This article provides a comprehensive and up-to-date analysis of the mandatory registration and critical legal formalities required for loan facility agreements in Tanzania, focusing particularly on cross-border financing (foreign loans) within the current legislative framework (R.E. 2023 and 2025 Acts).
1. MANDATORY REGISTRATION OF FOREIGN LOANS WITH THE BANK OF TANZANIA (BOT)
The registration of foreign credit accommodations with the Bank of Tanzania (BoT) is the single most critical procedural requirement for ensuring debt service legality in Tanzania. This mandate is enforced under the Foreign Exchange Regulations, 2022, as amended.
1.1. The Debt Registration Number (DRN) and Timeline
- Mandatory Requirement: Any foreign credit accommodation (loans, guarantees, advances, etc.) extended to a Tanzanian resident by a non-resident with a tenure exceeding 365 days must be registered with the BoT and assigned a Debt Registration Number (DRN).
- Borrower’s Submission Deadline: The borrower must submit a certified copy of the signed loan agreement and other relevant documents to their local bank or financial institution within 14 days of signing the agreement.
- Consequence of Non-Registration (The Penalty): Failure to register the loan with the BoT renders it impossible for the local bank to legally remit principal, interest, or any charges back to the foreign lender. Furthermore, the Foreign Exchange Act imposes a severe penalty for non-compliance, which can include a lumpsum fine of TZS 4 million or imprisonment for a term up to 14 years, or both, on the defaulting party (borrower or bank).
1.2. Conditions for BoT Acceptance
The BoT will not register a foreign loan agreement if it contains “unfavorable terms and conditions.” These typically include:
- Interest rates and charges that do not reflect the prevailing market conditions for the relevant currency of borrowing.
- Conditions precedent that require the borrower to open a foreign currency account outside Tanzania.
2. LEGAL AND TAX FORMALITIES (R.E. 2023 LEGISLATION)
The facility agreement must be compliant with the latest provisions of Tanzanian law to ensure its admissibility in court and tax compliance.
2.1. Contractual Foundation
The validity and enforceability of the agreement are rooted in the Law of Contract Act [Cap 345 R.E. 2023]. This Act ensures that the agreement meets all necessary legal criteria for a binding contract.
2.2. Stamp Duty and Penalties
The facility agreement and related security documents are instruments generally chargeable with stamp duty under the Stamp Duty Act [Cap. 189 R.E. 2023].
- Chargeability: Stamp duty applies to instruments executed in Tanzania, or executed outside Tanzania if they relate to property or a matter to be performed in Mainland Tanzania.
- Rate for Facility Agreement: A general facility agreement (or memorandum of agreement) often attracts a nominal fixed duty of TZS 2,000/=. However, if the facility is secured by a mortgage over land, the mortgage deed will attract a separate ad valorem duty, such as 1% of the property’s market value for a transfer or conveyance of land.
- Stamping Deadline: Instruments executed in Tanzania must be stamped within thirty (30) days of execution. If executed outside Tanzania, they must be stamped within thirty (30) days of their first arrival in Mainland Tanzania.
- Penalty for Late Stamping: Failure to pay stamp duty within the prescribed period subjects the instrument to a substantial penalty. Crucially, an unstamped instrument is inadmissible as evidence in any Tanzanian court of law, completely crippling the ability to enforce the contract.
2.3. Security Perfection
- Corporate Charges: Security interests must be registered with the Registrar of Companies within 42 days of creation under the Companies Act, RE 2023, to ensure the charge is perfected and provides priority over other creditors.
- Land Mortgages: Mortgages over land require approval from the Commissioner for Lands and registration with the Registrar of Titles under the Land Act [Cap. 113 R.E. 2023].
2.4. Withholding Tax (WHT)
The borrower must comply with the WHT obligations under the Income Tax Act, 2004. WHT must be deducted from interest payments remitted to the foreign lender and remitted to the TRA. The local bank is mandated to ensure that WHT clearance is obtained before facilitating the remittance of interest to the foreign lender.
3. INVESTMENT FACILITY REGISTRATION (TISEZA – ACT NO. 6 OF 2025)
The investment facilitation landscape has been fundamentally reformed with the merger of the TIC and EPZA into the Tanzania Investment and Special Economic Zones Authority (TISEZA), established under the Investment and Special Economic Zones Act No. 6 of 2025.
3.1. TISEZA’s Role and Scope
- One-Stop Facilitation: TISEZA is the unified One-Stop Facilitation Centre for all investment matters, significantly streamlining the process of obtaining permits, licenses, and approvals for investors.
- Mandatory Registration: Registration with TISEZA is mandatory for all investors (both domestic and foreign) before commencing operations in Tanzania.
- Access to Incentives: Registration is the gateway to accessing various fiscal incentives, including potential tax exemptions, which significantly impact a project’s financial viability and, consequently, its ability to service the loan.
4. SUMMARY OF COMPLIANCE CHECKLIST
| Compliance Area | Requirement | Governing Act/Authority | Time Frame/Penalty |
| Foreign Loan Registration | Obtain DRN for loans > 365 days. Borrower submits to bank within 14 days of signing. | Foreign Exchange Regulations, 2022 | Penalty: TZS 4 million fine and/or up to 14 years imprisonment for non-compliance; Inability to remit debt service. |
| Stamp Duty | Pay duty on facility agreement and security documents. | Stamp Duty Act [Cap. 189 R.E. 2023] | Deadline: 30 days of execution/arrival. Penalty: Document is inadmissible as evidence. |
| WHT & Tax Clearance | Deduct WHT from interest payments; obtain tax clearance for remittance. | Income Tax Act, 2004 / TRA | WHT is generally due by the 7th of the following month. |
| Security Perfection | Register charges (e.g., debentures, fixed/floating) with Registrar of Companies. | Companies Act, 2002 | Deadline: 42 days of creation. Penalty: Charge is void against a liquidator or creditor if unregistered. |
| Investment Registration | All investors must register project. | Investment and Special Economic Zones Act No. 6 of 2025 (TISEZA) | Mandatory for legal operation and access to government incentives. |
The legality and ultimate enforceability of a loan facility in Tanzania hinge on rigorous adherence to a defined set of administrative and fiscal procedures. The most significant risk lies in the failure to obtain a Debt Registration Number (DRN) from the BoT for foreign loans exceeding 365 days. Without the DRN, all debt servicing, including principal and interest repayments, becomes illegal and impossible. Furthermore, non-compliance with Stamp Duty timelines can fatally compromise the document’s admissibility in court. Successful execution of a loan facility in Tanzania requires diligent management of these inter-dependent regulatory requirements, specifically navigating the mandates of the BoT, the TRA, and the TISEZA.
Disclaimer
The content of this update is intended for general informational purposes only and does not constitute legal advice. It should not be relied upon without seeking specific legal counsel on any particular matter.
Author Details
The author is Sunday Ndamugoba , Partner, RIVE&Co he can be reached at sunday@rive.co.tz