Branch to Subsidiary Tanzania: How to Convert, Step by Step 2026

Branch to subsidiary Tanzania moves follow one pattern. Tanzanian law has no procedure that turns a registered branch into a company. The foreign parent forms a new company, transfers the business into it, and then closes the branch. Each step has its own authority, its own filing and, in places, its own tax charge. This guide covers that conversion process only. If you are still choosing a structure, start with our comparison of a branch, a subsidiary and a new local company.

The guide is written for the Mainland. Zanzibar has its own registry and its own Companies Act, covered in a separate section below.

What the law says

A foreign company that sets up a place of business on the Mainland registers under Part XII of the Companies Act Cap. 212 R.E. 2023, "Companies incorporated outside Tanzania", sections 437 to 447. Section 438 lists the documents the foreign company delivers to the Registrar. Section 442 requires it to file accounts. Section 445 is headed "Cessation of business by foreign company and striking off register". We read these headings in the Act's arrangement of sections. We did not read the operative text of section 445 this session, so confirm its notice period and form on the BRELA Online Registration System before filing.

The branch is not a separate person. It is the foreign company itself, trading here. A subsidiary is a new legal person, incorporated in Tanzania, owned by the parent. Moving the business from one to the other is therefore a transfer between two different persons. That single fact drives every tax question in this guide.

Four other statutes govern the move: the Income Tax Act Cap. 332, the Value Added Tax Act Cap. 148, the Stamp Duty Act Cap. 189 and the Investment and Special Economic Zones Act No. 6 of 2025. Each is covered in its own section below.

Who is affected?

This guide is for foreign companies registered with BRELA as a branch, and their finance and HR leads. Typical triggers include:

• A tender or contract that admits only companies incorporated in Tanzania.
• A sector regulator or local content rule that expects local incorporation or local shareholding.
• A parent that wants Tanzanian liabilities ring-fenced in a separate company.
• A plan to bring in a Tanzanian shareholder, which a branch cannot do.

Not yet registered? Read our guide to foreign company registration. Unsure whether you have a taxable presence? See permanent establishment in Tanzania.

Why move from branch to subsidiary?

The reasons are mostly commercial, not a lower tax rate.

The tax burden on profit is broadly the same. PwC's Tanzania summary, last reviewed 9 September 2026, describes a 30% rate on the branch's income plus 10% on repatriated income. Deloitte's Tanzania Highlights 2026 gives the same pair of rates. So the conversion is a decision about contracting, liability and ownership, not about rate arbitrage.

A subsidiary owned more than 50% by non-citizens is still "foreign owned" for business licensing under the Business Licensing Act Cap. 101 R.E. 2023 section 2 (register line NEW-08-13). It still pays the foreign-owned licence rows and cannot take up activities reserved for citizens under GN 487A. Sector rules on local participation are covered in our note on local content and sector regulators.

What happens to income tax on the asset transfer?

Section 39 of the Income Tax Act treats an owner as realising an asset when it "parts with ownership of the asset including when the asset is sold, exchanged, transferred, distributed". A gain or loss therefore arises in the branch on the transfer date.

The parent and its subsidiary are associates. Section 44(1) treats a transferor to an associate as receiving "the greater of the market value of the asset or the net cost of the asset immediately before the realisation". In plain terms, TRA can tax the branch on market value even if the parent sets a lower price.

Section 44(2) offers a rollover. Business assets, depreciable assets and trading stock can pass to an associate at net cost, so no gain arises. Section 44(4) sets five conditions:

• The person or the associate is an entity.
• The assets are business assets, depreciable assets or trading stock of the associate immediately after the transfer.
• Both parties are residents at the time of transfer, and the associate is not exempt.
• There is "continuity of underlying ownership in the asset of at least fifty percent".
• Both parties make a written election.

The residence condition is the difficulty. The transferor is the foreign company, which is not resident. The Act taxes a branch as if it were separate, but we found no text saying that this makes the branch "resident" for section 44(4). Treat the rollover as unavailable unless TRA confirms otherwise. The Tax Administration Act Cap. 438 section 11 provides for private rulings, and a ruling is the safe route before you sign.

Does the move trigger tax on repatriated income?

Possibly. Section 4(1)(b) charges a person with a domestic permanent establishment that has repatriated income. In the Revised Edition 2023 the computation sits in section 93, "Repatriated income of domestic permanent establishment". Earlier editions numbered it section 72. We could not read the operative text of section 93 this session, so we do not state its formula here.

