TANZANIA ECONOMIC ZONES

1.0. Introduction:

Tanzania is currently implementing the Economic Development Zones (EDZs) programs which
encompass Export Processing Zones (EPZs) and Special Economic Zones (SEZs) to stimulate
manufacturing of value added goods for regional markets and export to other countries. These
Economic zones offer an abundance of opportunity for investors all over the world to come and
invest in the zones while at the same time afforded attractive incentives to facilitate such
investment and generation of profit as well.

2.0. What is an Export Processing Zone (EPZ)?

Is an area of land established or declared in the gazette by the Minister responsible for Industries
as an Export Processing Zone, the area which may consist of a developed, partly developed or
underdeveloped area or may comprise of a single factory unit or group of factory units. The main
purpose for establishment of EPZs is to attract and promote export-led industrialization with a
view of diversifying and facilitating Tanzania’s exports and promoting international competitiveness
which in the process will create and expand foreign exchange earnings.

Moreover, the EPZs are established for the purpose of creating and increasing employment,
attracting and encouraging transfer of new and advanced technology as well as to promote
processing of local raw materials for export. All those areas in the United Republic of Tanzania
which are not within the area declared to be an EPZ are called customs territory. It should be
noted that, an area may not be within the area declared as EPZs but may be granted the status of
an EPZ. This status is usually granted to an industrial estate and it is called single factory Unit.

3.0. What is a Special Economic Zone (SEZ)?

A Special Economic Zone includes both export markets and local markets. The SEZ program covers
a wider range of permissible activities than the EPZ. Special economic zones include; Export
Processing Zones, Free Ports, Free Trade Zones, Industrial Parks, Regional Headquarters, Science
and Technology Parks, ICT Parks, Agricultural Free Zones, Tourism Development Zones and Business
Incubation.

4.0. Who can invest in an Export Processing Zone?

Under the Export Processing Zone Act, No.11 of 2002 (EPZA), an investor in an EPZ should be a
company which has been incorporated in the United Republic of Tanzania, licensed by The Export
Processing Zone Authority to manufacture and export industrial products from the EPZ to foreign
markets. The EPZ entity or investor may be 100% foreign owned, or 100% locally owned or partial
foreign and partially locally owned. It is the condition precedent that the investor in the EPZ should
export 80% of the products manufactured in the zone. That means that investors in the EPZ are
only allowed to sell their products inside Tanzania of up to and not exceeding 20% of their
products.

Moreover, the persons or companies who makes provisions of infrastructure necessary for the
development of an area established or declared to be an EPZ are also deemed as investors in the
EPZ.
 It should be noted that, an investor in the EPZ may be in form of a company or a Joint Venture. The
Joint venture may be incorporated as a company or unincorporated and may be between a foreign
investor and a local investor or a domestic private investor and a local parastatal or co-operative
organization or a foreign investor and another foreign investor.

5.0. What is an Export Processing Zone Authority (EPZA)?

The EPZA is an independent Government agency which operates under the Ministry of Industry and
Trade. EPZA is responsible for steering and implementing government policy on promotion of Special
Economic Zones (SEZs) in Tanzania together with other functions which include the development of
EPZ/SEZ infrastructure, provision of business services to EPZ/SEZ investors and issuing of
EPZ/SEZ licenses.

The Authority functions as a one stop service center for all prospective and existing investors. The
Authority is complimentary to the Tanzania Investment Centre (TIC) which is a primary government
agency dealing with investment in Tanzania. Moreover, the Authority works hand in hand with The
National Development Corporation which is an agent of the Tanzanian government especially
established and entrusted with the task of initiating, developing and managing the operations of the
EPZs in Tanzania including acquisition of land and building for purposes of investment in respect to
EPZ, make available the necessary infrastructure, water and electricity supply, sewerage system,
emergency services like ambulance and fire brigade, security of the EPZ, maintenance of property
in the EPZ and many other tasks for the upkeep of the EPZ.

6.0. How can a prospective investor in the Export Processing Zone invest?

A company or a joint venture prospecting to invest in the EPZ should make an application for a
license to do so. It is trite law that no business activity should be conducted in an EPZ without a
license authorizing to do such activity. The Authority responsible for receiving such applications
and issuance of such licenses is Export Processing Zone Authority (EPZA). EPZA is mandated by
law to issue such licenses. These licenses are synonymous with the business licenses issued by Local
Government Authorities and other Regulatory Authorities. Once an investor obtains the licenses he
or she does not require any other license except for highly regulated industries like foods and
drugs.

