Tanzania Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.
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TANZANIA
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Tanzania Payroll and Employer of Record: Employment Contracts
Tanzania, like any other country, has particular standards in place for foreign nationals planning to travel within its boundaries. Foreigners can get a number of visas, the most popular of which are as follows:
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Tourist/ordinary visa: This visa permits tourists and other visitors to enter Tanzania through approved border entry points.
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Business visa: This visa is for foreigners who want to invest in Tanzania and need to come for connected reasons such as making professional contacts and performing feasibility studies.
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Multiple-entry visa: Tanzanian officials give this visa to foreigners who need to visit the nation on a regular basis, usually for business or investment interests. This visa has a validity period ranging from one month to one year.
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Transit visa: This visa permits travellers to transit through Tanzania on their way to another destination without stopping.
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Diplomatic visa: A diplomatic visa is required for diplomats and other officials traveling to Tanzania on official business.
Tanzania also provides three types of work and residence permits in addition to these visas:
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Foreign investors can get Class A permits.
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Class B licenses are issued to foreign personnel with particular capabilities who are filling a post for which there are no qualified Tanzanians.
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Class C licenses are available for missionaries, volunteers, students, researchers, and others.
In Tanzania, the majority of employees will require a Class B work visa.
PAID TIME OFF
Annual Vacation
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The Employment and Labour Relations Act of 2004 mandates yearly leave after a year of continuous service with an employer. A worker is entitled to 28 days of paid yearly vacation, which includes any public holidays that may fall within the leave period. The yearly leave may be decreased by the number of days provided as paid occasional leave by the employer with the worker’s approval within a leave cycle.
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Under the Employment and Labour Relations Act, a worker with less than six months of employment is not entitled to paid leave, unless the person is hired on a seasonal basis or has worked for the company more than once in a year.
Sick
Employees have the right to 126 days of sick leave every year. Employees receive full compensation for the 63 days of paid leave and 50% pay for the remaining days.
Maternity
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The Employment and Labour Relations Act of 2004 provides for and regulates maternity leave.
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Female employees are entitled to at least twelve weeks (84 days) of fully paid maternity leave or 100 consecutive days (in the case of multiple births) throughout a 36-month leave cycle. If a new-born dies within a year of birth, a worker is entitled to 84 days of paid maternity leave within a leave cycle.
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Pregnant employees must tell their employers and present a medical certificate three months before taking maternity leave. She may begin maternity leave four weeks before the planned date of delivery, or sooner if a medical practitioner certifies that it is required for the worker or her child.
Paternity
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Men have the right to 3 days of paid paternity leave.
Family
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There is no explicit information available online about any family leave.
National Holidays
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Tanzania has a total of 17 public holidays which are paid.
Other Paid Time Off
N/A
STATUTORY EMPLOYEE BENEFITS
Unemployment
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Unemployment benefit: For up to six months in any 12-month period, 33.3 percent of the insured’s final monthly wages are paid. Individuals may obtain unemployment benefits for up to 18 months during their working lives.
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Unemployment grant: A lump sum payment of up to 50% of total employee and employer payments to the social insurance scheme may be made.
Workers Compensation
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The Compensation Act was enacted to compensate employees who were wounded or were handicapped on the job.
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While private-sector businesses must contribute 1% of their employees’ gross monthly income, public-sector employers must contribute 0.5% of their employees’ monthly wage.
Social Security
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The National Social Security Fund (NSSF) is a state-run social security system to which all private-sector employers are required to participate. The employer’s contribution is 20% of the employee’s cash pay; however, the employer has the right to collect up to half of this amount from the employee.
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The Public Service Social Security Fund (PSSSF) plan, which is a specific fund for employers and workers in the public sector, has similar contribution rates. The employer and employee contributions to the PSSSF program are 15% and 5%, respectively.
Retirement
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Pensions for the elderly (public and private sector programs): At the age of 60, you must have made at least 180 months of contributions. The contribution need is decreased for employees who get insured later in life, ranging from 165 months (if 45) to 45 months (if 55 to 59).
