INTRODUCTION
On 02 December 2022, the Parliament of Tanzania passed the new Tanzania Investment Act, 2022 (Act No. 10 of 2022). Subsequently, the Minister for Investment, Industries and Trade issued the Government Notice No. 94 of 17 February 2023 to effectively operationalize the new Investment Act. This publication, therefore, reviews and highlights the salient features including the new compliance and regulatory requirements brought about by the new Tanzania Investment Act, 2022.
SCOPE AND APPLICATION OF THE ACT
According to Section 2, the new Investment Act, 2022 (the Act) shall apply to all entities operating commercially except (a) companies or business enterprises involved in prospecting and drilling of minerals under the Mining Act and related activities, (b) companies or business enterprises involved in exploration or production of petroleum; or construction or operation of petroleum pipeline under the Petroleum Act and related activities; and (c) companies or a business enterprise involved in the production, marketing or distribution of hazardous chemical, arms or any type of explosives.
THRESHOLD CAPITAL REQUIREMENTS
The Act provides a minimum threshold capital requirement for a company to enjoy the benefits and protection under the Act, which is USD 500,000 for a foreign company and USD 50,000 for a local company. This means The New Act has reduced the minimum investment capital for Companies owned by a Tanzanian from USD 100,000 to US$ 50,000 while retaining the minimum investment capital threshold for foreigners to US$ 500,000.
DEFINED MEMBERS OF THE INVESTMENT COMMITTEE
To ensure effectiveness and efficiency in handling investment matters, the new Act establishes an Investment Committee comprised of 12 government entities and ministries including the Prime Minister (Chairperson), Minister responsible for Investment (vice chairperson), Minister for Finance, Minister responsible for International Relations, Minister for Lands, Minister responsible for Legal Affairs, Minister responsible for Local Government, Minister responsible for Government Policy and Coordination, the Attorney General, the Central Bank Governor, the Commissioner General for Revenue and the Tanzania Investment Centre Executive Director (Secretary to the Committee) (S.5).
ESTABLISHMENT OF AN INTEGRATED ELECTRONIC SYSTEM
In order to increase efficiency and speed up approvals and issuing of licenses the New Act requires the Tanzania Investment Center to establish an integrated electronic system for the facilitation and promotion of investment. The aim is to effectively obtain and share information between relevant regulatory authorities involved in issuing licenses and permits to improve the investor experience and encourage seamless registration services (S. 8).
ONE STOP CENTRE
The Act imposes a requirement for all government ministries, departments, and Agencies to work closely with TIC in the implementation of its objectives under the Act. According to S. 18(4) in the event any Institution or Agency or Authority receives an application made by TIC on behalf of an investor it shall issue such license or permit or feedback in writing within 7 days of failure of which such license or permit or approval shall be considered approved/issued (S. 18(5)).
DURATION OF CERTIFICATE OF INCENTIVES
The Act grants a duration of 5 years for a Certificate of incentive for all fiscal-related incentives from the date the of issuance of the Certificate of incentive to the investor whereas for non-fiscal incentives the Act grants the whole duration of the implementation of the project (S.20). Moreover, according to S. 27 the Act guarantees and assures investors that incentives granted under the Act shall not be waived or changed or altered for 5 years from the date granted to the investor.
CANCELATION OF THE CERTIFICATE OF INCENTIVE
The new Investment Act provides for circumstances that shall result in the cancellation of the issued certificates of incentives. Such circumstances include obtaining the certificate by fraud or false information; breaching the conditions of the certificate by the holder; transferring the certificate to another investor or investment without the prior consent of the Centre; failure to commence operations within the first two years of issuance of a certificate without satisfactory reasons; and failure to submit annual performance reports of the project for two consecutive years (S.20)
INCENTIVES
The Act specifically describes incentives to be issued to the Investor to include those to the business and as described under the Income Tax Act, The East Africa Union Customs Management Act, the Value Added Tax Act, or any other related law. In relation to Custom duty, the Act grants an incentive of 75% while investor must pay 25% of the Customs duty. On the other hand, the law does not allow and prohibit incentives such as motor vehicles not used directly to the project, cars that are old than 8 years, office furniture, air conditioners, fridges, cement, sugar, alcohol, airtime among others.