7.0. How does one obtain a license to become an Export Processing Investor?

To obtain an EPZ license, the interested investor is required to submit an application with the
EPZA. The Application should be accompanied by the following documents:

i. A copy of memorandum and articles of association or a copy of certificate of incorporation,

ii. an Export business plan indicating type of goods to be produced or processed, production volume,
volume of exports, type of raw materials to be used, production process intended to be used,
export plan etc.

iii. EPZ area where the business is intended to be carried on, a lease agreement or title deed for
privately owned stand-alone infrastructure and,

iv. An Environmental Impact Assessment (EIA) report.

 8.0. What Investment activities in the EPZ are eligible for EPZ Incentives?

Not all activities in the EPZ are eligible for incentives and licensing. Activities eligible for licensing
are those of: Zone Developer (the party that builds a zone, provides premises for investors to
occupy and manages those premises), Zone Operator (the party that undertakes the export-
oriented investment activities) Zone Service Provider (the party that provides required services in
the EPZ zones for daily running like power supply, water supply, meal providers, transport service
and other variety of services in the EPZ zones).

9.0. What exemptions are EPZ companies allowed as incentives?

Exemptions allowed to EPZ companies as incentives include the following:

i. Exemption from corporate tax for ten (10) years

ii. Exemption from payment of custom duty, VAT and other taxes on raw materials and goods of
capital nature related to production in EPZs

iii. Exemption from all taxes and levies imposed by Local Government Authorities on products produced
in EPZs

iv. Exemption from withholding tax on rent, dividends and interests for 10 years

v. Exemption from payment of customs duty and VAT, and any other tax payable in respect of
firefighting equipment.

vi. Exemption from pre-shipment or destination inspection requirements

vii. Exemption from any conditional transferability of profits, dividends and royalties.

viii. Exemption from out-site customs inspection outside the Export Processing Zones

ix. Entitlement to an initial automatic immigrant quota of up to five persons during the startup period.

Other investment incentives for EPZs include procedural and zone infrastructure incentives such
as;

i. Operations are done under one license issued by EPZA

ii. One-stop service center by EPZA for set-up, facilitation and aftercare (work permits, labour
relations and customs)

iii. On-site custom documentation and inspection

 The Differences between EPZA and TIC:

The Export Processing Zone Authority and the Tanzania Investment Center are both government
agencies whose main activities are to facilitate investment in Tanzania, but there are some
different mechanisms involved in the investment process as hereunder provided;

• The EPZA only deals with new investments. This means that an investor cannot convert an existing
manufacturing company. EPZA only encourages new investments in manufacturing of industrial
products for export or investment in development of infrastructure and services in the EPZ. TIC
does not have that restriction since investment is encouraged in both new businesses, and expansion
of existing enterprises and also equity investment.

• The EPZA only deals with investment on manufacturing industries for production of products
strictly for export with a condition that only 20% of such products manufactured from the EPZ
zones can be sold in Tanzania (custom territory). TIC shoulders investment in all kind of business
ventures, both manufacturing businesses, service-oriented businesses and so on. Moreover, there is
no restriction on exportation of such products. Investors registered with TIC have a discretion to
only sell their products in Tanzania’s market or export them to foreign markets or both.

• The TIC does not deal with enterprises that are prospecting to venture in mining and petroleum.
Mining and petroleum enterprises are regulated by The Energy and Water Utilities Regulatory
Authority (EWURA), Petroleum Upstream Regulatory Authority (PURA), Tanzania Petroleum
Development Corporation (TPDC), and the Minerals Commission. The same are supposed to follow
approval processes contained in their respective laws i. e The Mining Laws. EPZA can shoulder
investors prospecting to venture in mining and petroleum. For example, the EPZA has set aside
hectares of lands for inclusion in the EPZA territory in Mtwara, the lands which can be allocated to
the prospective investors in Mtwara’s gas resources.

• Investors in the EPZ operate under a license (Developer license Operator license, or service
provider’s license) issued by the EPZA while investors registered with TIC operate under the
Certificate of Incentives.

• Investors under EPZA should only invest in the ear-marked areas specified or included in the EPZ
territory whose investment may be in improvement or facilitation of high-standard social services
and infrastructures on the one hand and industrial activities on the other hand.