A Practical Guide to Corporate Compliance.

by | Feb 28, 2017 | Uncategorized

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A Practical Guide to Corporate Compliance

For most first time business people, the obtaining of Company’s Certificate of Incorporation seems to be the last step before the final take off of the Company’s Business. Corporate Lawyers know this to be untrue and in most cases their deeper involvement in a Company’s affairs seems like an act to squeeze additional fees from their Clients.
This Article aims to provide a practical guide to be used by Companies after their incorporation to ensure compliance with statutory requirements after incorporation (traditionally the duty of the Company Secretary) so as to ensure that the Company complies with the bulk of the requirements of the law before commencing day to day business. You will notice that we have said the bulk of and not all of as certain industries have industry specific requirements, which must be followed. This practical guide acts only as a guide and does not take away the role or need for legal advice that one may require for the operation of a company in Tanzania.
The Following are mandatory requirements that every Company Secretary appointed by a Company needs to be familiar with when taking on the position especially when appointed just post incorporation in order to ensure full corporate compliance in accordance with the laws of Tanzania.

1st Step: Obtaining of the Company’s Taxpayer’s Identification Number (TIN)

The Income Tax Act (Chapter 332 of the Laws of Tanzania) provides two categories of a TIN, one is a TIN for Individuals which is subdivided into two groups, one being an Individual TIN for Licenses Purpose (Driving License) and the Other being an Individual TIN for Business Purposes (Sole Proprietorship Business Undertakings), on the other hand, the second category is a TIN for Corporate entities.
Our focus here is mainly on the “Corporate TIN”. Though there are no direct fees involved in obtaining the same (No Fees), indirect costs, that is withholding tax and stamp duty and yearly estimate are inevitable at this point. The normal procedure at the TRA is that one fills in Form ITX100.01.B available at the TRA official website www.tra.go.tz or at their many branch offices nationwide.

The form requires that you provide in detail the following information;

  1. The physical address of the Company not its Registered offices but rather its actual business premises;
  2. Information regarding its Directors, and
  3. The actual date/expected date for the commencement of the Company’s business.

It should be noted that all Directors of the Company regardless the number must fill in as well, in addition to the above, specific forms detailing their particulars and other relevant information for the issuance of the Company’s TIN.
After completing the above, the Company needs to fill in Form ITX202.01.E, which is a Statement of Estimate for the Company on its expected yearly/annual income. The main purpose of the annual estimate is to facilitate computation of the corporate tax expected to be paid by the Company on its initial Fiscal year.
At the moment, Corporate Tax is at 30% of the company’s taxable Income and 25% for a company that is listed at the Dar es Salaam Stock exchange
Once the estimated corporate tax is derived after assessment by a tax officer, it must be paid in quarterly installments, that are, 31st of March, 30th June, 30th September and 31st December of the Company’s Business year (It should be noted that, In cases whereby the Company fails to meet the estimated target or exceeds the estimated sum, the Company shall file amended Estimate forms and account for the amount not met/exceeded in relation to the estimated amount during the following accounting/Business year).
After the successful payment of a quarterly estimated entity’s income, it is the responsibility of the Company Secretary to submit all relevant documents prior the issuance of the Company’s TIN which documents includes but not limited to;

  1. Company’s Memorandum and Articles of Association;
  2. Lease Agreement regarding the Company’s place of business or any other proof of ownership of Business Premises;
  3. A Letter from the Local Government recognizing the place of Business of the Company;
  4. Directors photographs and Passport or other form of Identification; and
  5. Company’s Certificate of Incorporation.
  6. Last but not least, is a Tax Clearance Certificate which is issued only to entities that have paid for and complied with all requirements, including payment of Withholding Tax and Stamp Duty in respect of the Company’s Lease Agreement. Withholding Tax is currently at 10% while Stamp Duty is at 1%.

    7. 2nd Step:Obtaining the Company’s Business License

    All the steps in commencing the operations of a business flow step by step, with each step being a precursor to the next. You cannot proceed to the next step without having first finalized the proceeding step.
    In line with the foregoing, in order to obtain a Business License one must first obtain the Company’s TIN and Tax Clearance Certificate.
    In accordance with the above, the following are mandatory documents when applying for a Business License;

    • Company’s Memorandum and Articles of Association;
    • Company’s TIN Certificate;
    • Company’s Tax Clearance Certificate;
    • A Lease Agreement in connection with the Company’s place of business or any other proof of ownership of Business Premises;
    • A Letter from Local Government recognizing the place of Business of the Company on that particular area;
    • Directors photographs and Passport or other form of Identification; and
    • Company’s Certificate of Incorporation.

    Upon Submission of the Business License Application Forms together with all accompanying documents and upon payment of relevant fees for the same depending on the Business License Class applied for and depending on the issuing authority (i.e. Some Licenses are issued at the District’s Municipal Councils while others are issued by the Ministry of Industries and Trade) one obtains a Business License.
    A point of Note is that TIN applications as well as Business license applications are done at District Level, in the Particular district where the Company intends to conduct its Business. For Instance, a Company with Business Premises in Kinondoni District must apply for a TIN at a TRA Branch within Kinondoni District, and accordingly a Business License must be applied for at the Kinondoni Municipal Council unless the Business License applied for is one, which is issued only by the Ministry.

    3rd step: Opening of Company’s Bank Account

    In today’s World, having a bank account is not only inevitable but it is a reality that a Company cannot survive without it. The Company Bank Account will enable all transactions connected to the Company’s Business to go smoothly and it will enable the Company to discharge its obligations towards its employees and staffs (For Instance, Salary Payments).

    In that sense, having a Bank account is not only crucial in the Corporate World but is an essential requisite for running the Company’s day to day Business affairs.
    In order to open the Company’s Bank Account the following are its requirements though they may vary depending on a Bank (Financial Institution) involved, nevertheless these are the basics;

    • Company’s Certificate of Incorporation;
    • Company’s TIN;
    • Tax Clearance Certificate;
    • Business Licence(s) (If the Company does more than one Business/General Commercial Company);
    • An Introduction Letter with details of the Signatories of the Bank Account; and
    • Directors’ ID and Photographs.

    4th Step: Employment and Labour Relation Documents (Employment Contracts)

    Every Employer must formulate employment Contracts, this will guide its relation with its employees as well as other Labour Statutorily Compliances. As one of the Final steps, Employment Contracts are to be prepared in compliance with the Employment and Labour Relation Laws of Tanzania.

    After the successful completion of all steps above, the Company can now conduct its business as permitted by its Memorandum and Articles of Association.

    Should you have any questions regarding the setting up of your particular business venture in Tanzania please feel free to contact our Firm at info@gabrielco.legal.
    [/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][vc_column width=”1/4″][vc_row_inner row_type=”row” type=”full_width” text_align=”left” css_animation=””][vc_column_inner][vc_single_image image=”https://www.gabrielco.legal/wp-content/uploads/2016/09/oscar-mutaitina.jpg” img_size=”large” alignment=”center” onclick=”custom_link” qode_css_animation=””][/vc_column_inner][/vc_row_inner][vc_column_text]Legal Officer
    Oscar Mutaitina

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