The practical risk is this. When the branch hands its net assets to the subsidiary in return for shares issued to the parent, value leaves the branch for the head office. TRA may treat some or all of that as repatriated income at 10%. Model this with your tax adviser using the Act's text, and raise it in the private ruling request.

Two other income tax points:

• Losses stay behind. The subsidiary is a new taxpayer. Unrelieved branch losses belong to the foreign company and do not pass to the subsidiary by the transfer.
• Change in control is usually not triggered. Section 56(1) treats an entity as realising its assets when its "underlying ownership" changes by more than fifty percent within three years. The new subsidiary starts life owned by the parent, so forming it does not change its ownership. A later sale of shares to a Tanzanian partner could.

Is VAT charged when the branch sells the business to the subsidiary?

Not if the going concern rule applies. Section 20(1) of the VAT Act sets two tests. First, "everything necessary for the continued operation of the economic activity is supplied" to the buyer. Second, the buyer acquires it for an economic activity it carries on after the sale. Section 20(3) then treats the supplies as a single supply that is "treated as if it were not a supply".

Section 20(3) applies only to a sale "by that taxable person to another taxable person". The branch must be VAT registered, and so must the subsidiary, at the time of transfer. If the subsidiary registers late, the relief can fail and 18% VAT (F0239) applies to taxable assets. Register the subsidiary first.

Section 36 says one VAT registration covers all of a person's branches or divisions. That rule helps the foreign company today. It does not extend to the subsidiary, which needs its own registration. After the transfer, the branch applies to cancel its registration under section 39. Our guide to VAT deregistration covers that step.

Is stamp duty due on the transfer instruments?

The Stamp Duty Act has a relief that fits this move closely. Section 5(1)(vi) of the TRA copy of Cap. 189 R.E. 2019 covers the case "where a company incorporated in Tanzania Mainland acquires all the undertaking in Tanzania Mainland of a company incorporated outside Tanzania Mainland". In that case no duty is payable on any conveyance or transfer to the company "of any of the property comprised in such undertaking at the time of such acquisition".

The relief needs the whole Mainland undertaking. A partial transfer, with some business left in the branch, falls outside it. Then ordinary rates apply: conveyance on sale under F0262, or share transfers at 1% under F0264.

A second relief sits in section 40, "Transfers between associated corporations". It removes conveyance duty on transfers between bodies corporate where one owns "not less than ninety per centum of the issued share capital" of the other. Section 40(1) adds a condition that catches people: the instrument is not "duly stamped" unless it is stamped at full value or certified by endorsement under section 43. Present the instrument to TRA for endorsement even when no duty is payable. An unstamped instrument is a problem in evidence later. The section numbers above come from the R.E. 2019 text and should be confirmed against the R.E. 2023 revision. For general rates, see our guide to stamp duty on documents.

What happens to employees?

The Employment and Labour Relations Act Cap. 366 has no section that moves employment contracts automatically when a business changes hands. We checked its arrangement of sections for one. Staff employed by the branch are employees of the foreign company. Each one moves only by a new contract with the subsidiary.

There are two clean ways to do it:

• Transfer by agreement. Each employee signs a tripartite letter with the branch and the subsidiary. The subsidiary recognises past service for leave, notice and severance. Nobody is dismissed, so no severance falls due on the move.
• Termination and rehire. The branch terminates on operational requirements under section 39, with notice under section 42 and severance under section 43 of at least "7 days' basic wage for each completed year of continuous service", capped at ten years. The subsidiary then hires afresh.

The severance section contains a useful rule. As enacted, it says severance does not apply to an employee terminated for operational reasons who "unreasonably refuses to accept alternative employment with that employer or any other employer". An offer of equal terms at the subsidiary is that kind of alternative. Whether a refusal is unreasonable is a fact question, and disputes go to the CMA. The subsection number in R.E. 2023 should be confirmed against the Act. Our guide to severance pay covers the computation.

The subsidiary also registers as an employer with NSSF, WCF and, where it has ten or more employees, for the Skills and Development Levy through TRA (F0276).

What happens to expatriate work permits?

