What You Need to Know
Tanzania’s Double Taxation Agreements (DTAs) are pivotal in attracting foreign direct investment (FDI) by eliminating double taxation and fostering a favorable tax environment. These agreements enhance investor confidence, streamline tax obligations, and support economic growth across various sectors. However, challenges such as administrative inefficiencies and potential tax avoidance strategies,
Africa-Press – Tanzania. TANZANIA, strategically located in East Africa, has steadily positioned itself as an attractive destination for Foreign Direct Investment (FDI), leveraging its abundant natural resources and expanding economic base across agriculture, mining and manufacturing.
As the country continues to pursue economic transformation, FDIs have become not only a critical source of capital but also a channel for technology transfer, job creation and industrial diversification. In this context, understanding the frameworks that facilitate such investments is essential—among them, Double Taxation Agreements (DTAs), which have emerged as a central pillar of Tanzania’s tax and investment strategy.
DTAs are designed to eliminate the burden of double taxation, where income earned across borders could otherwise be taxed in both the source country and the investor’s home country. By reducing this burden, they enhance Tanzania’s attractiveness to international investors, particularly in capital-intensive sectors such as construction and infrastructure.
Engineer Brenda Kiwelu from the Tanzania National Roads Agency (Tanroads) in Manyara Region explains that DTAs have played a significant role in encouraging foreign participation in infrastructure development. She points to the involvement of a leading Chinese company in the construction of the Mburu–Garababi Road as a reflection of investor confidence in Tanzania’s tax environment. “
These agreements streamline tax obligations and align with broader reforms aimed at creating a transparent and efficient system,” she notes, adding that such predictability is crucial for multinational firms undertaking large-scale projects.
Expanding Tanzania’s global tax network
Tanzania has actively pursued DTAs as part of its strategy to integrate into the global economy and attract investment. The country has signed agreements with a range of partners, including India, South Africa, Italy, Canada, the United Kingdom and Scandinavian countries such as Sweden, Norway, Denmark and Finland.
At the regional level, Tanzania has also entered into agreements with neighbouring countries including Kenya, Uganda and Zambia, promoting economic integration within East Africa.
According to Dar es Salaam-based tax consultant Mr Kelvin Paschal, these agreements provide clarity and certainty for investors by defining how different types of income—such as business profits, dividends, interest and royalties—are taxed.
“They reduce the risk of double taxation and prevent fiscal evasion, making Tanzania a more competitive investment destination,” he explains.
Tax expert Mr Barita Taseni emphasises that DTAs also facilitate cooperation between tax authorities through information exchange, improving compliance and transparency.
“By creating a predictable and investorfriendly tax environment, Tanzania is strengthening its position in the global investment landscape,” he says.
The Tanzania–India DTA: A case study in impact
The DTA between Tanzania and India offers a clear illustration of how such agreements can influence economic activity.
Originally signed in 1979 and revised in 2013, the agreement has become a cornerstone of bilateral economic relations. It covers a broad range of income streams, including business profits, dividends, interest, royalties and capital gains, ensuring that investors are not taxed twice on the same income.
Mr Emmanuel Edwin, Managing Director of an engineering firm and former tax consultant, explains that the agreement has significantly reduced both financial and administrative burdens for investors.
“Before the DTA, dividends paid to Indian shareholders could be taxed in both countries. Now, taxation is either limited to one jurisdiction or applied at reduced rates, with tax credits available, effectively eliminating double taxation,” he says.
This predictability has encouraged deeper economic engagement between the two countries. Indian companies have expanded their presence in Tanzania, particularly in sectors such as telecommunications, mining and manufacturing.
Companies like Bharti Airtel have grown their operations, benefiting from reduced tax liabilities on repatriated profits, while financial institutions such as the Bank of Baroda have supported local projects through favourable tax treatment on interest income.
The economic outcomes have been notable. Since the 2013 revision, Indian investment in Tanzania has grown by an average of 20 per cent annually, contributing to a 15 per cent increase in tax revenues from Indian enterprises. Employment within Indian companies has also risen significantly, with over 15,000 jobs created.
“These figures demonstrate how DTAs can lower barriers to international business and stimulate economic activity,” Mr Paschal observes.
Driving tax reform and investor confidence
Beyond their immediate financial benefits, DTAs play a broader role in supporting Tanzania’s tax reform agenda. By reducing tax-related uncertainties, they create a stable and predictable environment that is essential for long-term investment planning. They also strengthen compliance through information sharing between tax authorities, helping to reduce evasion and improve enforcement.
In doing so, DTAs contribute to the modernisation of Tanzania’s tax system, aligning it with global standards and enhancing its credibility among international investors.
However, the implementation of these agreements is not without challenges.
Administrative hurdles and implementation gaps
Despite their potential, DTAs in Tanzania face significant implementation challenges that can limit their effectiveness.
Mr Edwin points to administrative inefficiencies, including delays in treaty enforcement and inconsistent interpretations of provisions by tax authorities.
“These inconsistencies increase compliance costs and create uncertainty for investors,” he says.
