Sub-National Costs of Doing Business in Tanzania (2007)

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May 2007

Document of the World Bank

Report No. 42041-TZ

TanzaniaSubnational Costs of Doing Business in TanzaniaAn Assessment of Doing Business in Arusha, Dodoma, Iringa,Kigoma, Mtwara, Mwanza, and Zanzibar

for The Tanzania National Business Council

Finance and Private Sector DevelopmentAfrica Region





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Nordic Trust Fund

Operations and maintenanceProject AccountsProject ImplementationUnitPhotovoltaicResettlement Acti on PlanRura l Energy AgencyRura l Energy BoardRural Energy Fund

Rural Energy Working GroupRiskManagement Fund

Resettlement Policy FrameworkSupervisory Control and Data Acquisi tionSolar Home SystemSwedish Internationa l Development Cooperation Age ncySector Investment LoanState-owned enterprise

Statement o f expenditure

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Small pow er projectsSm all Power Purchase Agreement

Small Power Purchase Ta ri ffSustainable Solar Ma rke t PackageTec hnic al assistanceTanzania E lectric Supply Company Ltd.

Tanganyika Wattle CompanyTanzania-Zambia Ra ilway Autho rityTanzania Chamber of Commerce for Industryand AgricultureTanzania Energy Developme nt and Access ProjectTanzania Investment CenterTax Identif ication Number

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iii

Vice President:

Country Director:

Sector Manager

Task Team Leader

Obiageli K at ryn Ezekwesil i

John Murray Mc In t i re

Gerard0 M.Corrochano

Michael D. Wong



Contents

Acknowledgments ............................................................................................................... 1Executive Summary ............................................................................................................ 2

Introduction ......................................................................................................................... 4

1 Survey Methodology................................................................................................... 62 . Survey Findings .......................................................................................................... 8

Business Incorporation and Reg istration ............................................................ 82.1.1 Lega l Process .............................................................................................. 8

Business and Trade Licens ing ............................................................................ 9

2.1

2.1.2 Results......................................................................................................... 8

2.2.1 Lega l Process .............................................................................................. 9

2.2.2 Results ....................................................................................................... 10Nation al Social Security Fund (NSSF) Registration ........................................ 11

2.3.2 Results....................................................................................................... 11

2.2

2.32.3.1 Process ...................................................................................................... 11

Tax Registration wi th Tanzania Revenue Au thority (TRA) ............................. 122.4.1 Process ...................................................................................................... 12

Property Purchase and Transfer ........................................................................ 132.5.1 Process ...................................................................................................... 13

2.6 Connecting Power ............................................................................................. 15

2.6.1 Process ...................................................................................................... 15

2.7 Connecting Water ............................................................................................. 17

2.7.1 Process ...................................................................................................... 17

Obtaining a L oan............................................................................................... 182.8.1 Process ...................................................................................................... 18

3.1 Duration ............................................................................................................ 20Where i s the time spent? ........................................................................... 20

4 . Conclusions.,............................................................................................................. 23

2.4

2.4.2 Results ...................................................................................................... 13

2.5

2.5.2 Results....................................................................................................... 14

2.6.2 Results....................................................................................................... 16

2.7.2 Results....................................................................................................... 17. .2.8

2.8.2 Results ....................................................................................................... 18

3 Consolidated Picture 20.................................................................................................

3.1.13.2 Costing the Time ............................................................................................... 21

Appendixes

Appendix 1 Starting a Business in Tanzania by Ci ty ...................................................... 24Appendix 2 Legal Process Associated wi th Registering a Business ............................... 31

Appendix 4 . Description o f Property Transfer Procedures............................................... 35Appendix 3 . Licensing Procedures ................................................................................... 34





Acknowledgments

This joint report, between the TanzaniaNational Business Council (TNBC) and the

World Bank was prepared by Michae l Wong, Aidan Eyakuze, George Clarke, and

Shireen El-Wahab. I t s basedon the data collected by Baldwin Lema, Godfrey

Lwakatare, Eneza Mnzava, Elias Mutani, Douglas Peter, John Bakilana, and Sospeter

Andrew between February and March2007. The legal analysis was prepared and

provided by Rex Attorneys, Dar es Salaam. Valuable contributions and support were

provided by Samuel Chemponda,Danie lMrutu, and O h i a Vegulla o f TNBC.





2

Executive Sum mary

Tanzania i s a top 10 reformer fr om 175 countries in he Cos t o f Do in g Business Report2007. Despite the ambitious improveme nts that me rit top reform er status,' Tanzania i s

ranked in he bottom 50 countries, assessed globally at 142.

This report assesses some o f he more sign ificant D o in g Business Indicators includi ngho w easy i t s to register a business, ob tain a license, transfer prope rty, connect basic

utilities, and obtain an overdraft in 8 regions of Tanzania. The time and cost o fcomp leting these transactions play a significant ro le f or loc al investors in their decisiono f whether to operate in a country's f orm al sector, thus affe ctin g its investment and

gro wth performance.

The feature o f his methodology that distinguishes i t f rom that o f he global Doin g

Business survey was i t s focus: studyingh ow government of ficials and service providersin the regions understood, communicated, and implemented a set o f elevant laws and

regulations. The survey team tested the relevant regulations governing thebusinessenvironment in Tanzania by going through the procedures req uire d to start a business.

The easiest place t o set up a business in Tanzania i s Zanzibar. Fo llo win g the above-listedtransactions, i t wou ld take a Tanzanian in Zanzibar some 129 days, or 4 months, to

complete al l transactions. The m ost di ffic ult places in Tanzania are Kigoma and Mtwara,in which i t will take a Tanzanian over one-and-ha lf years, o r mo re than 500 days, tocomplete a ll transactions. M u ch o f his time is taken up with pro pe rty transfer,

connecting power, and securing the appropriate business licenses.

Registering the business name remains centralized in Dar es Salaam. This reality makesthe phy sica l distance between the region and from Dar es Salaam a maj or factor in

increasing the costs and durat ion associated with registration.

Whe n considered fro m a per capita inco me perspective, the opp ort uni ty costs associated

with spending this amount o f ime to start up a business are significant. Firms in Kigoma

struggle to pa y the 145% o f heir per capita incomes required to get their businessesrunning. Zanzibar and Mb eya pain t a more favorable picture, with the durations costingapproximately 35% and 53% o f heir respective per capita income. Ho wever, given these

costs, i t s itt le wonder that many f i r ms bypass form al channels when possible, o r chooseto rema in unregistered in the info rma l sector.

The government o f Tanzania i s committed to imp rov ing the investment climate for the

' On par with Ghana, Tanzania enacted 4 different reforms in 2006 across different business areas including ustice and trade

facilitation. One of he more ambitious reforms picke d upb y Do ing Business was the in troducti on of electronic data interchange andrisk-based nspections of customs. By using the D oing Business method, Tanzania reduced the time to clear imports b y 12 days.



3

priv ate sector. Howeve r, given the significant difference in cost and performance amongregions, loc al governments, and nation al agencies also have bo th the op portun ity andresp onsib ility to ensure that they create economic spaces wh ich facilita te a nd encourage

the formalization o f business act ivit y across the cou ntry.

