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Tanzania lures investors with 10-year tax breaks, sets aside land for cities

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President Jakaya Kikwete inspects a Special Economic Zone. Photo/Ray Naluyaga

By RAY NALUYAGA, The EastAfrican

Posted Saturday, November 23 2013 at 16:06

IN SUMMARY

The government has set aside 16,150 hectares of land for the SEZs — 10,500 in Bagamoyo, 2,650 in Mtwara and 3,000 in Kigoma — which it hopes to develop into cities.
Investors will be exempted from payment of corporate tax, withholding tax on rent, dividends and interest as well as exemption from payment of property tax for the first 10 years.

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Investors who put their money in infrastructure development in Tanzania's Special Economic Zones (SEZs) will be exempted from paying tax for 10 years.

The government has identified a total of 16,150 hectares of land for the SEZs — 10,500 in Bagamoyo, 2,650 in Mtwara and 3,000 in Kigoma — which it hopes to develop into cities, Grace Lemunge, investment promotion manager at the Tanzania Export Processing Zones Authority (EPZA), told The EastAfrican.

For Bagamoyo, located 50 kilometres from Dar es Salaam, the government has recently paid Tsh120 billion ($75 billion) as compensation for land acquired to pave the way for a satellite city, with a free port and an international airport.

"The authority has set aside 3,000 hectares for social infrastructure, such as residences, schools, hospitals and entertainment centres," Ms Lemunge said.

Another 6,000 hectares have been allocated for industrial services and commercial infrastructure, while 500 hectares have been set aside for a free port and 1,000 for an airport.

Mtwara is an integrated project with land owned by the government through the Tanzania Ports Authority, that aims at supporting the Southern Corridor linking Mozambique, Malawi, Zambia and Congo.

It will have a free port, industrial, technological and tourism parks, as well as logistics centres targeting companies providing services to offshore oil and gas companies.

For Kigoma, where the land is owned by the municipal council, the government is seeking investors for construction of a port on Lake Tanganyika bordering Burundi and DRC.

The area, for which a feasibility study and phase one of the master plan have been completed, is to be developed into an industrial cum commercial complex that will be a trade hub for neighbouring countries.

"Investors are invited to develop Kigoma port, EPZ and SEZ industrial, commercial, tourist and ICT parks, warehouses, hotels, banks, schools, hospitals and housing estates," said Ms Lemunge.

Investors will also be exempted from paying taxes and duties for machinery, equipment, heavy-duty vehicles, building and construction materials and any other goods of a capital nature to be used for purposes of development of SEZ infrastructure.

They will also be exempted from payment of corporate tax, withholding tax on rent, dividends and interest as well as exemption from payment of property tax for the first 10 years.

The investor is also entitled to an initial automatic immigrant quota of five people during the start-up period and thereafter any application for extra people will be submitted to the authority, which in consultation with immigration department will make the authorisation taking into consideration the availability of qualified Tanzanians.

The projects are to be executed in various forms of private-public partnership, which includes Build Operate Transfer, a financing arrangement where a developer designs and builds a complete project or facility at little or no cost to the government or a joint venture partner.

Then the investor owns and operates the facility as a business for a specified period — ranging between 10 and 30 years — after which he transfers it to the government or partner at a previously agreed-upon or market price.

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