How to Register a Sole Proprietorship (Mmiliki Mdhamini Mmoja / Sole Trader) in Tanzania

Working as a sole proprietor in Tanzania is appealing because the setup is relatively straightforward, cheaper than forming a limited company, and gives you full control over your income and operations.

The bureaucracy is moderate: you’ll need permits, registration, and tax compliance, but many processes have been digitized. The main challenges are keeping accurate records, meeting threshold rules for VAT registration, and choosing the right tax regime (especially for smaller businesses). The main benefits include flexibility, lower startup costs, and simpler accounting than with corporations.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Tanzania?

In Tanzania, a sole proprietorship is often informally called a “sole trader,” but the legal concept is that of an individual trader or sole proprietor who undertakes business personally rather than through a separate legal entity.

Depending on the context, you might see “self-employed,” “individual trader,” or “sole proprietor” used interchangeably. These all mean one person running the business, bearing full responsibility (profit and losses), without incorporation like a limited liability company.

How does a sole proprietorship work in Tanzania?

Here are the key facts you need to know:

Sole Proprietorship vs Limited Liability Company in Tanzania

Below is a comparison to help decide whether to remain a sole proprietor or form a more formal entity like a Limited Liability Company.

Step-by-step guide: How to register a sole proprietorship in Tanzania

Step 1: Confirm eligibility and obtain your NIDA ID

You must be a Tanzanian citizen or a foreign resident legally allowed to conduct business. The first identification you’ll need is your NIDA ID (National Identification Authority card). This is essential because the Tanzania Revenue Authority (TRA) uses your NIDA ID to issue your Taxpayer Identification Number (TIN).

Step 2: Register your business name with BRELA

If you trade under your own name, you may not need to register separately. But if you want a business or trade name, you must register it with the Business Registration and Licensing Agency (BRELA) using the Online Registration System (ORS).

Step 3: Apply for your TIN with the TRA

Once you have your NIDA ID, apply for your TIN via TRA as an individual entrepreneur. This establishes you in the tax system and allows you to file returns, pay income tax, and interact with TRA digitally.

Step 4: Obtain a Tax Clearance Certificate (if required)

Some municipalities require proof that you are tax-compliant before granting a business licence. This certificate is issued by the TRA and may be mandatory depending on your locality.

Step 5: Apply for your municipal business licence

You must obtain a business licence from your local municipal or city council before starting operations. The licence is tied to your type of business activity and location.

Step 6: Register for VAT if you cross the threshold

VAT registration is mandatory if your turnover reaches TZS 200,000,000 in 12 months, or TZS 100,000,000 in six months. Once registered, you must charge 18% VAT, issue VAT invoices, and file returns with the TRA.

Step 7: Complete additional registrations if you employ staff or operate premises

If you have employees, you must register them with a recognized social security scheme (such as NSSF). If you operate physical premises, you must register your workplace with OSHA (Occupational Safety and Health Authority) and enroll with the Workers Compensation Fund (WCF). These registrations ensure compliance with labour and occupational safety laws.

Financial and Tax Obligations for Sole Proprietors in Tanzania

• Income taxes: Individuals not under the presumptive tax regime pay income tax on net profit using progressive rates. The presumptive regime applies to small businesses whose turnover does not exceed TZS 100,000,000 per annum, with a simpler tax based on turnover instead of detailed profit accounting.

• VAT/GST: Standard rate is 18%. Mandatory registration when turnover ≥ TZS 200,000,000 in 12 months, or meets equivalent in 6 months (i.e., TZS 100,000,000 in six months).

• Record-keeping requirements: Accurate bookkeeping is required, especially if you are not under presumptive tax; if you are, requirements are simpler. Registered VAT payers must keep invoices and VAT-related documentation.

• Returns and deadlines: Income tax returns are annual; VAT returns are periodic (often monthly or per TRA rules). For presumptive tax, simpler declarations are allowed. TRA requires filings by specified dates.

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FAQs

What is the minimum capital required to start a sole proprietorship in Tanzania?
There is no legal minimum capital required. You can start with minimal funds, though having enough to cover licences, premises, materials, etc., is practical.

Do sole proprietors need to register for VAT?
Yes, if your taxable turnover reaches TZS 200,000,000 over 12 months (or half that in six months), then VAT registration is mandatory. If you expect to reach that, you can register early.

How much are standard monthly or annual contributions/taxes?
If under prescribed turnover (e.g., under TZS 100,000,000), you may qualify for presumptive tax, which taxes turnover at simpler rates rather than profit. Otherwise, you pay income tax based on standard progressive rates. The exact amount depends on profit, deductions, and turnover.

Can a sole proprietor hire employees?
Yes. If you employ people, you must comply with payroll taxes, social security contributions, withholding, and employee registration.

How long does it take to register as a sole proprietor?
If documentation is in order, registration of the business name via BRELA, obtaining the business licence, and tax registration can be completed in a few days to a couple of weeks, depending on the local municipality and whether you need special permits.

Can foreign nationals register as sole proprietors in Tanzania?
Yes, although they need to satisfy immigration/residency requirements. Certain permits or permits of residence may be required, depending on their status.

Do sole proprietors need a separate business bank account?
Not always legally required, but very strongly recommended for managing finances clearly, separating personal and business transactions, and for compliance with TRA audits or bank requirements.

What happens if I stop working as a sole proprietor?
You should deregister licenses, notify TRA of cessation of business, file final tax returns, cancel VAT registration (if registered), and keep records for required retention periods in case of audits.

Are there any government incentives or reduced rates for new sole proprietors?
The presumptive tax regime is one such incentive: simpler taxation for smaller turnovers. Also, TRA may provide exemptions or simplified obligations for very small businesses. Still check the local municipality and TRA for any sector‐based incentives (e.g., agriculture, manufacturing) or finance act amendments in 2025.

Can I use Deel as a sole proprietor to get paid by international clients?
Yes. Deel allows sole proprietors in Tanzania to receive payments from clients worldwide, in multiple currencies, with low fees and transparent exchange rates.

Does Deel generate compliant invoices for Tanzanian sole proprietors?
Yes. Deel invoices follow legal requirements, including necessary tax identifiers, enabling you to stay compliant with TRA and VAT rules (if applicable).

Can Deel help me with taxes as a sole proprietor in Tanzania?
Yes. Deel provides downloadable tax reports and payment records you can use to fill returns. While Deel doesn’t replace an accountant, it simplifies recordkeeping and compliance.

Does Deel offer contracts for freelancers and sole proprietors?
Yes. Deel includes contract templates that align with Tanzanian legal norms so you can work with clients professionally.

Can I access benefits through Deel as a sole proprietor?
Yes. Deel offers optional perks like health insurance and retirement savings plans and similar benefits (where available locally), to provide more security for freelancers.