Summary Notes:

·  Introduction to the new Foreign Exchange Regulations

• Authority of the Governor of the BoT
• Regulations on foreign currency and gold transactions
• Rights and restrictions for residents and non-residents
• Current account transaction requirements for exports and imports
• Outward remittance processes
• Guidelines for capital and financial account transactions
• Securities transaction regulations
• Penalties for non-compliance
• Revocation of previous regulations

The Governor of the Bank of Tanzania (BoT) has exercised his powers to introduce the Foreign Exchange Regulations, 2022, which came into force on May 31, 2022. These regulations bring significant changes to the handling of foreign exchange transactions in Tanzania, covering areas such as dealing in foreign currency and gold, current account transactions, and capital and financial account transactions.

Dealing in Foreign Currency and Gold

Under the new regulations, both residents and non-residents are permitted to hold, sell, and purchase foreign currency from banks, financial institutions, or bureau de change. They may also open and maintain foreign currency accounts with banks or financial institutions within Tanzania. However, a key restriction is imposed on banks operating within Tanzania: they can only exchange foreign currencies with banks outside Tanzania, either directly or through electronic platforms.

Additionally, the regulations prohibit residents from opening and maintaining foreign currency accounts outside Tanzania, except for specific purposes such as the settlement of securities in a prescribed territory or when explicitly permitted by the Governor.

For residents traveling outside Tanzania, the regulations limit the amount of foreign currency they can receive from banks or financial institutions to an equivalent of USD 10,000. Moreover, anyone entering or leaving Tanzania with foreign currency exceeding USD 10,000 or its equivalent must declare it.

Current Account Transactions

The regulations facilitate cross-border trade by allowing the expatriation and receipt of foreign currencies in Tanzania from neighboring countries, in accordance with BoT directives. For exporters to sell foreign currency to a bank or financial institution, an account relationship between the exporter and the institution must exist. Similarly, importers are required to have an account relationship with a bank or financial institution before making direct advance payments for imports.

Exporters are also mandated to receive all proceeds from their exports into an account held in a bank or financial institution in Tanzania. They must submit all relevant export documents within seven days and no later than 90 days after completing customs export procedures.

For import transactions, payments must be made through banks or financial institutions, with the necessary supporting documents obtained from the importer. If a bank or financial institution makes direct advance payments for imports, it must ensure that the importer has an account relationship with the institution.

Outward remittances from Tanzania are permitted through banks, financial institutions, or mobile money operators without the need for supporting documents, provided the reasons for the remittance are stated, and the remittance does not exceed the prescribed limit per transaction per day.

Residents are allowed to remit funds to a prescribed territory for outward direct investment or the acquisition of real estate, provided this is done through a bank and supported by documentation such as a certificate of incorporation, business license, TIN certificate, tax clearance certificate, and other necessary permits. Approval from the BoT is required for investments or acquisitions outside the prescribed territory.

Capital Account and Financial Account Transactions

Residents are permitted to purchase, issue, sell, or transfer securities to a resident of a prescribed territory and remit funds for purchasing securities or participatory rights in a collective investment scheme within the territory. However, funds cannot be remitted for purchasing participatory rights in a collective investment scheme issued by an unauthorized entity in the prescribed territory.

Non-residents are allowed to remit funds for purchasing traded securities of a listed company or an issuer making a public issue. However, they are restricted from purchasing, selling, or transferring government securities unless they are residents of a prescribed territory or Tanzanian citizens.

Non-residents must maintain a securities settlement account with a bank or financial institution in Tanzania or appoint a custodian in Tanzania for processing payments and receiving proceeds from securities transactions.

All securities transactions in Tanzania must be conducted through a licensed dealing member of an approved stock exchange or the BoT in the case of government securities.

Residents are also granted access to credit accommodation from non-residents, provided the transaction is conducted through a bank or financial institution. If a Foreign Credit Accommodation (FCA) exceeds 365 days, the underlying agreement must be registered with the BoT within 14 days of execution and assigned a Debt Registration Number (DRN). A penalty of TZS 1,000,000 per day will be imposed on borrowers if the FCA remains unregistered for more than 14 days, especially if the lender directly pays the supplier without involving a bank or financial institution in Tanzania.

Penalties for Non-Compliance

Violating the regulations can result in penalties of up to TZS 4,000,000 or imprisonment for up to 14 years, or both. These regulations also repeal the Foreign Exchange Regulations, 1998, and the Foreign Exchange (Listed Securities) Regulations, 2003, introducing a new legal framework for foreign exchange management in Tanzania.

Disclaimer: This article is authored by Ruwaida Manji, Associate Corporate from Rive & Co, a new and innovating law firm as a result of the partnership between ABC Attorneys and Stallion Attorneys, built on the foundation of trust, credibility, and novelty, offering expert legal solutions.  This Article is for informational purposes only and should not be construed as legal advice. It is recommended to consult with a qualified legal professional for advice specific to your situation.