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Employment must be terminated.
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Early retirement: At the age of 55, with at least 180 months of contributions. The early pension must be equal to or more than the monthly minimum old-age pension.
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The minimum monthly old-age pension is 40% of the legally mandated monthly minimum salary.
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Depending on the economic sector, the legal monthly minimum salary ranges from 100,000 to 400,000 shillings.
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Pension deferral: The pension may be postponed. There is no upper age limit.
Health
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Medical Aid is a private option and is based on an employee voluntary basis to sign up or for the employer to offer it.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
There is no private workers compensation yet in Tanzania.
Retirement
There are no private pension options yet in Tanzania.
Health
Private health care is available in Tanzania but options are limited (facility wise) and it is recommended to get the full comprehensive cover as the operation or surgeries can become very expensive due to limited resources.
Insurance
Private life insurance is available in Tanzania.
PERSONAL INCOME TAX
Tax Year
Tax year runs from January 1st to December 31st.
Tax Tables
The local currency is TZS in Tanzania. For resident people, the top marginal tax rate is 30%. Non-resident persons are taxed at a fixed rate of 15% on work income, which is the ultimate tax in Tanzania.
Taxable Income | Rates of Taxes |
0-270 000 | 0% |
270 000 – 520 000 | 8% |
520 000 – 760 000 | 20% |
760 000 – 1 000 000 | 25% |
1 000 000 + | 30% |
Taxation Method
Taxes are levied on income earned during the calendar year. The tax will be assessed on the income received for the year in the case of irregular income. Tanzania’s tax system includes both direct and indirect taxes such as income tax, VAT, import duty, excise duty, and stamp duty. Taxation is also levied at the municipal government level. Tanzania Revenue Authority is in charge of all central government taxes (TRA).
Double Taxation
Tanzania has multiple double taxation agreements.
Residence Requirements
An individual is considered to be a Tanzanian resident in any tax year if he or she I has a permanent home in Tanzania and visits the country during the year, or (ii) does not have a permanent home but is present in the country for 183 days in the year or an average of 122 days per year in the relevant year and the two preceding years.
Payroll Calendars
- Employees are not required to be paid on a set schedule.
- Payrolls can be done weekly, biweekly, fortnightly, or monthly.
Rebates & Tax Credits
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A resident individual can claim a tax credit for any income tax paid in another nation on income earned in that other country. This credit cannot be greater than the Tanzanian tax rate on such income. Any unused portion of a foreign tax credit can be carried forward. It is also possible to choose to claim relief as a cost rather than a credit.
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In Tanzania, there are no additional substantial tax advantages or incentives for individuals.
Health Insurance
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The National Health Insurance Fund (NHIF) was formed with the primary goal of giving Central Government Personnel access to health care services. The Fund Act was extended further to cover private sector organisations and individuals who join the fund on a voluntary basis.
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Contributions to the Scheme are generally decided by a prospective member’s capacity to pay and are not affected by the risk profile, gender, or historical usage rate (s). The initial NHIF Act specified that 6% of monthly basic pay be split between employer and employee as contributions, and further arrangements were made for students, clergy, organizations, private sectors, people, and other public servants.
Unemployment
Unemployment benefit:
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For up to six months in any 12-month period, 33.3 percent of the insured’s final monthly wages are paid. Individuals may obtain unemployment benefits for up to 18 months during their working lives.
Unemployment grant:
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A lump sum payment of up to 50% of total employee and employer payments to the social insurance scheme may be made.
Social Security
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The National Social Security Fund (NSSF) is a state-run social security system to which all private-sector employers are required to participate. The employer’s contribution is 20% of the employee’s cash pay; however, the employer has the right to collect up to half of this amount from the employee.
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The Public Service Social Security Fund (PSSSF) plan, which is a specific fund for employers and workers in the public sector, has similar contribution rates. The employer and employee contributions to the PSSSF program are 15% and 5%, respectively.