This assessment s ntended for the Tanzania Nation al Business Cou ncil (TNBC), loc algovernments, and agency officials wh o d irectly facilitate firm operations within theregions. The most important objective o f his exercise i s to enable these actors to better

understand and mo re eff ecti vely assist Tanzania’s businesses to increase their investment,

enhance their productivity, a nd drive the country’s economic growth.



4

Introduction

The vast major ity o f people wh o escape fro m poverty do so by starting a business o rfinding work in an existingone. Evidence shows that countries in which i t s relativelyeasy to do business are associated with higher numbers o f obs.

The "doing business" assessment provides an index for measuring the ease o f doing

business across 175 developing and developed countries. Th e assessment prom otes

awareness o f and focus o n priva te sector needs, and oftentimes competit ion in reform

programs among countries. N o w 4 years old, the 2006 indicators lo ok at 10 key operatingareas for a firm, ranging fr om starting up and gettingcredit to closing the businesse2Therepo rt studies a theoretical firm. Data s based on research o f aws and regulations in acountry's m ain business city o r capital. Input and verificatio n are supplied by local

government officials, lawyers, business consultants, accountants, and othe r professionals

who rou tinely administer or advise on egal and regu latory requirements.

Despite ambitious improve ments that mer it top reform er status, Tanzania i s ranked in the

bottom 50 countries. I t s assessed glo ball y at 142 o f 175. A Tanzanian entrepreneur's

biggest leg al bottlenecks in setting up a business come during incorporation, whose costsare high; gettinga business license; and getting a comp any seal. I t s encouraging that,although its overall ranking s poor, Tanzania perfor ms better in some areas than the Sub-

Saharan Af ric an average. Fulfilling a l l the legal requirements t o start a business in Dar esSalaam takes appr oxima tely 35 days. Re gister ing a business takes lon ger in most

comparator countries: 36 days in Uganda, 48 days in China, 54 days in Kenya, and 71days in ndi a. Nevertheless, in Tanzania the monetary costs o f his process rem ainonerous at 161.3% o f per capita gross national income (GNI)-co nside rably more than in

any o f t s neighbors, let alone China or India, with wh ic h Tanzania seeks to compete.

One reason for Tanzania's imp rov ing performance is the pri ori ty the cou ntry gives to the

private sector agenda. The Tanzania Nation al Business Co unc il (TN BC) provides a

foru m for regular dialogue o n private sector development issues, an d through this forumaims to create a comp etitive pr iva te sector in Tanzania. Chaired by the President, T N B Ciden tifies constraints to enterprise gr ow th and recommends ways to address them. Thecost o f doi ng business in Tanzania (based on analysis done on ly f or D a r es Salaam) i s one

such issue discussed by the council.

Many o f he determinants o f what makes i t easy or cumbersome to do business l i e with

the loc al governments and councils that interpret and implement regulations and laws,rather than within theboundaries o f he capital. Therefore, the ease o f doing business canvary signif icantly by region within a diverse cou ntry such as Tanzania. An assessment o fthe subnational legal, regulatory, and administrative contexts for firm s w ou ld assistcentral policymakers to understand the details that influen ce fir ms ' operations across

Starting a business, de aling with icenses, emp loy ing workers, gettin g credit, registerin g property,

protectin g investors, pa ying taxes, enforcin g contracts, and closing a business.



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Tanzania's regions. T N B C recognized the region al variations and was in spired by thefrankness o f he glo bal report, which compares Tanzania's progress against that o f

countries such as Singapore and China. As a result, T N B C co mmissioned a subnationalsurvey o f he cost o f starting a business in eight major urban centers within the country,

excluding Dar es Salaam.

The global D oi ng Business 2007 repo rt compares the Tanzanian l aws and regulations thatgovern the relevant business environment with those o f other countries. In turn, the

subnational survey assesses, first, how these laws and regulations are understood,communicated, and implemented. Second, the survey assesses ho w they a ffect theconduct o f private sector activities in Tanzania's regions outside the ma in ci ty o f Dar es

Salaam. Mot ivat ed by the desire to pro mot e investment in the regions and encourageformalization o f business activity, T N B C has institutio nalized this region al focus o n the

priv ate sector within regio nal business councils.

This annual subnational Cost o f Do in g Business report, f irst, wil l complement the Doing

Business assessment3by gathering data on the re al time and costs o f setting up abusiness, one o f he natio nal report's 10 pr io rit y areas. Second, the subnational report will

insert evidence-based input in he regio nal business councils' dialogues and in the

broader, evidence-based dialogue betw een priva te and pu bli c sectors. This f i rs t

subnational study wi l l be repeated and expanded to i nclu de Tanzania's other regions,ultim ate ly producing an annual comprehensive nation al comparative re port o n the cost o f

do ing business in the country.

The most important objective o f his subnational report and related survey i s to help the

loc al governments and agency officials w ho d irec tly facilitate firm operations within the

regions to better understand and mo re effec tive ly hel p Tanzania's businesses increase

their investment, enhance their pro ductiv ity, and driv e the country's economic gro wth.

This pi lo t focused on eight regions w it h subsequent expansion across Tanzania.



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1. Survey Methodology

The survey collects informatio n on real t ime and cost-both explicit and indirect-fsetting up a business in he major cit ies o f eight regions across TanzaniaS4 he surv ey

examines the interpretation o f he essentially comm on (with the except ion o f Zanzibar)legal and regulatory frameworks. I t also identifies key cognitive, administrative, and

logistica l bottlenecks that d elay comple tion or add to the costs o f settingup business

operations in the form al sector.

The distinguishing feature o f his methodology, compared with that o f he g lobal Doi ngBusiness survey, was i t s focus: studying ho w government offici als and service provide rs

in he subregions understood, communicated, and implemented a set o f elevant laws and

regulations common to 7 o f he 8 regions. (Business in Zanzibar i s governed by adifferent set o f aws than in Ma inl an d Tanzania.). The approach created three different

types o f business activities typi cally found in the regions: a grain milling firm, an autorepair business, and a small hotel with attached badrestaurant.

T o verify the relevant regulations governing the business environment in Tanzania, the

survey team went through the procedures required to start a business. Where i t was not

possible to experience the process, the team obtained detailed info rmation o n ho w tocomplete each o f he steps required to f orm ally c om ply with established national and

loca l laws.

In each o f he 8 regions, the team carried out the 7 procedures invo lve d in setting up a

business:

1. Incorp orate d a business2. Obtained relevan t business licenses

3. Registered employees for social security4. Registered for taxes5 . Boug ht and transferred prope rty

6. Connected po wer and water u tili tie s (changed accounts and insta lled newconnections)

7 . Opened a bank account and applied for a Tsh 5 mi l l i on overdraft .

The survey team visited 9 different offices in February 2007 to obtain information and

data o n the procedures and costs:

1. Regional chambers o f commerce2. Business registr ation office s/office rs (registration)

3. Mu nic ipa l tradinghusiness license offices/officers (licensing)4. Munic ipa l land offices/officers (buying and transferring property)

Arusha, Dodoma, Iringa, Kigoma , Mbeya, M twara, Mwanza, and Zanzibar.



