Other Business Taxes (Local Taxes, Stamp Duty, Payroll Levies)

Beyond the major taxes (income tax, VAT, withholding), businesses in Tanzania face several other taxes and levies. These include local government taxes, transaction duties like stamp duty, and payroll-related contributions. While individually smaller, they can add to the cost of doing business and must be complied with.

Local Government Taxes and Levies

Local authorities in Tanzania impose certain taxes to fund municipal services. Key local levies affecting businesses:

• Property Tax: The Tanzania Revenue Authority (TRA) now administers property rates on behalf of municipalities. Property tax is levied based on the value of premises. Rates vary by location and value band. For unvalued properties, fixed amounts apply – e.g. TZS 18,000 per ordinary building per year and TZS 90,000 per storey for multi-storey buildings​. For valued properties, a percentage of the value is charged (commonly 0.1% to 0.2% per annum of the property value, depending on city by-laws). Businesses owning premises should budget for this annual tax. Note: In recent years, there have been changes centralizing collection at TRA to improve compliance.
• Local Service Levy: Local Government Authorities can charge a service levy up to 0.3% of a business’s turnover in their district​. This is effectively a local business tax on gross revenue. Many councils impose the full 0.3%. For example, a factory in Dar es Salaam with TZS 10 billion turnover might owe up to TZS 30 million as service levy to the Dar City Council​. Usually, this levy is payable quarterly. It’s important to note that it’s on turnover (not profit), so even loss-making businesses must pay. (EPZ companies are exempt from this for first 10 years​).
• Produce Cess: If your business purchases agricultural products or forestry products, local governments levy a produce cess. It’s capped at 3% of the farm gate price for food and cash crops and 5% for forest products (timber, charcoal, logs). For instance, a cotton ginner buying cotton from farmers may have to pay 3% cess to the district where the cotton is produced. This tax is intended to fund local infrastructure in producing areas. Transport of crops under one ton between districts is exempt to not overburden small farmers​.
• Signage fees, permit fees: Municipalities often charge fees for business licenses, billboards or signage permits, parking fees, etc. These are typically smaller and vary by town. For example, a shop might pay an annual billboard fee for its sign and a city trading license fee depending on its trade category.

Local taxes are deductible expenses for income tax. They do increase the effective tax burden and must be monitored as rates can change by council decisions (though caps are set in law as above). The Tanzanian government has tried to rationalize local taxes to avoid overburdening businesses and to eliminate nuisance fees. Still, service levy and property tax are significant.

Stamp Duty

Stamp duty is a tax on certain legal instruments and documents. The Stamp Duty Act (Cap 189) specifies rates for various documents. Common instances for investors:

• Instruments of Transfer of land or buildings: Stamp duty is 1% of the consideration or market value. So, if you purchase real property for TZS 500 million, the stamp duty is TZS 5 million. This is paid by the purchaser (usually) upon executing the transfer deed.
• Transfer of shares in a company: Stamp duty of 1% of the value of shares transferred is payable. For instance, selling shares worth TZS 100 million would incur TZS 1 million duty. This tax can apply to M&A transactions – an investor acquiring a local company’s shares should factor this cost (1% may seem small but at big deal sizes it’s material).
• Lease agreements: Stamping of lease deeds is required. The rate might be a percentage of average annual rent or a fixed fee by duration. Often 1% of total rent over the lease term (capped if long term).
• Mortgage deeds: Stamp duty applies on mortgages (maybe 0.1% of loan amount or fixed nominal amounts).
• Contract notes, debentures, insurance policies: Many attract nominal stamp duties or % rates. For example, an insurance policy stamp duty might be a flat TZS 500.
• Receipts over TZS 100,000 technically require a TZS 100 stamp (though in practice this is subsumed by use of EFD receipts nowadays).

Most business transactions that involve formal documents – you must ensure stamping to make them legally enforceable. Unstamped (or insufficiently stamped) instruments can be inadmissible as evidence in court unless duty and penalties are paid. So, when closing a deal, part of the process is to submit the document to the Tanzania Revenue Authority’s Stamp Duty office, calculate duty, pay it (often via bank or mobile money), and get the document stamped/franked.