PAYROLL ELEMENTS
Income
Salary, earnings, bonuses, overtime pay, taxable benefits, allowances, and certain lump sum perks are examples of remuneration (revenue from employment). Profits or losses made by a company or trade. Income or profits derived from an individual’s status as a trust beneficiary.
Bonuses
In addition to wages or salaries, businesses may offer bonuses or gratuities to their employees as part of an incentive package. However, under the Employment Act, these are not legally required payments (other than in the Income Tax, Chapter 332, Revised Edition 2019 of the laws of Tanzania where they are taxable).
Allowances
In Tanzania, there are no personal allowances.
Benefits in Kind
These are non-cash perks provided by the company to employees. Benefits in kind are quantified according to the regulations and are included in an employee’s taxable income. They are quantifiable according to the following rules:
Provision of Premises/Housing to an Employee:
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A benefit in kind connected to premises/housing is defined as the lesser of the premises’ Market Value Rent and the greater of the following:
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15% of the employee’s total yearly salary and the expense claimed as a deduction by the employer for the premise.
Provide an employee with a motor vehicle
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The motor vehicle benefit is not applicable if the employer does not claim a deduction for the vehicle’s ownership, maintenance, or operation.
Granting a loan to an employee
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When an employer makes a loan to an employee at a lower interest rate than the statutory rate, the amount of benefit in kind is calculated as the difference between the following:
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The amount of interest that would have been paid if the interest on the loan had been levied at the statutory rate, less the amount of interest paid on the loan at the supplied rate.
*Exception:
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When an employer gives a loan with a duration of less than twelve months and the total amount of the loan and comparable loans outstanding at any point during the previous twelve-month period does not exceed three months’ basic pay of an employee, the benefit in kind is nil.
Other in-kind benefits
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The market value will be used to determine additional in-kind benefits.
Investment Income
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Dividend income is taxed by WHT, which is a final tax. The regular rate is 10%, although dividends paid by publicly traded corporations are taxed at a lower rate of 5%.
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Dividend income from non-resident corporations is taxed at a rate of 10% if paid to a resident individual (and not in the nature of business income). On the dividend, a tax credit for foreign income tax can be claimed.
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Interest paid to an individual (unless it is in the nature of business income to the individual) is classified as a final withholding payment, implying that the WHT is a final tax.
Retirement Funding
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Pensions for the elderly (public and private sector programs): At the age of 60, you must have made at least 180 months of contributions. The contribution need is decreased for employees who get insured later in life, ranging from 165 months (if 45) to 45 months (if 55 to 59).
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Employment must be terminated.
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Early retirement: At the age of 55, with at least 180 months of contributions. The early pension must be equal to or more than the monthly minimum old-age pension.
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The minimum monthly old-age pension is 40% of the legally mandated monthly minimum salary.
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Depending on the economic sector, the legal monthly minimum salary ranges from 100,000 to 400,000 shillings.
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Pension deferral: The pension may be postponed. There is no upper age limit.
Health Insurance
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The National Health Insurance Fund (NHIF) was formed with the primary goal of giving Central Government Personnel access to health care services. The Fund Act was extended further to cover private sector organisations and individuals who join the fund on a voluntary basis.
-
Contributions to the Scheme are generally decided by a prospective member’s capacity to pay and are not affected by the risk profile, gender, or historical usage rate (s). The initial NHIF Act specified that 6% of monthly basic pay be split between employer and employee as contributions, and further arrangements were made for students, clergy, organizations, private sectors, people, and other public servants.
Risk Insurance
N/A
Taxable Income
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For resident people, the top marginal tax rate is 30%.
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Non-resident persons are taxed at a fixed rate of 15% on work income, which is the ultimate tax in Tanzania.
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Individuals with a company revenue of less than 100 million Tanzanian shillings (TZS) per year are subject to presumptive income tax rates.