7

5. Tanzania Revenue Au tho rit y offi ces (taxation)6. Nat iona l Social Security Fundand Nat ion al Insurance Corpora tion (employment

issues)7 . Tanzania Electricity Supply Company (TANESCO ) and loc al water authority for

utility connections (account change and new connections)8. T w o banks with country-wide networks (for bank account and overdraft)

9. Others as advised by the various offices/officers.

The data collected was the veri fied by discussing the findings with 2-3 businesspersonsin each location wh o h ad set up businesses. The survey team then visited loca l business

associations (T CCIA s) and presented the preliminary firldings.



8

2. Survey Findings

2.1 Business Incorporation and Registration

Accord ing to the law, seven days should be a ll i t takes to incorporate and register abusiness in Tanzania. However, this i s n o t the case fo r f i r m s outside o f Dar.At least in

Mbeya or Mwanza, the forms can be f i l l ed out locally. However, the process i s s t i ll

centralized, so the forms sti l l must be submitted to the capital, calli ng fo r a costly and

sometimes lo ng our ney o n Tanzania’s roa d system. Thus, the length and cost o f

incorporating a business depends more o n the physical pr ox im it y to the ca pital thananything else. Instead o f 7 days, M be ya managed a speedy 10. In contrast, in Dodoma, acombination o f absent offi cial s and a pract ice o f n o for wa rdin g assistance means a firm

must spend 19 days to register.

2.1.I Legal Process

Figure 1shows the seven form al steps to inc orpo rate in Tanzania.

Figure 1. Seven steps to incorporate in Tanzania

Total cost betweon Tshs 108,200 and Tshs 338200 Fee PBYmWnl7 procedures, 7 dnyr

@ EN D 0

To comply with a l l these procedures, a firm must pay an average statutory cost o f Tshs106,200-Tshs 356,200.These costs comprise the registration fee o f Tshs 50,000-300,000depending o n the com pan y share capital; flat rate filing fee o f Tshs 45,000; and stamp

duty, wh ich varies according to the number o f copies o f he forms submitted: Tshs 6,200

for the Origina l Memorandu m and Art ic les o f Association, and Tshs 5,000 for each copy.

Reg istratio n requires seven steps. The multiple layers o f clearances or sequential stepsconta in rep lica tion (appendix 2).

2.1.2 Results

All businesses o n main lan d Tanzania are registered in D ar es Salaam and require between

10 and 23 days to complete the process. Eve n taking int o account the travel time betweenthe regio n andDar es Salaam by the cheapest form o f ransport available (usually busand/or tra in fr om Kigoma), there i s much regional variation. The global Do in g Business

report cannot pic k up region al variations.



9

Figure 2. Business incorporation and registration: Results

25

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Zanzibar h i b c y a Ar L R ha M i w ar a 1)odorna Kigo ina Mwstiza I h g a

18

Ano the r factor that determines the time to register includes whether the loca l office i s

suppliedwith application forms (figure 2). InMbeya (10 days), the applicatio n forms fo rbusiness name clearance were available loca lly, a nd i t ook just 2 days to travel to and

f r om Dar es Salaam. O f hose surveyed, M be ya represents the mos t efficie nt place in

wh ic h to register. In five o f hese locations, business name clearance fo rms we re no tavailable loca lly. Inothers, there was o n ly one fo rm (in a fairl y fragile state), wh ic h had

to b e photocopied by the applicant(s), addi ng one day to the duration. In Mwanza, i t ook12 days to register, one reason bei ng that the application f or m to register must beobtained fro m the Tanzania Investment Center (TIC). In extreme cases, the situation was

worse. In Dodoma, the relevant of fici al was absent fr om his offic e for three days during

the survey perio d in February. One Regional Trade Officer to ld the enumerators that hisoffic e n o longe r facilitated business registration by forwa rding applications t o Da r es

Salaam or fol low ing up o n the registration.

2.2 Business and Trade Licensing

For mal requirements wou ld take 32 days, mostly spent wait ing for the Munic ipa l

Licen sing Committee (MLC ) to meet procedural requirements. Therefore, durationvaries widely among the regions, taking anywhere between 19 days in areas with n oM L C equirement to 136 days in Mtwara.

2.2.1 Legal Process



10

Deal ing with the pro toc ol around licenses requires patience. In heory, the forma l

requirements shou ld take o n average 32 days, 21 o f wh ich are spent o n securing approvalfro m the Muni cipal Licensing Committee, whic h grants the business license. A llo wi ng 7days to complete the forms, most other steps take 2 days. The cost to the firm i s nil,

unless anticipated annual turnover is 20 m il li o n Tshs or above. In he lat ter case, the firm

would pay a fee o f Tshs 20,000. The process i s outl ined below.

1. Form completion. The applicant obtains application forms (Form 211 Rev.,

Ma rch 2004) f rom the Municipal Trade Officer and f i l l s in the requiredinformation. N o fee is required at this stage.

2. Form submission. Assuming the applicant is a l imited l iabil i ty company, i t

submits to the Trade Officer at the Ward level two completed application formsaccompanied by Memorandum o f Associat ion o f the company, Certificate o f

Incorporation, T ax Identificatio n Number (TIN), and Certificate and Tit le Deed orLease Agreement as evidence that the applicant has premises in wh ich to conduct

the business.

3. Assessment and payment if applicable. The Trade Officer at the Ward levelassesses the documents to estimate the anticipated annual turnover o f he intendedbusiness for purposes o f evyin g a license fee. Firmpays fee i f applicable.

4. Obtain approvals. All applications rel atin g to n onto urist hotels, guest houses, and

badrestaurant businesses requ ire the app roval o f the Ward Health Off icer (see

para. 14(ii) o Form 211 (Rev. Ma rch 2004)).

5. All applications (including for nontourist hotels, guest houses, barhestaurants)must obtain the approval o f he UrbanPlanning Officer.

6. Mu nic ipa l Licensing Committee approval and grant of license. Ha vin g obtained

all approvals above, the applicant submits al l documents t o the Mun icipa l TradeOfficer, who reviews them pr ior to a meet ing o f the Munic ipal Licensing

Committee, which grants the business license.

2.2.2 Results

Licenses are receive d with least delay in Mwanza and Iring a (figure 3). One reason is thatauthorities in bo th cities indicated that they did not require a Ward Committee meeting toapprove business license applications as all other locatio ns did.

T wo other factors tend to d elay licensing. P ro of o f ax payment across 2 separate quartersi s required in some regions such as Mtwara, in which i t took 136 days to obta in a license.In Arusha, D od om a (26 days), and Mb ey a (26 days), applicants ha d to photo copy thesingle application form at the o ffice because forms were no t available for distribution. In

Kigoma, i t too k 107 days to complete the process. In he absence o f a businessregistration or in corpor ation certificate, the Tanzania Revenue Au tho rity (TRA) officer in

Kigo ma refused to pro vide any informat ion on the TIN regis tration process.