Recent note: In 2022, Tanzania moved toward electronic stamping in some areas, but physical stamps/franking machines are still widely used at registries.

Stamp duty is a minor cost (1% on transfers is the key one). Exemptions exist for group internal reorganizations (with Minister’s approval) to avoid duty on intra-group transfers, and for certain government-related transactions.

 Payroll Taxes and Social Contributions

Employers in Tanzania face additional charges on top of PAYE withholding for employees:

• Skills and Development Levy (SDL): This is effectively a payroll tax paid by employers to fund vocational training. The SDL rate is 3.5% of the total gross salary paid to employees. (It was 3.5% but was reduced to 3.5% from July 2020.) Every month, an employer calculates SDL = 3.5% of all payments to employees (wages, bonuses, allowances except maybe exempt allowances) and remits it to TRA by the 7th of next month. Employees do not contribute to SDL; it’s entirely employer’s cost. For a company with large payroll, SDL is a significant expense (e.g. for a monthly payroll of TZS 100 million, SDL is TZS 3.5 million). Certain small employers (with few employees) and approved educational institutions are exempt from SDL. The government has considered further reducing SDL to spur employment, but currently 3.5% stands​.
• Workers Compensation Fund (WCF): Introduced in 2015, this is an insurance-type contribution to cover employee injuries and occupational diseases. Private sector employers contribute 0.5% of monthly payroll to the WCF. Public (government) employers contribute 0.5%. The WCF provides compensation to employees for workplace injuries. Employers pay this to the fund (managed by Social Security). So effectively, an investor company with 100m payroll pays 600k per month to WCF. This cost is often not widely known to new investors but is mandatory.
• Social Security (Pensions): Tanzania merged pension funds into the National Social Security Fund (NSSF) for private sector and Public Service Social Fund (PSSSF) for public sector. Private employers and employees each contribute 10% of the employee’s salary to NSSF (total 20%)​. Employers may opt to shoulder the whole 20% (some do as part of net-salary agreements). As an investor, you must register employees with NSSF and remit the contributions monthly. The contributions build the employee’s retirement benefits (so unlike taxes, these are personal savings albeit mandated).

These payroll levies mean the cost of an employee is higher than their net salary. For example, an employee with TZS 1,000,000 gross: the employer pays 1,000,000 + 35,000 SDL + 6,000 WCF + 100,000 NSSF (employer portion) = 1,141,000 cost, while the employee’s take-home after PAYE ~ say 800,000 and 100,000 NSSF deducted. When planning labor costs, add ~15% on top of gross salaries for employer SDL+WCF+NSSF. (This 15% is comprised of 3.5% SDL + 0.6% WCF + 10% NSSF = 14.1%).

Other Taxes and Fees

• Stamp Duty on financial instruments: As mentioned, if your company finances via loans or raises capital, stamp duties apply (1% on share capital increases, etc.). The Tanzania Investment Centre (TIC) often facilitates exemptions on stamp duty for strategic investors under certificates of incentives, but normally 1% still applies on share transfers.
• Excise on certain payments: While excise duties mainly hit goods (see section 12), there is an excise of 10% on mobile phone airtime and data usage and on money transfer fees​. Companies with bulk phone bills effectively pay that embedded in their telecom charges.
• Municipal charges: If you operate in a city, expect things like garbage collection fees or fire service levy. For example, Dar es Salaam city may charge a fixed annual fee per commercial building for waste management.
• Industry-specific fees: Mining companies pay royalties to the state on mineral production (e.g. 6% on gold, separate from taxes). Petroleum companies pay production sharing or royalties. These are not “taxes” in the general sense but rather contractual/resource payments.
• Tourism levy: Hotels and tour operators collect a 2% Tourism Development Levy on accommodation charges, which is remitted to a tourism fund (again a sector-specific levy).
• Education levy: There used to be a small levy on imported education materials but that’s largely removed in favor of exemptions now.

One important “other tax” historically was “City Service Levy” which we covered. Investors in Special Economic Zones (SEZ) or EPZ often get a 10-year exemption from that local service levy, which is a significant incentive for those zones.

