the value of import consignment does not exceed US$ 10,000. Before making any payment for imports, the Regulations requires Banks and Financial institutions to satisfy itself of the necessary compliance of the Importer like having direct baking relationship with the said Bank or Financial Institution but also, submit necessary supporting documents relating to the importation such as invoices, supply contract, relevant permits/authorizations from the relevant authorities in addition to shipping documents. In cases of deferred payments, the regulations stipulates a maximum period of 365 days for the credit facility.
In terms of the timeline, Regulation 14 requires Imports must be consigned to Tanzania within 90 days failure of which the importer must notify the Bank within 14 days from the expiry of that duration. In the event an importer fails to report the non[1]receipt of goods within the time prescribed the Bank or Financial institution is required to cease to provide foreign currency to the importer until the matter has been resolved.
Generally, the regulations permits Bank or Financial institution as part of its customary banking business, to receive any amount of foreign currency whether in the form of currency notes, coins, travellers’ cheques, bank drafts or in any other form subject to notification the Central Bank Governor and compliance with any other procedures, which may be required by relevant authorities.
OUTWARD REMITTANCES
Regulation 16 requires that any person who intends to remit funds outside Tanzania to do so through a Bank, Financial Institution or a mobile money operator. The regulations places the following documentary requirements for each category of remittances as follows:
| Purpose for Remittance | Document/Information required |
| Remittances for Education or medical expenses | Documents in form of a letter, or invoice from the respective educational or medical institution |
| Remittances for Living allowances | Identity card, copy of relevant pages of passport of the beneficiary and request from the beneficiary in the form of a letter, email, fax or any other formal communication approved by the Bank. Amount to be remitted per transaction not to exceed US$ 10,000 |
| Remittance by expatriates for various purposes | Relevant employment contract and copy of work permit in Tanzania |
| Retirement benefits of expatriates | Relevant employment contract and pension award letter from the respective pension fund |
| Insurance or reinsurance | A no objection letter from the Commissioner of Insurance |
| Consultancy, management or royalty payments | · Contractual documents duly executed by the parties;
· Relevant invoice or fees notes; and · Tax clearance certificate from the Revenue Authority |
| Technology transfer agreement covered by the law governing promotion and facilitation of investment | Supporting documents that the agreement is registered with the authority responsible for promotion and facilitation of investment |
| Other transactions not specifically mentioned | Such relevant supporting documents as may be requested by the Banker |
| Payment of Dividends to foreign shareholder | · Submit audited financial statements or dividend payment notice indicating declared dividends or profit to be repatriated
· Approval of board of directors or shareholders for payment of dividends; and · Documents confirming payments of all relevant taxes from the Revenue Authority. |
| Payment of Coupon and principal amounts on securities to non[1]residents | Submit a contract note, statement of holding the security or any other relevant document. |
CAPITAL AND FINANCIAL ACCOUNT TRANSACTIONS
Regulation 20 which deals with purchase, sale or transfer of Government Securities, limits Non residents from purchasing, selling or transferring government securities unless such non resident is from the East African Community (EAC) or Southern Africa Development Community (SADC). In the event a non resident engages in any security transaction, then the Regulations requires the Non resident to open and maintain a Securities Settlement Account with a Bank or Financial institution or appoint a custodian in Tanzania. The Regulations thus requires such transaction to be carried by a Licensed Dealing Member of approved stock exchange in Tanzania.
As for Funds for the purpose of engaging in direct investment in the Tanzania, the Regulations requires the same to be remitted through a Bank or Financial Institution and such funds if they are in the form of equity, then shall not be converted into loan.
FOREIGN LOANS
According to Regulation 25, foreign loans to a resident whose tenure exceed 365 days shall be registered with the Bank of Tanzania and assigned a Debt Registration Number (DRN), which shall then be used for reference for debt service and any other transaction related to that foreign loan. The Loan Registration must be done within 14 days from the signing of the Foreign Loan Agreement. The borrower is thus required to submit all relevant documents to his/her banker for registration process. Equally, Banks are required to submit such information within 7 days to the Central Bank so as to obtain the DRN.
The regulations also imposes a penalty of TZS 1Million per day to a Borrower or a Bank for failure submit documents or to register foreign loans (whose tenure exceeds 365 days) with Bank of Tanzania.
In relation to the terms and conditions applicable to the Foreign Loan Agreement, the Regulation prohibit Loan agreements which contains unfavorable terms and conditions such as conditions which require the borrower to open a foreign currency account outside Tanzania or Interest rates and other charges that are not commensurate to the market conditions of such currency borrowed.
Finaly, the Regulations vest power to the Central Bank Governor in:
- issue directives or restrictions in relation to capital account transactions (R.29)
- grant exemption on the applicability of these regulations or issue directives or restrictions in relation to capital account transactions (R.33)
CONCLUSION
The new Foreign Exchange Regulations G.N. No. 294 of 2022 sets new standards in the management and supervision and dealing with the of foreign exchange in Tanzania. Following the decade of economic and financial changes, it was inevitable to revise the regulations to suit the economic but also financial development within the country but also accommodate the regional intergradations and technology (mobile money). The Regulations thus, imposes, clarifies and sets necessary requirements applicable to both Banks and Financial Institutions in the country and also Residents and non residents engaged in/dealing with foreign exchange be it in export/import transactions or other inward and outward capital investment. It is necessary to take note of these new regulations to avoid any unexpected liabilities, penalties as well ensure smooth business and financial operations by both Banks and Financial Institutions and its customers.