11

Figure 3. Business and trade licensing: ResultsI

I Zanzibar Mbeya Arusha Mrwara Dodoma Kigorna M wa nz a Ir inga

21

2.3 National Social Security Fund (NS SF) Registration

Registrat ionwith the N SSF i s a two -da y process, with n o fees incurre d. Arusha, Mtw ara,

Mwanza, and Ir in ga meet this est imate. Mbeya's f ixed t im e prom ise o f 5 days extends i t s

dura tion to 7 days, the mos t t ime o f al l regions.

2.3.1 Process

1. The applicant obtains the fol lo win g forms fr om the local NS SF Comp lianceOff icer:

0 For m NS SFR .1 for the employer)

0 Fo rm NS SF R. 3A (one for each employee).

2. The ap plicant returns with the forms duly completed, w hi ch then are processed o n

th e same day and an NSSF number and/or certificate obtained.

2.3.2 Results

Arusha, Mtwa ra, M wanza, and Ir ing a al l complete the NSS F registrat ion process withinthe giv en theoretical 2 days (f igure 4). These four location s process applications o n th e

day that they are received fro m the applicants. In othe r cases, the agencies have chose n to

allocate a given tim e to the process duration. In Zanzibar, i t akes 4 days, because

applicants are requ ired to retu rn after a fixed 2 days. In Dod om a and Kigom a, applicants

return after 3 days. M be ya takes the longest-7 days-because app lican ts are asked to

retu rn after 5 days to co llect their numbers and/or certificates.



12

Figure4. NSSF registration: Results

2 2 2

I Zanz ibar Mbcyil AruuhA Mrwrrn Dodomv Kipoma Mvr lur Iring,

24

2.4 Tax Registration with Tanzania Revenue Authority (TRA)

Some tax registration form alit ies are dece ptively straightforward, consistin g o f ew short

steps with n o fees attached. In eal i ty i t can take up to 100 days to complete two key tax

registra tion steps, obtain ing a Tax Id entif icatio n Number and registering for the value-

added tax. .Mtwara, Kigoma, and I r inga are the most dif f ic ult c i t ies in wh ich to complete

tax registration. Across the board, tax registration appeared to be more a dec lara t ion o f

taxable income than registrat ion for informa tional purposes. I t of ten l ed to f i r m s being

taxed on anticipated rather than actual income. This outcome m ay create a n incentive for

infor ma l pract ice and mu lt ipl e business plans on f i rms' part.

2.4.1 Process

The steps be low out l ine the off ic ial procedure necessary to (a) obtain a Tax Ident i f icat ion

Number (TIN) and (b) register for th e value-added tax (VAT). Ea ch procedure takes 2days in heory, with no associated fees levied .

A. Obtaining a TIN:

1. Applicant obtains TIN application forms at the l oca l TRA off ice.

2. Applicant returns with the forms dulyfille d out and copies o f he Cer ti fi ca te o fIncorporat ionand Memorandum and Art ic les o f Association; and tw o passport photos

o f each director.

3. Application isprocessed, and TIN number i s issued o n th e same day.

B. Register ing for Value-Added Tax (VAT):



13

1. Applicant obtains an d completes a VATapplication for m after showing pro of o f

hav ing obtained a TIN.

2. TRAOfficer assesses whe ther the applicant i s el igible for VAT (that is, annual

turnover o f Tshs 40 mi l l io n or more).

3. I f applicant i s el ig ib le fo r VAT, i t s processed and a VAT num ber issued.

2.4.2 Results

Mtwara, Kigoma, and I r ing a are themost dif f icu lt c i t ies in which to obtain these two

services (figure 5). In Mtwara, i t akes over 30 days each to receive a TIN and a VAT

Figure 5. Tax registration: Resultsb7 I

registra tion because the applications must be sent to Dar es Salaam. InKigom a, the TRA

of f icer would no t prov ide any informat ion until the entrepreneur showed p ro of o f

business registrat ion or incorporat ion. In r inga, i t takes 8 days to issue the TIN. In

contrast, in Iringa, i t akes 91days. Appl icat ions from Irin ga were processed in Mbeya,

which, due to an I T systems upgrade, ha d a 60-da y backlog.

2.5 Property Purchase and Transfer

Purchasing existin g premises and obtaining th e t i t le deed i s not norm al pract ice for mo st

entrepreneurs in Tanzania. They prefer to rent premises, n ot least because o f he time i t

takes to complete prop erty transfers. The process sho uld take n o mo re than 38 days.

Mbey a ust falls short at 41 days. Howeve r, in Mtwa ra, the process i s estimated to take

280 days. There the survey team was told o f applicants beingadvised by the

Commissioner f or Land s offic e to stop the transfer process before obtain ing the t i t le deedbecause the process was tak ing too lo ng.

2.5.1 Process

Regardless o f whether the p roperty b eing transferred i s a developed o r emp ty plot, the

three-step procedure out l ined below remains the same. In theory, i t i s possible to



14

complete this process in 38 days. The cost to the buyer i s 1% o f the sa le pr ice o f theproperty in stamp duty. The cost to the seller i s a valuatio n fee, an approval fee o f Tshs

5,000, and subsequent cap ita l gains tax.

1. Obtain appropriate forms. Obtain from the Commissioner for Lands or

authorized Officer Lan d Forms N o. 2gY5No. 30,6 and No. 35, the Agreement o fTransfer o f Right o f Occupancy. No ee is payable.

2. Submission for approval of disposition to the Municipal Land Officer. The

forms must be accompanied by a Sale Agreement prepared by the SelledLawyer,

Valuation Report approved by a Government Valuer, valuation approval fees

receipt, Current Land Rent Receipt (as evidence that no outstanding land rent i s

payable), current Annual Returns filed with the Registrar o f Companies (in casethe seller i s a l imited l iabi l i ty company), pro of o f payment o f Stamp Duty, and

p r oo f o f payment o f capita l gains tax. A Tshs. 5,000.00 approval fee i s evied.

3. Submission to the Zonal Land Registry for registrationlendorsement o f the

details o f he new owner in he Certif icate o f Tit le. No fee at thi s stage.

2.5.2 Results

I t appears that several o f he loca l offices generally are efficie nt within their o w n

mandates at com ple ting their own responsibilities, but the centralized system causes

significant additional delay ( f igure 6). Lo ca l processes in Mw an za (1 14 days), Irin ga (120

days), and Arush a (125) cou ld be completed within 40 days but then were d elayed at least

3 additional months for the title deeds to be processed in D a r es Salaam.

Mbeya7and Zanzibar appear to be the most ef ficie nt cities, taking 4 1 and 53 days to

complete the process, respectively. The process took longest in Dodoma, Kigoma, andMtwara, where the offices suffer from extreme backlogs. Furthermore, in Kig oma (268days), different treatment o f differe nt clients appeared to take place. There, the team

spoke with applicants who had been wai ting to see the relevantoff icia l fo r several weeks

with n o success. InMtwa ra, applicants often were advised by the Commissioner for

Lands of fice to stop the transfer process before obta ining the tit le deed. One storyinv olv ed a businessman who h ad insistedo n comp leting the process but had been wait ingfor h is t i t le deed to come from Dar es Salaam for over five years.

Not i fi ca tion o f dispo sition under Sec. 36 o f he Land Ac t o f 1999.