A work permit does not move with the business. The Non-Citizens (Employment Regulation) Act Cap. 436 section 12(3) says a permit "shall not be transferable". Section 14(1)(b) lets the Labour Commissioner cancel a permit when the holder ceases the employment for which it was issued. Section 16(2) requires an employer to report an early end of a non-citizen's employment immediately.

The subsidiary therefore applies for new work permits for each expatriate before they start working for it. The penalty under F0422 is a fine of not less than TZS 10,000,000 or imprisonment of not less than two years, or both. Our guide to changing employer on a work permit sets out the filing, and Zatra's work and residence permit desk handles the applications. Confirm with Immigration whether each residence permit must also be reissued in the subsidiary's name.

What happens to contracts, licences and the TISEZA certificate?

Contracts in the foreign company's name stay with the foreign company. Moving them needs each counterparty's consent, usually by a novation agreement. Check change-of-control and assignment clauses early, because a key customer can use the request to renegotiate.

Business licences issued under Cap. 101 are personal to the licensee. The subsidiary applies for its own licence on the Tanzania National Business Portal or through the council (NEW-08-05). Sector licences follow the same logic: confirm with each regulator whether it will transfer the licence or require a fresh application.

A TISEZA certificate needs approval to move. Section 17(1) of the Investment and Special Economic Zones Act bars transfer or amendment without the Authority's approval. Section 17(2)(b) lets TISEZA revoke a certificate that has been "amended or transferred to another person" without consent. Section 18(2)(a) requires notice where "another person has succeeded to the investment". Apply to TISEZA before the transfer date, not after. See our guide to TISEZA investor registration.

How does Zanzibar differ?

Zanzibar runs its own company registry. A branch with a place of business in Zanzibar is registered with the Zanzibar Business and Property Registration Agency (BPRA), not BRELA. The governing law is the Companies Act No. 15 of 2013. The Companies Regulations, 2017 (L.N. 145 of 2017) set the forms. Regulation 34 uses Form No. 21 for registering a foreign company under section 239 of the Act. Regulation 37 requires a notice of ceasing to have a place of business in Zanzibar under section 245, on Form No. 22. The notes to Form No. 22 ask for notice at least 30 days before the company stops operating there.

A 2022 change also matters. EY reported on 18 January 2023 that Zanzibar's Written Laws (Miscellaneous Amendments) Act 2022 repealed section 238(3) of the Companies Act 2013. Mainland companies with a place of business in Zanzibar may now operate there as a branch or form a local company. Our guide on registering in Zanzibar with BPRA explains the registry.

We have not verified whether Zanzibar offers reliefs like those above, so treat a Zanzibar conversion as a separate file.

Worked example: a hypothetical engineering branch moves into a subsidiary

This is a hypothetical business. A European engineering firm runs a registered branch in Dar es Salaam offering consultancy. It forms a subsidiary with nominal share capital of TZS 200,000,000 and transfers the whole Mainland business on 1 March 2027. Two expatriate engineers move with it. The branch holds no land.

Income tax. If the section 44(2) rollover is not available, section 44(1) prices the transfer at market value. The excess is USD 420,000 minus 300,000 = 120,000, plus USD 100,000 minus 80,000 = 20,000, a total of USD 140,000. At 30% (F0196) that is up to USD 140,000 × 0.30 = USD 42,000. Pooled depreciable assets run through the pool, so the actual figure depends on the pool balances. If TRA confirms the rollover, the gain is nil.

VAT. If both companies are VAT registered and the whole business moves, section 20(3) applies and no VAT arises. If the relief fails, VAT at 18% (F0239) on USD 570,000 is USD 570,000 × 0.18 = USD 102,600. The subsidiary could claim input tax, but the cash cost remains.

Stamp duty. The whole Mainland undertaking moves, so section 5(1)(vi) relief applies to the conveyance, subject to endorsement. Without it, conveyance duty under F0262 would be roughly 1% of value: USD 570,000 × 0.01 = USD 5,700, assessed in shillings.

Repatriated income. Not computed. We could not read the operative text of section 93, so any figure would be a guess.

Government fees. These are the fees the register prints, at 26 September 2026.

TZS total: 50,000 + 450,000 + 20,000 + 22,000 = TZS 542,000. USD total: 2,000 + 2,000 + 4,100 = USD 8,100. The two currencies are not added together. Filing the residence permits through TISEZA adds a 10% facilitation fee after approval (F0404). The amount on each control number governs on the day of payment.

