ivestment law in Tanzania

INTRODUCTION

Definition of investment.

The word investment essentially means an outlay on an asset that is capable of generating returns over a period of time. The level of investment depends on the capacities as well as the intents of the individuals or the organizations that are carrying out the investments. In many cases, it actually is influenced by the risk appetite of the investor.

Generally, an investment that is more risky offers a higher return. Investments can be made in stocks of listed companies as well through initial public offering, in mutual funds, in pension funds, in insurance sector and with banks in various forms. In respect of companies, monies paid to buy out other companies as well as holding a controlling stake in other companies is classified as investments. Investments can be short term as well as long term, depending on the maturity period.

Investment law is a discipline with an emphasis focused on legal responsibilities of investors as well as to provide for legal protection of investors rights and interests.

There are notable developments in substantive laws which regulate investment and to create a conducive environment for investment and make sure profit is acquired from those investments. These investment laws are fragmented and cyclical in nature for the government to be able to control effectively the investment sector.

In Tanzania, investment laws are fragmented and cyclical in nature as follows;

1.      Investment laws and the development of banking law.

Traditionally, banks are supposed to act as financial intermediaries by mobilizing capital from surplus units for investment to the deficit unit. The Nation Investment ( promotion and protection) Act under paragraph 11 provides for reserved areas not open for investment. The banking business was reserved area, therefore one intending to start banking business had to obtain a special license.

Recently, there are many commercial banks operating in Tanzania. Laws governing the operation of banks and investment in banking business includes, The Bank of Tanzania Act of 2006 and the Banking and Financial Institution Act of 2006. The role of banking industry is to promote investment.

2.      Investment laws and the development of insurance Law

Insurance is a promise for compensation for a specific future loss which is done with some periodic payment of money. It is designed to protect the financial well-being of individuals, companies or other entities in case of unexpected loss. The law governing insurance companies and business in Tanzania is The Insurance Act of 2009.

3.      Investment laws and the development of intellectual property right protection law.

Protection of intellectual property rights is a very important issue. In Tanzania it never used to be important but with globalization and investment activities the protection of intellectual property right become of importance. Laws providing for protection of intellectual property rights in Tanzania are;

(i)                 Trade and Service Mark Act of 1986.

(ii)               Patents Act of 1986.

(iii)             Copy Right and Neighboring rights Act of 1999.

4.      Investment laws and the development of immigration law.

Immigration refers to a situation whereby people come from one country with the intention to settle in another country for a specific purpose, either for business purposes or investment purposes. The law regulating immigration affairs in Tanzania is the Immigration Act of 1972. There is an immigration department where foreign investors are to go through normal process of coming in the country. In Tanzania visas are of class A,B and C. For foreign investors a class A permit is required.

5.      Investment laws and the development of tax laws.

In Tanzania there are different types of taxes such as the income tax, capital gain tax and corporate tax. Income tax is provided under The Income Tax Act of 1973, tax code is 25% of one’s income. The law regulating capital gain tax is The Income Tax Act and the tax code is 10%.

Corporate tax is the tax on the income which companies earn. After the company has reduced all the allowable expenses what is normally left is taxed under corporate tax.

6.      Investment laws and the development of land law.

According to the Land Act of 1999, all land in Tanzania is the Public land. Land was placed under the control of the government and it would issue a revocable license to the people who owned and used the land. Section 4 (1) of the Land Act provides for President as a trustee for or on behalf of the citizens of Tanzania. Section 6 of the Land Act provides that a non citizen can only acquire land in Tanzania for investment purposes.

7.      Investment laws and the development of mining law.

Mining is a very important aspect in Tanzania development. Mining activities also have got impact on the environment in Tanzania, especially large scale mining activities. In Tanzania mining activities has been governed by The Mining Act of 2010, it governed the way mining prospect should be done, way harmful chemicals should be disposed off and so forth.

Most of the mining companies in Tanzania are owned by foreigners. The Tanzania investment centre is the one which gives a mining company a license to prospect and start mining activities.

Conclusion.

As observed in above, laws relating to investment are fragmented and cyclical in nature. Every investment area or investment sector has its own independent laws which regulates the investment affairs in connection to such sector, for example in mining sector there is a Mining Act which regulates mining investment activities, the Income tax Act regulates tax affairs in relation to investment activities, banking laws regulates banking business and so forth. All these laws and many other laws operates interdependently to each other with the investment laws.