Appl icat ion for Approval o f Disposi t ion under Sec. 39 o f he Land Ac t No. 4 o f 1999.

I t must be noted, however, that the estimate by the Mbeya L and Off icer that i t would take seven days to

obtain a ti tle deed fro m Dar es Salaam seems very optimistic.



15

Figure 6. Property transfer: Results

. - - __30 0 1

Zanzibar Mbeya Amsha Mtwara Dodoma IGgoma Mwanza Ir inga ILocal processes B an al and Central Govt Drocesses

30 I

I

2.6 Connecfing Power

Getting power of ten i s ci ted by f i r ms as one o f he k ey constraints t o business. The recent

InvestmentClima te Assessment (IC A) noted that almost 60% al l f i rms surveyed rated

po we r as a serious prob lem . In Tanzania, some areas suffered severe bac klogs and no

longer accepted applications. Other areas ha d no poles, wires, or meters. Transfers are

m uc h easier, taking 5 days at most.

2.6.1 Process

A. Ne w Connection

1. Applicant obtains orm. Fee: Tshs 6,000.2. Contractor provides rep ort. App l icant seeks a certi f ied electr iciade lectr ical wiring

contractor to prov ide a detailed (notarized) repo rt on the nature o f he wiring o f he

buildingon the TA NE S C O appl ication form. Electr ician’s fees: Tshs 30,000 (3-phase) or Tshs 10,000 (single phase).

3. Applicant submits application to TAN ES CO Planning Department to assess

instal lation costs ( of wiring and electr ical poles needed to bring electr ici ty building

location). There is n o charge for the assessment.

4. TANESCOperforms physical assessment o f o c at io n and connection options.

5. Contractor installs at the location.



16

Costs: Tshs 16,000 min. plus installation costs depending on distance to building.

Duration: 30-1 80 days.

A. Account Transfermame Change

1. Applicant writes a letter to the TA NES CO Office Manager requesting a name change

to the existing meter, attaching pro o f o f occupancy (t itle deed or lease agreement),new ma ilin g address, and pr oo f hat the previous account holde r has p ai d the last bill

in i l l .

2. TA NE SC O Office Ma na ger approves letter and supporting documents. Accou nt

change i s effected the same day. I t wil l be observed in he next billing cycle.

Costs: None.

Duration: 1 day.

2.6.2 Results

In Kigoma, Iringa, and Mbeya, i t was no t possible to get a power connection: K ig om a

had no poles or wires, and Ir inga had runout o f wires and meters (figure 7 ) . Mbeya had abacklog o f 20,000 applications due to the nonavai labi l ity o f wires. To tal days required

were 123, 103, and 101, respectively. How ever, the survey team was told o f a new

customer in Mbeya who had been connected within eight days after the process.

:igure 7. Connecting power: Results

Connect inn Pow er - results140

120

100

h

& n o

Ei

60

40

20

0

Znnzthmr M b vY . 4 Aruwhr Mtvunra I h d o m a Kigomn M w ~ n r n Ir lnp'

33,u < < , O , I L C , I I I I I 0 \ % < < , U , , , L,<,ll.tF,

In a ll other locations, i t took between 36 and 41 days to receive a n ew connection (figure.Zanzibar i s the most efficient, requ iring on ly 13 days for n ew connection. Time totransfer ex isting connections ranged fro m a minimum o f 2 days in Mwanza to a

m a xi m um o f 5 days in Mtwara.



17

2.7 Connecting Water

2.7.1 Process

A. New Connection

Acti on s and documents require d to connect water:

1. Applicant makes written request for a new connection that includes detailed

directions to the location.2. Tech nician makes needs assessment. Technician visits the locatio n with the

applicant t o assess what i s needed to in sta ll the new conn ection (distance t o nearestwater mains, required materials). T echnician’s trav el costs are incu rred by the

applicant.3. Technician produces pro-forma invoice for the new connection installa tion costs.

Customer i s expected to ma ke a payment before the installa tion is started.

4. Technician installs meter to complete process.

Cost: M ate ria ls a nd labor costs to install.

Duration: 10 days.

B. Account Transfer

Actions and documents required to connect water:

1. Applicant obtains account transfer application form.

2. Applicant submits application with p r oo f o f occupancy or a lease agreement and

evidence that the previ ous account hold er has cleared the bill.3. Water autho rity approves and transfers the account.

Cost: None.

Duration: 2 days.

2.7.2 Results

Again, i t s faster to transfer an ex isting account (2-3 days) th an to get a ne w waterconnection (minimum o f 1-2 weeks) (figure 8). The process ofte n can be expedited onl yi f he customer him- or hersel f purchases the req uired mate rials and digs the trenches forwater pipes in advance.



18

Figure 8. Connecting water: R esults

2.8 Obtaining a Loan

T o start up, grow, and expand, f i r m s need easy access to f ina nc ial services, capital, and

long- and short-term financing. Altho ugh the process is relativ ely simple, eligibility

requirements differ f ro m reg ion to region. In Kigom a, once they ope n accounts, f i r m s

need not wa it out a lock-out period8 o request an overdraft. Howe ver, f i r m s in M t w a r a

and Arusha m ust wait 3 years after start-up be fore achieving el igib i l i ty to m ake an

application.

2.8.1 Process

The process o f obtaining a loa n includes in i t i al contact with the bank's credit off icer fo r

advice on ho w to apply for the loan, submission o f a loa n request, cred it appraisal,

documentation, and disbursement. T he duratio n and costs o f he transaction depend

largely o n the nature o f he business and lo an request.

2.8.2 Results

Obtaining a Tshs 5.0 m i l l i o n overdra ft took a minimum o f 60 days and largely depended

on loa n el igib i l i ty requirements as comm unicated by th e relevant bank branch staff. In

Dodoma, an overdraft was possible after 61 days, in M be ya 182 days, in r ing a 212 days,

and in Zanzibar 362 days (figure 9). Ba nk branches in Mwanza, Mtwara, and Arusha to ld

o f businesses be ing elig ible f or loans 2-3 years after start-up.

* The restr iction o n new accounts' us e o f overdraft facil it ies, whic h varies from reg ion to region.



19

Figure 9. Obtaining a loan: Results

1

1000

BOO

00 0

40 0

200

0

I*%Fanzibar Mb cy i A * " S h n M t w a r i D o d o m a K i go m a M w n n za



20

3. Consolidated Picture

3.1 Duration

Starting a business in Tanzania takes betwee n 4 mon ths (Zanzibar) and 18 months

(Mtwara and Ki goma) (figure 10). Country-w ide, the distance fr om D ar es Salaam

combined with the qua l ity o f he roadha i l ne twork ar e impo rtant factors in expla in ing th e

difference in he number o f days i t akes.

Figure I O . Days to open a business

Zanzibar Mbeya Fvusha Mt wara Dodoma Kigoma Mwanza lringa

A "psychological" distance from the head off ice also might expla in the differences in the

performance o f off icers and staff within the same organizations (NSSF, TRA, bank).

Mwanza, Arusha, and Mb eya seem to be the quickest places to se t up businesses.

How ever, M beya 's f igures m ay have been exaggerated by the La nd Off icer's rather

optimistic estimate o f h o w l o n g i t wo ul d take to get a t i t le deed for a transferred property.