He cites the Tanzania–India DTA as an example, noting that delays in obtaining tax credits and refunds have reduced the practical benefits of the agreement.
Such challenges are often compounded by limited capacity within tax institutions, including insufficient training for officials and weak coordination between countries.
Conflicts between treaty provisions and domestic tax laws can also create ambiguity, leading to disputes and prolonged negotiations.
To address these issues, experts emphasise the need for streamlined administrative processes, improved capacity building and clearer alignment between DTAs and national tax policies.
Unintended consequences: Tax avoidance and revenue risks
While DTAs are designed to prevent double taxation, they can also create opportunities for tax avoidance if not carefully structured.
Mr Fred Msangi, a finance professional and Managing Director of an insurance brokerage firm, warns that multinational corporations may exploit DTAs through practices such as treaty shopping and profit shifting.
“These strategies allow companies to channel profits through jurisdictions with more favourable tax treaties, reducing their overall tax liability,” he explains.
Such practices can erode Tanzania’s tax base and undermine its ability to fund public services.
The Acacia Mining dispute in 2017 highlighted these vulnerabilities. The government accused the company of underreporting export values and engaging in aggressive tax planning strategies.
Although not directly linked to a specific DTA, the case underscored the risks associated with multinational operations and the potential for treaty provisions to be exploited.
Mr Msangi argues that Tanzania must strengthen anti-abuse measures, including tighter regulations on transfer pricing and participation in global initiatives such as the OECD’s Base Erosion and Profit Shifting (BEPS) framework.
Economic dependence and local industry concerns
Another concern raised by experts is the potential for DTAs to contribute to economic dependence on foreign capital. Mr Taseni notes that while foreign investments bring capital and expertise, they can also overshadow domestic enterprises, particularly small and medium-sized businesses.
“The influx of well-capitalised foreign firms can make it difficult for local businesses to compete,” he says.
The Bagamoyo Port Project serves as a prominent example. Valued at approximately 10 billion US dollars, the project involved foreign investors operating under favourable tax arrangements.
Critics argued that the terms granted extensive concessions, including tax exemptions and long lease agreements, potentially limiting Tanzania’s long-term revenue.
In 2019, the late President John Magufuli suspended the project, citing unfavourable conditions.
“This decision highlighted the importance of balancing foreign investment with national interests,” Mr Taseni notes.
He stresses the need for policies that prioritise local value addition, technology transfer and partnerships with domestic industries to ensure that the benefits of investment are widely shared.
Lessons from regional and global peers
Comparative analysis offers valuable insights into how Tanzania can strengthen its DTA framework.
A taxation expert from the University of Dar es Salaam points to Kenya as an example of a country with a broader DTA network and stronger anti-abuse measures.
“Kenya has incorporated provisions to limit treaty benefits and curb profit shifting, reducing the risk of revenue loss,” he explains.
Uganda, on the other hand, has focused on renegotiating treaties to ensure alignment with domestic priorities, including minimum tax rates on certain income streams.
Ghana has adopted a transparency-focused approach, emphasising information sharing and adherence to international best practices, while Rwanda has tailored its DTAs to support specific sectors aligned with national development goals.
“These approaches demonstrate the importance of strategic and adaptive policymaking,” the professor notes.
Towards a balanced and resilient DTA framework
As Tanzania continues to expand and refine its network of DTAs, striking the right balance between attracting investment and safeguarding national revenue remains a key challenge.
Experts agree that enhancing DTAs requires a comprehensive and forward-looking approach.
Key priorities include strengthening anti-abuse provisions to prevent exploitation, renegotiating outdated agreements to reflect current economic realities and improving administrative capacity to ensure effective implementation.
Equally important is the adoption of evidence-based policymaking, supported by robust data and analysis.
“Understanding the real impact of DTAs—both positive and negative—is essential for informed decision-making,” Mr Taseni says.
Tanzania’s Double Taxation Agreements have played a significant role in shaping its investment landscape, attracting foreign capital and supporting economic growth.
They have reduced tax barriers, enhanced investor confidence and contributed to the modernisation of the country’s tax system.
However, their benefits must be balanced against the challenges they present, including administrative inefficiencies, risks of tax avoidance and concerns about economic dependence.
As global economic dynamics continue to evolve, Tanzania’s ability to adapt its DTA framework will be critical.
By strengthening implementation, enhancing transparency and aligning agreements with national development priorities, the country can maximise the benefits of DTAs while safeguarding its fiscal interests.
In doing so, Tanzania will not only reinforce its position as an attractive investment destination but also ensure that its tax system supports inclusive and sustainable economic growth.
Tanzania has been actively pursuing Double Taxation Agreements (DTAs) to enhance its attractiveness as an investment destination. These agreements aim to eliminate the burden of double taxation on income earned across borders, thereby encouraging foreign direct investment (FDI). Over the years, Tanzania has signed DTAs with several countries, including India, South Africa, and the United Kingdom, to promote economic integration and facilitate international business operations. The impact of these agreements has been significant, contributing to increased foreign investment and job creation in various sectors, including telecommunications and infrastructure development.