Compliance and Impact

Local taxes like service levy are filed to the relevant Municipal Council (though TRA collecting on their behalf now). Stamp duty is paid usually upon lodging documents with registries (e.g., at Ministry of Lands for property transfers, at Business Registration and Licensing Agency (BRELA) for share transfers). SDL and WCF are included in the monthly payroll tax returns filed to TRA (usually the same form as PAYE).

For budgeting, these taxes collectively can add a few percentage points to the tax bill:

• SDL 3.5% of payroll (for labor-heavy industries, that’s notable).
• Service levy up to 0.3% of turnover (for high-turnover low-margin businesses like trading companies, that hurts).
• Stamp duty 1% on big transactions (one-off but relevant in acquisition costs).
• Property tax – varies but e.g. 0.2% of property value per year.

Example: A manufacturing company with TZS 50 billion turnover, TZS 5 billion payroll, and TZS 10 billion property:

• Service levy = 0.3% * 50b = TZS 150 million/year.
• SDL = 3.5% * 5b = TZS 175 million/year.
• WCF = 0.6% * 5b = TZS 30 million/year.
• Property tax = say 0.25% * 10b = TZS 25 million/year. Total ~ TZS 405 million. Not trivial.

These funds go to different purposes (skills fund, local council, etc.), but from the investor perspective it’s part of tax compliance.

The government has made efforts to streamline these. For instance, introduction of online payment portals for SDL, and aligning due dates (SDL, WCF, PAYE all by 7th monthly). Also, many of these are now under TRA’s umbrella which simplifies payment (one-stop).

Incentives and Relief

The TIC Certificate of Incentives often lists that investors enjoy “import duty and VAT exemption on capital goods”, but it does not waive these local taxes or levies. However, for very large “Strategic Investors”, sometimes the government via negotiation (and now via the Investment Act 2022) might offer relief from certain local charges as part of an agreement, but that’s case-by-case.

EPZ/SEZ investors, as noted, get 10-year relief from municipal taxes, levy, and stamp duty on deeds in the zone​.

EPZ/SEZ investors, as noted, get 10-year relief from municipal taxes (service levy), stamp duty on instruments, and other local levy​. For example, an EPZ company in textile manufacturing would not pay the 0.3% service levy or stamp duty on property in the zone during its first decade of operation. This incentive can save significant costs and simplify compliance for eligible investors.

Summary

In addition to corporate and indirect taxes, businesses in Tanzania must navigate an array of other taxes:

• Local government taxes like property tax and service levy support local infrastructure but effectively act as a turnover-based or asset-based tax on businesses.
• Stamp duty imposes a small percentage cost on legal transactions (notably 1% on share or property transfer​).
• Payroll-related levies (SDL 3.5%, WCF 0.6%) increase labor costs and must be budgeted for alongside salaries​.
• Social security contributions (10% employer, 10% employee) are mandatory, though they benefit employees in the long run.

While each of these taxes is lower in magnitude than corporate income tax or VAT, non-compliance can result in penalties or legal hurdles (e.g. unstamped contracts being unenforceable). Therefore, an investor should ensure their finance team or advisors set up processes to handle:

• Monthly payroll filings (PAYE, SDL, WCF together via TRA’s portal).
• Quarterly/annual local tax payments (service levy to the city, property tax via TRA or council).
• Stamping of documents at relevant times (especially during major transactions).

Keeping good records and confirming exemptions in writing (if operating under an incentive regime) is important, so that local authorities are aware of any special status (for instance, presenting the EPZ license to a council to avoid service levy billing).

In sum, these “other business taxes” modestly increase the effective tax burden in Tanzania. However, they fund specific public goods – roads, training, etc. – that ultimately support a better business environment. From a planning perspective, factor in roughly 5-6% of payroll and up to 0.3% of turnover as additional tax cost (subject to incentives). With diligent compliance, a company can manage these obligations smoothly as part of its overall tax strategy in Tanzania.

For more information and inquiries reach us out through info@auditaxinternational.co.tz