USD Contracts in Tanzania: What the Shilling Rule Does to Your Clause

This page is the contract-denomination operating file: it decides whether an agreement may carry a dollar price, and what must be rewritten if it may not. It is not an exchange-rate forecast and not an opinion on the enforceability of your clause.

• Quoting and billing a customer in dollars: USD pricing and invoicing
• What the commercial bank applies at the counter: Bank of Tanzania foreign-exchange rules
• Holding and moving the currency itself: foreign-currency accounts and cross-border payments
• Tax on the non-resident leg: withholding on cross-border payments

As at 14 September 2026. This file rests on GN No. 198 of 2025 and its parent Act, with Income Tax Act Cap. 332 and VAT Act Cap. 148 behind the tax consequences; confirm the live text on bot.go.tz and the treatment with TRA.

The rule: a domestic price is a shilling price

The mandate over currency sits with the Bank of Tanzania. GN No. 198 of 2025 commenced on 28 March 2025 and reaches two separate acts: quotation and settlement. A supply performed inside the country must be priced in Tanzanian shillings and paid in Tanzanian shillings. Converting one and not the other leaves the file half-repaired: a shilling receipt against a dollar price clause is still a dollar price clause.

Nationality does not move the line. Two foreign-owned Tanzanian companies contracting for work on a Mbeya site are a domestic file, and so is a lease of local property between resident parties whose shareholders sit abroad.

Currency, coinage, legal tender and the central bank are Union matters, so a Zanzibar warehouse lease sits inside the same restriction as one in Dar es Salaam. What differs across the channel is tax: value added tax is non-Union and a Zanzibar supply is assessed by the Zanzibar Revenue Authority, while income tax and withholding stay with TRA on both sides.

What may still be denominated in foreign currency

The regulations name four permitted categories: government contributions to regional and international bodies; transactions with embassies, diplomatic missions and international organisations; foreign-currency loans advanced by banks and financial institutions; and duty-free purchases. The Minister responsible for finance may grant an exemption or an extension. Nothing on that list rescues an ordinary supply between two resident parties, and no bank letter creates a private category.

Contracts with a non-resident counterparty

Where the work is performed and who receives it decide the question. An import contract with an overseas supplier, a licence taken from a foreign owner, a consultancy delivered abroad: each is genuinely cross-border and keeps its dollar denomination. Receipts and payments then become a bank documentation file.

The trap is the arrangement that reads as cross-border and behaves as domestic. A non-resident parent contracting for work carried out at a Tanzanian site through a branch or project office is supplying inside the country, and the same facts usually raise a permanent-establishment question under the Income Tax Act Cap. 332. Re-invoicing local work through an offshore affiliate to preserve a dollar price attracts two regulators instead of one.

The exchange-rate clause that survives review

The repair is structural, not cosmetic. Make the shilling the contractual price and the settlement currency. A dollar figure may remain as a computation input: the parties agree that the shilling amount is derived from a stated USD reference at the rate the central bank publishes for a named determination date.

A workable clause names six things: the rate source, the determination date and cut-off, the rounding convention, who performs the computation, the fallback where no rate is published that day, and any cap or collar on movement before payment. Leave out the seller’s election to demand dollars: an option to be paid in foreign currency reproduces the breach the amendment was meant to cure. Indexation is a pricing mechanism; denomination is what the instrument governs.

Invoicing, VAT and withholding in shillings

The fiscal invoice follows the contract. A converted supply is billed through the electronic fiscal system administered by TRA under the Tax Administration Act Cap. 438, in shillings, with the tax base stated in shillings. Open dollar invoices are cancelled by credit note and reissued rather than overwritten, so the audit trail shows one decision instead of a silent edit.

Value added tax on a Mainland taxable supply is charged at the standard rate of 18% under the Value Added Tax Act Cap. 148; for a Zanzibar supply the rate and registration sit with ZRA, which is a separate confirmation. Income Tax Act Cap. 332 also governs translation: amounts expressed in another currency are converted into shillings at the Bank of Tanzania rate applying at the time of the transaction, so a dollar reference does not survive into the tax computation.

Withholding follows the same translation. Under Cap. 332 the rate on service fees to a non-resident is 15%, royalties 15%, interest 10%, and dividends 10%: 5% where the distributing company is listed on the Dar es Salaam Stock Exchange. Turnover feeds the service levy of 0.3% under the Local Government Finance Act Cap. 290, and provisional tax instalments fall due on the last day of the third, sixth, ninth and twelfth months of the accounting period. Confirm the live schedule on tra.go.tz.

