Real Estate Foreign investors are allowed to invest in the real estate industry in Tanzania, however Tanzanian law prohibits foreign persons and entities from holding the highest form of land title called a granted right of occupancy (GRO). Foreign investors may only acquire and hold a lesser form of title referred to as a derivative right of occupancy (DRO). Foreign investors must obtain a DRO from the TIC and are not able to acquire a land title directly from the Land Registry in the same way as Tanzanian persons or entities. Under Tanzanian law, for the purposes of the Land Act 1999, a company is deemed to be a foreign company where more than 50% of its shares are majority owned by a foreign person. Tanzanian law does not specify the treatment of a company which is owned in equal proportions (i.e. 50%/50%) by a Tanzanian person or entity and a foreign person or entity. Accordingly, the following options are available for foreign investors to acquire land in Tanzania in addition to acquiring a DRO from the TIC: 1. a joint venture with a local partner which would hold the majority of shares issued in a special purpose vehicle company. This option would allow the foreign investor to use land under a GRO; or 2. a lease from the local person holding a GRO (a lease may be granted for a term of up to 10 days less than the term of the GRO). Banking, Finance and Exchange Control The Foreign Exchange Act, 1992 (the Foreign Exchange Act ) is the law that covers the dealing with or exchange of local currency or foreign currency and vice versa. There are no specific restrictions imposed on businesses exchanging Tanzanian Shillings ( TZS ) for other currencies, provided this is done through an “authorized dealer” or “Bureau de Change” established under the Foreign Exchange Act. Where a company intends to export funds from Tanzania to another country, banks are permitted to authorize outward capital payments subject to the following requirements: 1. In respect of payments connected with direct investments and repatriation of capital and income to foreign shareholders (including remittances in respect of proceeds in the event of liquidation) banks would demand audited reports and authenticated tax clearances from the TRA confirming payments of all relevant taxes; and
2. In respect of payments or transfers for scheduled debt servicing: a. contracts approved by a commercial bank must be sighted plus creditor’s demand notes to that effect. Such remittances should not be affected by any bank other than the approving bank; and b. (commercial banks should furnish the Bank of Tanzania ( BoT ) with monthly reports on loans serviced in the prescribed format. The legislation regulating banks and financial institutions (including foreign investors in the banking sector) in Tanzania is the Banking and Financial Institutions Act, 2006. There is other subsidiary legislation and circulars are issued by the BoT from time to time. There are no restrictions on foreign investors opening bank accounts with Tanzanian banks, provided that the investor gives the bank sufficient information for KYC purposes, and the bank complies with the existing banking regulations Dispute Resolution Court Litigation Commercial disputes can be initiated in the High Court of Tanzania, Commercial Division (High Court). Since its establishment, the High Court has resolved the large majority of cases within 6 months. Decisions of the High Court can be appealed to the Court of Appeal of Tanzania, which is the final appellate court. Arbitration Tanzania became a contracting state to the New York Convention on 13 October 1964. Despite this, the country is yet to implement the Convention into domestic law. Therefore, there remain challenges with the enforcement of foreign arbitration awards in this jurisdiction. However, arbitration proceedings are common for disputes arising out of investments. Investors must be aware that some disputes, in relation to particular industries, must be allocated to special quasi-judicial bodies. For example, disputes in relation to petroleum exploration or development operations must be heard by the Commissioner for Petroleum Affairs at first instance.
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