STRATEGIC AND SPECIAL STRATEGIC INVESTMENTS
The Act grants extra and additional incentives to business enterprises considered as strategic investors and special strategic investments.
The Act describes a business enterprise to be a strategic investment, if: for the business owned by a citizen, the minimum capital should be US$ 20Million, while a foreign-owned business’s minimum capital is US$ 50 million. The business enterprise must also contribute to at least 1,000 employments and has sufficient senior positions in the project not requiring high and modern technology. Likewise, the business must export at least 50% of its product as well as it increases the technical and technological advancement to the citizen.
On the other hand, the Act describes a Special Strategic Investor to be an investment with not less than US$ 300Million. The business enterprise must also generate direct employment of at least 1,500 employments and must be able to produce products that would reduce reliance of imports to the country.
RIGHTS AND OBLIGATIONS OF INVESTORS
The Act provides the rights and duties of investors. According to S. 26 the rights of investors include to abide by the laws of the Country, to submit timely information to the Government when required, to protect consumers, the environment, and gender balance as well as to endeavor to use resources obtained in Tanzania.
INVESTMENT GUARANTEES
The Act provides investment guarantees that assures investors of the following, that is, full repatriation of profits generated from the investment, payment of interests from loans sources outside the country, income from the sale/transfer of business, incentives and allowances paid to expatriates employed in the Country (S 28).
RIGHT AGAINST EXPROPRIATION
Like the repealed Act, the new Act it provides for the right against Expropriation, that no business enterprise shall be nationalized or expropriated by the Government, and no person who owns, whether wholly or in part, the capital of any business enterprise shall be compelled by law to cede his interest in the capital to any other person. There shall not be any acquisition, whether wholly or in part of a business enterprise to which this Act applies by the State unless the acquisition is under the due process of law which makes provision for payment of fair adequate and prompt compensation, and a right of access to the Court or a right to arbitration for the determination of the investor’s interest or right and the amount of compensation to which he is entitled (S 29).
REMOVAL OF AN AUTOMATIC IMMIGRATION QUOTA INCENTIVE
The new Act excludes the immigration quota incentive accorded under the old Act. Prior to this new law the investor was accorded an automatic immigration quota of 5 expatriates who can be employed by the investor during the start-up period. The benefit is no longer accorded by the law so foreign employees will be subjected to the normal work and residence permit process, which does not guarantee the grant of the permits.
It should however be noted that S. 19 of the Non-Citizens (Employment Regulation) Act Cap. 436 provides a quota of up to 10 non-citizens incentive on discretionary basis.
DISPUTE SETTLEMENT
The new Investment Act has retained the same position as provided for under the Repealed Act which provides that where a dispute between a foreign investor and the Government is not settled through amicably by negotiations, the dispute may be submitted to arbitration in accordance with arbitration laws of Tanzania for investors; rules of procedure for arbitration of International Centre for the settlement of Investment Disputes (ICSID); or within the framework of any bilateral or multilateral agreement on investment protection agreed to by the Government of Tanzania and the Government of the country where the investor originates (BITs).
OFFENCES AND PENALTIES
The New Act provides for offenses against employees or people administering the Act for unauthorized disclosure of information as well as any person who issues false information to the Centre will have committed an offense and, upon conviction, shall be fined TZS 5 million or imprisoned for a term not exceeding one (1) year. However, both a fine and imprisonment may be imposed at once.
CERTIFICATE OF INCENTIVES
All certificates of incentives that were issued before this Act will still be valid and applicable including all incentives related to the certificate and registration. Under the new Investment, there is the fiscal and non-fiscal certificates of incentive, under the new Act the fiscal certificates of incentives shall remain to be valid for a period of not more than 5 years from the date of issued, whereas the non-fiscal certificate of incentive shall remain to be valid for the whole period of the investment.