Enforcement risk on a non-compliant clause

The regulations put nullification on the table for arrangements left unamended after the transition, absent a ministerial extension. Whether a particular clause is void is an advocate’s opinion on your facts. The commercial exposure arrives long before any court does.

A bank declines the domestic dollar debit and the payment date you promised evaporates. The counterparty tenders shillings and you have no clean ground to refuse. A TRA auditor reconstructs the shilling base regardless of what the paper says, and the price clause becomes the thing being argued about.

The amendment sequence

1. Classify every live agreement: domestic supply, named exempt category, or genuine cross-border. Contract by contract, not by portfolio assumption.
2. Pull the payment clause and its satellites: quotation, settlement, currency election, schedule of rates, side letter.
3. Choose the mechanism: a flat shilling rate card, or a shilling price derived from a dollar reference on a named date.
4. Execute an addendum: signed and dated by both parties, authorised by resolution where the constitution requires one, stamped where the Stamp Duty Act Cap. 189 attaches.
5. Reissue the open billing: credit note the dollar invoices, raise shilling fiscal invoices, keep both.
6. Recompute the tax base: VAT, withholding and service levy on the shilling figure, with the translation evidenced.
7. Brief the bank in writing: give the relationship manager the addendum before the next credit is queued for a query.
8. Diarise a review: the exemption list and the published rate both move.

Papers the amendment file carries

• The executed original and every prior amendment, in sequence
• Board or members’ resolution authorising the addendum
• The signed addendum naming the shilling price and the rate mechanism
• Open invoices, the credit notes cancelling them, the replacement fiscal receipts
• BRELA extract for a Mainland company or BPRA extract for a Zanzibar one, with TIN and VAT certificates
• The bank’s written documentary list, kept with the SWIFT advice
• Ministry of Finance correspondence where an extension was sought, and the reply
• Withholding certificates issued on any non-resident element

Illustrative arithmetic on a converted supply

A resident contractor holds a USD 250,000 domestic works package. At an illustrative translation of TZS 2,600 to the dollar (not a published figure, and not one to budget from) the price becomes TZS 650,000,000. VAT at 18% adds TZS 117,000,000, for an invoice of TZS 767,000,000. Service levy at 0.3% of that turnover is TZS 1,950,000.

Inside that package a non-resident engineer is engaged for USD 40,000. On the same translation that is TZS 104,000,000; withholding at 15% is TZS 15,600,000 remitted to TRA in shillings, leaving TZS 88,400,000. Illustrative arithmetic, not a quotation. The translation you apply is the one published for the date your addendum names.

Where this file stalls

• The addendum converts the headline price while the rate schedule behind it stays in dollars
• A side letter preserves the dollar figure as the “real” number to be honoured
• The seller reserves a right to invoice in foreign currency at its own option
• The fiscal receipt shows shillings while the unamended contract demands dollars, so the file tells two stories
• Parties suspend performance instead of amending, turning a currency question into a breach claim
• A Mainland addendum is photocopied onto a Zanzibar lease without checking ZRA’s treatment
• A ministerial extension is assumed rather than applied for, with no request on file

What changed, and when the window closed

The Finance Act 2024 amended the Bank of Tanzania Act to carry the restriction; GN No. 198 of 2025 gave it operative detail from 28 March 2025 and allowed holders of existing foreign-currency arrangements twelve months to bring them into line. That period ran out on 28 March 2026. A contract still carrying a dollar price today is outside the transition, not inside it.

GN No. 487A of 2025, the reserved-activity list, is a separate screen deciding whether a non-citizen may carry on the business at all. It creates no currency exemption. Confirm on bot.go.tz whether any later Government Notice has widened the permitted categories.

Desks this file does not replace

The Bank of Tanzania owns the currency rule and publishes the rate. TRA owns VAT, withholding and fiscal invoicing; ZRA owns value added tax on a Zanzibar supply. The Ministry of Finance owns exemptions and extensions. Your commercial bank decides whether an instruction clears. An advocate gives the opinion on validity and drafts the addendum.

Zatra prepares, structures and coordinates the file across those desks. It does not practise law, audit or issue approvals, and no outcome is guaranteed.

What to confirm before you act

• Whether the supply is performed inside Tanzania, and whether a branch or project office makes a foreign contract domestic
• Whether the arrangement sits in a category the 2025 regulations actually name
• Whether any exemption or extension has been published since commencement
• Which published rate the addendum names, on what date, and what applies if none is published
• The live VAT and withholding schedules on tra.go.tz, and ZRA’s position for a Zanzibar supply
• The bank’s current list for the converted payment, obtained in writing
• Whether stamp duty attaches to the addendum, and who presents it
• Whether a lender, landlord or partner must consent before the price clause moves