What to do now

1. Map the business. List every asset, contract, licence, permit, employee and bank facility held in the foreign company's name in Tanzania.
2. Ask TRA first. Request a private ruling under section 11 of the Tax Administration Act on the section 44 rollover and on repatriated income.
3. Incorporate and register. Form the subsidiary at BRELA on ORS, with beneficial owner details under section 15 of Cap. 212. Then obtain its TIN and VAT registration before the transfer date, using our guide to TIN and VAT registration.
4. Seek consents. Apply to TISEZA, sector regulators, landlords, lenders and key customers for transfer or novation.
5. Move the people. Agree tripartite transfer letters with staff and file new work permits for expatriates.
6. Sign and stamp. Execute the business transfer agreement and present it to TRA for stamping or endorsement.
7. Close the branch. File final returns, cancel the branch's VAT registration and deliver the cessation notice to BRELA. Our guide to company deregistration covers the clean-up.

Key dates

Permits and regulator consents usually set the pace, not BRELA.

How Zatra helps

Zatra plans the sequence, incorporates the subsidiary, registers it with TRA, prepares the transfer schedules and staff letters, files permits, and closes the branch at BRELA. Our restructuring desk runs the file, and our tax advisory team prepares the private ruling request.

Government fees and taxes are paid to the authority at the official rate against its control number. They are separate from Zatra's professional fee and are never marked up. Zatra prepares and files; it does not decide or guarantee any authority's outcome. Disputes with TRA or staff, prosecution, seizure and formal legal opinions go to an advocate, and Zatra works with one on its team.

Sources and status

Accurate as at 2 November 2026.

• Income Tax Act, Cap. 332, ss.4, 39, 44 and 56. TanzLII, consolidation dated 30 November 2019. Accessed 2 Nov 2026.
• Value Added Tax Act, Cap. 148, ss.20 and 36. TanzLII, version of 30 November 2019. Accessed 2 Nov 2026.
• Stamp Duty Act, Cap. 189 R.E. 2019, ss.5 and 40. Tanzania Revenue Authority, 2019 revision. Accessed 2 Nov 2026.
• Investment and Special Economic Zones Act No. 6 of 2025, ss.17 and 18. TISEZA, English text published as GN 4 of 2026. Accessed 2 Nov 2026.
• Companies Regulations, 2017, L.N. 145 of 2017. Zanzibar Business and Property Registration Agency, gazetted 22 December 2017. Accessed 2 Nov 2026.
• Non-Citizens (Employment Regulation) Act, Cap. 436. TanzLII, version of 14 March 2025. Accessed 2 Nov 2026.
• Employment and Labour Relations Act, Cap. 366. TanzLII, text as enacted in 2004. Accessed 2 Nov 2026.
• Tozo za kampuni (company fees). BRELA, fee schedule page, 2026. Accessed 2 Nov 2026.
• Tanzania: Branch income. PwC Worldwide Tax Summaries, last reviewed 9 September 2026. Accessed 2 Nov 2026.
• Tanzania Highlights 2026. Deloitte, July 2026. Accessed 2 Nov 2026.
• Mainland companies no longer required to register a subsidiary in Zanzibar. EY Global Tax News, 18 January 2023. Accessed 2 Nov 2026.

Figures to confirm before you act

• Operative text, notice period and form for Companies Act Cap. 212 R.E. 2023 section 445: confirm on BRELA ORS.
• Formula in Income Tax Act section 93 (R.E. 2023) and how TRA applies it to a branch transfer: confirm by private ruling.
• The 10% rate on repatriated income, from PwC and Deloitte: confirm against First Schedule paragraph 3 of the current Act.
• Whether a branch meets the residence condition in section 44(4)(c): unknown, ask TRA.
• Stamp Duty Act section numbers 5(1)(vi), 40 and 43 in the R.E. 2023 revision.
• The ELRA subsection on refused alternative employment, as numbered in R.E. 2023.
• Whether residence permits must be reissued on a change of employer: confirm with Immigration.
• BRELA's fee, if any, for a foreign company's cessation notice beyond the F0005 filing fee.
• Zanzibar income tax and stamp duty treatment of the same transfer: confirm with ZRA.

This article is general information based on official sources available at the date of publication. It is not legal, tax or financial advice. Laws and notices change. Verify with the issuing authority or consult Zatra before acting.