3.1.IWhere is the time spent?

Across the country, transferring anded property to the business and gettin g a good, clean

t i t l e to i t s th e most t ime-consu ming process in starting a business (figu re 11).



21

igure 11 . Where is the time spent?

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Zanzibar Mbeya Arusha Mtwara Dodoma Kigoma Mwan za l r inga

Connect ing power was ne xt in l ine, especially since some regions (Mbeya, Kig om a, an d

Iringa) n o longer w ere accepting appl icat ions for ne w connect ions.

Securing business licenses at the municipal level came third, fo l lowed by deal ing with

taxat ion (TIN an d VAT), business registration, an d wa ter connection.

3.2 Costing the Time

The cost o f he time spent going thro ugh these processes was c omp uted using Tanzania's

2004 regional per capita GD P figures. A dai ly per capi ta GDP was calculated and used as

the opportuni ty cost o f ormal iz ing and startingup a new business in various locations.

In Kigo ma and Mtwara, the cost to f orm al business far exceeded regio nal pe r capita G DP

(f igure 12). With th e cost o f he time spent registe ring and starting a business at 145% o f

i t s per capita GDP, K i g o m a i s highest cost investment location in Tanzania. Mtwara i s

th e second most expensive location with the amount o f time spent cost ing 139% o f per

capita GDP. These regions' low er incom e levels amp li f ied the negative effect o f their

distance from Dar es Salaam, where at least two o f the mo st impo rtant processes

(business incorpo rat ion and f inal izat ion o f i t l e deed transfer) are completed.



22

igure 12 . What is the opportunity cost?

400,000

350,000

300,000

I

f i50,000

e

3 200,000

150,000

100,000

50,000

35%

139%145%

89%

140%

120% -)

U

sE

100% .!IU

n0

8

-80%

ss

8

540% f

60 %Lc

20 %

0%

Zanzibar Mbeya Arusha Mtwara Dodorna Kigorna Mwanza lringa36

Although Dodom a and Mwa nza had roughly s imi lar costs in TZ S terms,’ Dodo ma’s cost

was almost 90% o f t s regional GDP compared to Mwanza’s 55%. I t s clear that Dodom a

is disadvantaged bot h by i t s lowe r income le vel and the fact that i t too k almost 50% moretime to register and start a business there than i t did in Mwanza.

“TZS” means Tanzanian shi l l ings p er US$.



23

4. Conclusions

The central ization o f the business inco rporation and registration function in Dar esSalaam has a ma jor imp act on the t im e taken and nonstatutory costs incurred to complete

the process fo r those w ho are not in he ci ty. E ve n sole proprietorships must register their

businesses in Dar es Salaam. A s imple and ef jc ient solut ion to some of the informat ion

f lo w and s tandardization problems may l ie in the design and deployment o appropr iate

informa tion dat a transfer systems. International experience suggests that web-based

appl icat ions and a broader approach can pro v id e bet ter -qual i ty government serv ices,

increased citizen satisfaction, higher efficiency, reduced costs, lower administrative

burden, shorter processing times, and reduced rent-seeking by government employees.6

Update d data transfer systems can translate int o increased qua l i ty o f nterface between

f i rm s and public sector at a regional level, an improved business environment, and

expanded business opportunities for the priva te sector across Tanzania.

Simi lar ly , s t reamlin ing procedures can cut t imes withou t req uir ing much inst i tut ional

reform. For example, the requirement for site visits and ward committee meetings

lengthens business licensing. The delegation o f hese functions from the ward commi ttee

to M un icip al Trade O fficers sets de facto l im its on duration.

Regis ter ing fo r tax appears to be more fo r dec lara tion o taxab le income than fo r

informational puvposes. Furthermore, tax payments may be based on anticipated rather

than actual income. G ive n that the latter m ay encourage f i r ms to avoid formal izat ion or

incentivize them to prepare multiple business plans and financial accounts, this aspect o f

tax registration might war rant deeper analysis and review .

Access to business-enabling ut i l i ty services such as power and water in the regions

remains cruc ia l . The shortage o f equipment for p ow er connections in three towns at the

time o f he surveywas a clear i l lustration o f he seriousness o f his particular constraint to

increasing investment in Tanzania’s regions.



24

Appendix I. tarting a Business in Tanzania by City

Zanzibar

Zanzibar is th e col lect ive name for two is lands: Unguja Island (the m ai n is land) and

Pemba Island to i t s north. According to the August 2002 census, Zanzibar’s population

was 981,754. The capi tal o f Zanzibar located o n the is land o f U ngu ja i s Zanzibar city. I t

i s a 15-minute flight and a 2-hour journe y by fast ferry f r om D ar es Salaam. The city ’s

ol d quarter kn ow n as Stone Town i s a UNESCO W o rl d Heri tage site. Zanzibar’s m ai n

economic act iv i t ies are tourism, for which i t i s well-known global ly; spice cult ivat ion

(cloves, nutmeg, cinnamon, and pepper); and raf f ia product ion.

Figure A I .IStarting a business in Zanzibar, February 2007

--.~tarting a Bu siness in Zanzibar (Feb 2007)

.,,...._.,---- ~ -_1--- _-2%

4%

120

100

80

v)

hmn

60

40

20

0

Duration: 129 Days

Cost: 35 % of per capita GDP

2%

2%

15%

Registration License NSSF TIN VA T Roperty power Water

Procedure



25

Mbeya

Mbey a i s a ci ty located in southwest Tanzania approximately 1,200 kilometers (km) f rom

Dar es Salaam. Mbeya i s a 12-hour dr ive f rom Da r es Salaam on a go od paved nat ional

road or a 2-day journey o n th e TAZARA rai lway l ine. Mbeya ai rport i s no t operating.

Mbeya's urbanpopulat ion in 2005 was e stimated at 280,000.

Mb eya region's ma jor act iv i ty i s smallholder ag riculture. L oc al crops includ e maize, rice,

banana, and potatoes. High -va lue expo rt crops such as tea and coffee also are grown, and

there i s extensive anima l husbandry. M bey a's weather i s mo st pleasant between June and

October, when it i s dry and warm. There are game-viewing safaris in Mad ib i l a and

Rujew a as well as excellent trout fishing, hiking, and forest-walking opportunit ies in the

mountains south o f own.

Figure A I 2 Starting a business in Mbeya, February 2007

25 0

200

150

(R

an

100

50

0

Starting a Business in Mbeya (Feb 2007)x - - ~ ~ ~ ~ ~ - - --- I

Duration: 194 Days

Cost: 53% of per capita GDP

11%

2%

Registration License NSSF TIN VAT Roperty Power Water

Procedure



2 6

Mwanza

T h e c it y o f M w a n z a o n the southern shores o f Lake V ic tor ia in northwest Tanzania i s the

second largest c it y in the country. In 2002 i t had a popu lat ion o f 476,6461° but has most

l ikely expanded to over 500,000. Mw anz a i s approximately 1,219 km f r o m D a r es

Salaam. Travel t ime between the 2 takes approximately 1 hour and 45 minutes by air, 2

days by road depending o n the condit ions, and 3 days by t rain.

