THE 5 LEGAL CONSIDARATIONS FOR AGRICULTURAL INVESTMENT IN MAINLAND TANZANIA

Introduction

May be you are a tourist or a businessperson who happened to visited Tanzania and find out that there is an opportunity if you will invest in agriculture activities but you wonder what legal measures you should take prior engaging fully into that opportunity. It’s of no doubt that Tanzania's fertile lands and favorable climate make it an attractive destination for agricultural investment. However, navigating the legal landscape is crucial for both local and foreign investors to ensure compliance and sustainability. This article outlines five key legal issues to consider before investing in agriculture in Tanzania, specifically mainland Tanzania.

1.     Land Ownership and Acquisition.

In Tanzania, land is classified into three categories: General Land, Village Land, and Reserved Land. The general rule is that Foreigners are restricted from directly owning land but can acquire land through the derivative rights, which is granted through the Tanzania Investment Centre (TIC), this derivative right allowing foreign investors to occupy and use land for investment purposes.

Another way in which a foreigner can be said to have an interest in land is when he or she partnering with Tanzanian and establishing an entity normally a company which will be the one which owning that land and its shareholders including a foreigner will only have interest in it. It's also important to note that Village Land must be converted to General Land before it can be allocated to foreign investors, a process that requires presidential approval and adherence to specific procedures. But it should be noted that for other legal effects and desires should first be observed.

2.     Due Diligence

Another thing to do is to conducting a thorough due diligence so as to avoid any future disputes and legal complications. As the general rule is that when engaging in any transaction involving land the buyer should be aware. Investor should do the following during due diligence procedure

a)     Title Verification so as to be sure that, the land has a clear title and is free from encumbrances.

b)    Land Use Compliance so as to confirm that the intended agricultural activities align with the designated land use.

c)     Community Engagement so as to engage with local communities and authorities to understand customary rights and avoid conflicts.

3.     Environmental Laws and Regulations

Agricultural investments must comply with environmental laws to promote sustainable development. Requirements may include:

Environmental Impact Assessments because this is a mandatory procedure for large-scale projects to assess potential environmental effects.

Adherence to Environmental Management Act: Ensures that agricultural practices do not harm the environment.

4.     Taxation and Fiscal Obligations

Investors should be aware of the tax regime governing agricultural activities including Corporate Tax which standard rate is 30% on profits. Also the Value Added Tax (VAT) which applicable at 18% on goods and services, with certain agricultural inputs exempted. And Agricultural Produce Cess (Tax), which is a type of tax levied by Local Government Authorities on the sale of agricultural products. This levy is based on the value of the marketed product and it’s a significant source of revenue for many Local Government Authorities. This tax is charged at the 3% of rate of farm gate price and it’s still debatable due to its impact on farmers and agricultural business.

5.     Dispute Resolution

As a future investor you should understanding the legal avenues for dispute resolution available in Tanzania. As sometimes disputes in business are not inevitable but they can be reduced and settled amicably without any party feel the pain. In disputes related to land for example ownership or trespass we have the Ward Land Tribunal, District Land and Housing Tribunal and the High Court. These are the institutions responsible for land disputes. On tax disputes we have Tax tribunal and Board, other Courts like the Primary Court, District Court and Court of resident Magistrate may be approached depending on the nature of the dispute.

Apart from Courts and Tribunals, Alternative Dispute Resolution mechanisms are available and can be stipulated in contracts.

Generally, it can be said that, investing in agriculture in mainland Tanzania offers significant opportunities, but it requires careful navigation of the legal framework. Engaging legal experts and conducting comprehensive due diligence can mitigate risks and pave the way for successful and sustainable investments.

We hope this article gives you an overview of what to do and to expect prior investing in agriculture sector in Tanzania. For personalized legal assistance, CLICK HERE.