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When investment income reflects a ‘final withholding payment,’ the appropriate tax rate is the relevant withholding tax (WHT) rate. The disposition of an investment with a Tanzanian source is taxed at a rate of 10% if sold by a resident and 30% if disposed of by a non-resident. The sale of an investment with an overseas source by a resident is taxed at a rate of 30%.
Allowable Deductions
Costs of employment
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The employee’s statutory social security payment is the sole amount deducted from work income (e.g. to the NSSF).
Allowances for personal expenses
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In Tanzania, there are no personal allowances.
Tax breaks for businesses
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Individuals may claim a deduction for costs incurred entirely and solely in the development of revenue through business or investment, subject to certain restrictions.
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
Retirement fund is 40% of the legally mandated monthly minimum salary. There is also the National Health Insurance Fund (NHIF) which specifies that 6% of the monthly basic be split between employer and employee.
Unemployment
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Unemployment benefit: For up to six months in any 12-month period, 33.3 percent of the insured’s final monthly wages are paid. Individuals may obtain unemployment benefits for up to 18 months during their working lives.
-
Unemployment grant: A lump sum payment of up to 50% of total employee and employer payments to the social insurance scheme may be made.
Social Security
-
The National Social Security Fund (NSSF) is a state-run social security system to which all private-sector employers are required to participate. The employer’s contribution is 20% of the employee’s cash pay; however, the employer has the right to collect up to half of this amount from the employee.
-
The Public Service Social Security Fund (PSSSF) plan, which is a specific fund for employers and workers in the public sector, has similar contribution rates. The employer and employee contributions to the PSSSF program are 15% and 5%, respectively.
Workers Compensation
-
The Compensation Act was enacted to compensate employees who were wounded or were handicapped on the job.
-
While private-sector businesses must contribute 1% of their employees’ gross monthly income, public-sector employers must contribute 0.5% of their employees’ monthly wage.
ADMINISTRATION
Income
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When investment income reflects a ‘final withholding payment,’ the appropriate tax rate is the relevant withholding tax (WHT) rate. The disposition of an investment with a Tanzanian source is taxed at a rate of 10% if sold by a resident and 30% if disposed of by a non-resident. The sale of an investment with an overseas source by a resident is taxed at a rate of 30%.
Payroll Taxes
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Retirement fund is 40% of the legally mandated monthly minimum salary.
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There is also the National Health Insurance Fund (NHIF) which specifies that 6% of the monthly basic be split between employer and employee.
Unemployment
-
Unemployment benefit: For up to six months in any 12-month period, 33.3 percent of the insured’s final monthly wages are paid. Individuals may obtain unemployment benefits for up to 18 months during their working lives.
-
Unemployment grant: A lump sum payment of up to 50% of total employee and employer payments to the social insurance scheme may be made.
Social Security
-
The Public Service Social Security Fund (PSSSF) plan, which is a specific fund for employers and workers in the public sector, has similar contribution rates. The employer and employee contributions to the PSSSF program are 15% and 5%, respectively.
Workers Compensation
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The Compensation Act was enacted to compensate employees who were wounded or were handicapped on the job.
-
While private-sector businesses must contribute 1% of their employees’ gross monthly income, public-sector employers must contribute 0.5% of their employees’ monthly wage.
Statutory Benefits
Tanzania has a national health insurance program that is mandatory for all residents who are fully employed.
Here are examples of some benefits:
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Paid parental leave is available.
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Plans for private health insurance
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Car, phone, health insurance, housing, or education stipends
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Paid time off in addition
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Performance-based incentives
Employee Benefits
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Many benefits are likely to be included in your Tanzanian benefits management plan, but we recommend starting with those that are legally guaranteed. For example, the country observes 17 national holidays, and employees should be entitled to paid time off on those holidays. In most cases, all employees are entitled to at least 28 days of paid yearly leave. In Ghana, most female employees are entitled to at least 12 weeks of paid maternity leave. There is also 3 days of paternity leave.
LEGISLATION
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Employment and Labour Relations Act, 2004
STATUTORY BODIES
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Tanzania Revenue Authority