The main economic act iv i t ies in Mwan za Region inc lude fishing and f ish processing,

mining, cotton farming, textiles, and soap manufacturing. The ci ty also serves as a por t

for trade to Kenya and Uganda across La ke Tanganyika. Mw an za also is one o f the

gateways to th e Serengeti Na tiona l Park to the northeast and the mining sites in the

neighbor ing regions o f M a r a and Shinyanga.

Figure A I 3 Starting a business in Mwanza, February 2007

Starting a Business in Mwanza (Feb 2007)250

200

150

Inrn

n

100

50

0

4%

Registration License NSSF TIN V A T Roperty Power Water

Procedure

lo at iona l Bureau o f Statistics, August 2002 Popula tion Census o f Tanzania.



27

Arus ha

The tow n o f Arusha is located in northern Tanzania approximately 642 km f rom D ar es

Salaam. Travel time f r om D ar es Salaam to Arusha i s approximately 1 hour by air and 8

hours o n a wel l -maintained m ajor nat ional road. According to th e 2002 Census, Arusha

had a popula t ion o f 282,712 but l i ke ly has increased to almo st 400,000. Arush a has been

dubbed the "Geneva o f Afr ica." I t i s home to the headquarters o f the East Afri can

Communi ty and the Internat ional Crimina l Tribun al for Rwa nda (ICTR), bo th hosted at

the Arusha In ternatio nal Conference Center.

The primary industry in Arush a is agriculture: vegetable, coffee, and flowe r cultivation .

D u e t o i t s location, Arusha i s also the gateway to Tanzania's world-class tourist

destinations: Serengeti Plains, Ngo ron gor o Crater, Ol du vai Gorge, La ke Manyara,

Tarangire N ation al Park, and M o u n t K i l i m a n jaro.

Figure A I 4 Starting a business in Arusha, February 2007

250

200

150

In%

mn

100

50

0

Duration: 216 Days

Cost: 59 % of per capita GDP

5% 1%1%

1%

34 %

11 %

Registration License NSSF m VA T Roperty Power Water

Procedure



28

Dodoma

Dodoma i s Tanzania’s po lit ic al capital. The t o w n i s ocated in cen tral Tanzania, about

486 km f r om Dar es Salaam. Travel t im e betw een the 2 centers i s appro ximately 6 hours

on a good paved road. Alt hou gh the t o w n i s served by a Tanzania Ra i lwa ys Corporation

l ine, services fro m Da r es Salaam are suspended. The airport can handle light aircraft.

In 2002 Dodo ma Reg ion was est imated to have a populat ion o f 1.7 mi l l i on . The reg ion i s

almo st ent irely dependent o n sma llholder ag ricu ltur e (beans, seeds, grain, peanuts,

coffee, tea, and tobacco) and l ivestock production. I t i s a l ivestock trading center.

Industr ia l act iv i ty i s min ima l . I t nvolves a few small-scale processing indus tries such as

o i l extraction, carpentry, pottery, m etalworking, and woo d carving.

Figure A I 5 Starting a bu siness in Dod oma, February 2007

Starting a Busines s in Dodom a (Feb 2007)350

300

250

200

In

hCoa

150

100

50

0

Registration License NSSF TIN V A T Property Powe r Water

Procedure



29

lringa

Lringa is located in central Tanzania a pproximately 502 km f rom Dar es Salaam. The trip

f ro m Da r es Salaam to Ir ing a takes app roximately 8 hours by road. According to the 2002

Census, the town’s p opu lation was 106,668. Iring a’s t o w n center stretches along a hil lto poffer ing scenic views o f he Ruaha River and the val ley below. During June, July, and

August, night temperatures fall to near freezing. Economic activity revolves around

agriculture (primarily maize, onions, and tomatoes), vegetable, and dairy processing;

transportation (Iring a i s a t ruck ing hub); and general merchandise trading.

‘igure A I 6 Starting a business in Iringa, February 2007

Starting a Business in lringa (Feb 2007)

400

350

300

250

u)

z 200n

150

100

50

0

2%

28%

Duration:359 Days


Registration License NSSF TIN VAT Property Power Water

Procedure



30

Kigoma

K i g o m a i s located in Western Tanzania, on th e eastern shore o f Lake Tanganyika and

close to th e Burundiborder. Kigo ma s approximately 1,572 km f r om D ar es Salaam. The

trip takes approximately 3 hours by air and 3 days by road and rai l . According to the

2002 Census, Kigoma 's popu lat ion was 144,852. I t s m ai n economic activit ies are fishing,

subsistence agriculture, and cross-border trading . I t s also the staring po in t for tourist and

researcher excur sion to vie w the chimpanzees o f he Ma hale Game Reserve.

600

500

40 0

v)

2 3000

200

100

Starting a Business in Kigom a (Feb 2007)~ -" --- ~ - __-~

Duration: 528 Days

Cost: 145% of per capita

25%

0

GD P

73%

0%0

34% 1%

Registration License NSSF Tw\I VAT Roperty Power Water

Procedure

Figure A I 7 Starting a business in Kigoma, February 2007



3 1

Mtwara

Mtwa ra is located south o f Tanzania o n the border with Mozambique. The main t ow n i s

584 km f rom Dar es Salaam. Travel time i s approximately 1hour by air and 12 hours ona road o f vary ing qual i ty depending on the season. In 2002 the region’s popu lat ion was

estimated at 1.12 m ill i on .

M tw ar a has a deep-sea por t in a natural harbor. Ag ricultu re i s th e mainstay o f he town’s

and region’s economies. Cashews are i t s major cash crop. The region has faced

significan t development challenges due primarily to poor road and energy infrastructure.

However, the recent ly commiss ioned M na zi Ba y Gas to Elect r ic i ty Project i s ensuring a

rel iable powe r supply for in dustrial and commercial act iv i t ies inMtwara.

Figure A I 8 Starting a business in Mw ara, February 2007

600

500

400

v)

2 300c1

200

i o0

0

Starting a Business in Mtwara (Feb 2007)

Duration:509 Days


9%

9%

28% 1%

10% 2%

I

Registration License NSSF TIN VA T Roperty Power Water

Procedure

Appendix 2. Legal Process Associated with Registering a Business



32

S/N1.

Detailed description o f procedure

Na me search clearance

2.

3.

4.

Appl ica nt submits appl ication for

registrat ionby filing Company FormsNos . 14(a) and 14(b) a ccompanied by

Memorandum and Art ic les o f Associat ion

Assessment an d advice o n registrat ion and

fi l l ing fees and stamp duty

Payment o f equi red fees

a f i le

Preparation an d Issuance o f Cert i ficate o f

Registrat ion

5 .

6.

1.

2.

3.

4.

5.

Preview o f documents

Issuing Registrat ion Number and opening

A name search i s conducted to establish availability and validity. N o fee i s

payableSubmission to the Reg istry Officer of, among other items, the Memorandum and

Art ic les o f Association o f the proposed com pany together with Company FormsNos. 14 (a) and 14 (b). Note that Form No. 14 (a) wil l contain informationdescribing details o f the f i rs t directors, secretary, and registered off ice o f theproposed company. Fo rm No. 14 (b) i s a confirmation by a director or secretary o f

the company as the case m a y be regarding compliance with the provisions o f the

Companies Ac t N o . 12 o f 2002.Docu men t review and fee assessment by Reg istry. The minimum i s Tshs.50,000.00 where the authorized share capital i s between Tshs. 20,000.00 and

500,000.00 whi le the maximum i s Tshs. 300,000.00 where the authorized share

capital i s more than Tshs. 30,000,000.00. Stamp Duty depends on the number o fcopies o f Memorandum and Artic les o f Association submitted to the RegistryOffi cer. Tshs. 6,200.00 is changeable on the ori gin al cop y and Tsh. 5,000.00 o neach copy. N ot e that the law does not provide fo r a minimum numbers o f copies

for purposes o f Stamp Duty. However, the practice i s to submit the original andsuch other copies as may be the numbers o f he shareholders o f he company or

for other regulato ry authorities o r banking institutions.

After the paymen ts an d receipt issuance, the documents wil l be forwarded to the

Registrar for review and approval. I f he documents ar e approved, the Registrar

will forward the documents to the Deputy Registrar, who assigns the documentsto the Registry Officer with instructions to open a f i l e and give a registrationnumber to the intended company.The Regis try Office r opens a file, issues a registrat ion number, and forwards thefil e to the Secretary.



33

6. The Secretary prepares a Registratio n Certifica te an d submits i t to the Deputy

Registrar fo r signature. Once signed, the Registration C ertificate i s returned to the

Regis try Office, w hic h issues the Registration Certificate to the applicant.

Statutory Costs: Registration Fe e varies between Tshs 50,000 and Tshs 300,000

depending on the company share capital; F il in g Fee : 45,OOOflat rate; Stamp Duty:

6,200 for Orig inal Memorandum and Articles of Association and Tshs 5,000 for each

copy. Total between Tshs 106,2 00 and Tshs 356,200.

Duration: 7 days.



34

Appendix 3. Licensing Procedures

s /N1.

2.

3.

1.

5 .

Detailed description of

procedureApply fo r businessLicensethrough fi l ing A pplicationFormNo. TEN.211 (Rev.

Mar ch 2004). In case o f acompany, accompanied by

Memorandum and Articles o fAssociation o f company,Certificate o f ncorporation,TIN Certificate, and Title

Deedor Lease Agreement orReceipt. In case o f a BusinessName, Certificate o fRegistration and Extract.

Obtain approval o fHealthOfficer in case o f a l lapplications relating tononto urist hotels, guesthouses, badrestaurant.

Obtain approval o f UrbanPlann ing Of fic er as describedunder para. 14(iv) o fForm

No. 21.Review o f applicationdocuments pendingMun icipal LicensingCommittee’s meeting.

Approval by MunicipalLicensing Committee andsubsequent grant o f aBusiness License.

Wh er e (office)

and who (official)Trade Officer(s) atWard Level .

Health Officer atWard Level

Urba n PlanningOfficer atMunicipal level

Municipa l TradeOff icer

MunicipalLicensingCommittee

Statutory

(costs) (TZS)Tshs 20,000 if

anticipated Tshs 20mi l lion. N o ee i s

payable if urnoveri s below Tshs 20mi l l ion.

NIL

NIL

NIL

NIL

Estimated

duration to

completion (days)7

2

2

21



3 5

Statutory costs

(TZS)Valua tion fee

depends o n value

o f prope rty subject

o f sale as indi cate d

in valuat ion report.

Stamp Duty i s

assessed at 1% o f

Appendix 4. Description of Property Transfer P rocedures

Estimated

duration to

completion (da)

7

1

1. The seller obtains Land Forms No. 29 being a n ot i f ication o f disposi tion under

Section 36 o f he Land Ac t, 1999 to the Commissioner for Lands or authorizedOfficer , Land For m No. 30 being Appl icat ion for Approval o f Disposi t ion under

Section 39 o f the Land Ac t No. 4 o f 1999 and Land Form N o. 3 5 being

Agreement o f Transfer o f Right o f Occupancy. N o fee i s payable o n obtaining the

said LandForms.

Detailed description

Seller causes valuation

o f property subject o f

sale.

2. The seller completes the forms referred to above and submits the same for

approval o f disposit ion to the Muni cipa l Land Officer. The forms must beaccompanied by a Sale Agreement (prepared by the SelledLawyer), Valuation

Report approved by a Government Valuer, v alu atio n approva l fees receipt, currentLand Rent Receipt (as evidence that no outstanding land rent is payable), currentAnnual Returns f i led with the Registrar o f Companies (where the seller i s alimited l iabi l i ty company), pro of o f payment o f Stamp Duty, p r oo f o f payment o f

Capital Gain Tax. At th is stage, the seller pays Tshs. 5,000.00 as approval fee.

Where (office) and

who (official)

Government Valuer. Not ethat even if valuat ion was

conductedby a PrivateValuer, i t must be

approved by a

Government Valuer.

3 . Having obtained the required approval from the Municipal Land Officer, the

Seller submits the documents to the Zonal Land Registry forregistratiodendorsement o f the details o f the new owner in the Certif icate o fTi t le. N o fee at this stage.

4. Note that the procedure i s the same regardless o f whether the property being

transferred is developed or empty plot .

30 % o f sale pric e if

prope rty subject o ftransfer is owne d

by a l im i ted

l iabi l i ty company

and 10% o f sale

p r i c e if proper ty

S I N

1.

-.

-. 1

Seller prepares Sale

Agreement for part ies to

sign and submit signed

agreement to Ta nzaniaRevenue Author i ty fo r

purposes o f Stamp Duty.

Seller must p ay capital

gains tax.

TRA’s off icer at Regional

level

TRA’s of f icer at Regional

level



36-.

5.

-.

Seller obtains La nd

Forms Nos. 29,30, and

35.

Seller submits completed

Land F o m pply ing for

approval o f disposition.

No te that the forms will

be accompaniedby a

Sale Agreement, current

(within six months)

approved Valua t ion

Report, valuation

approv al fee receipt,

current La nd Rent

Receipt, p ro of o f

payment o f Stamp Duty,

and Current Annua lReturns f i led with the

Registrar o f Companiesin case o f a l imi ted

l iabi l i ty company.

Seller sub mits a ll the

documents referred to

above to the Zon al Lan d

Registry for registrat ion

o f ransfer inwhic h the

details o f he new owner

wil l be endorsed in he

Cert i ficate o f Title.

Munic ipa l Land Of f ice

Munic ipa l Land Of f icer

Depu ty Registrar at Zon al

Lan d Registry, wh o

endorses and signs the

t ransfer o n behal f o f he

Registrar for Lands.

subject o f ransfer

i s indiv idual

property.

Nil

Tshs 5,000approv al fee.

Nil

1da y

14 days

14 days

Cost (to buyer):

Cost (to seller):

Duration: 38 days

Stamp Du ty of 1% of the sale price of the property

Approval Fee: Tshs 5,000

Valuation Fee, Capital Gain Tax



Documents

Sub-National Costs of Doing Business in Tanzania (2007)