Tanzanian firms face April 2025 deadline for beneficial ownership disclosure

The Finance Act No. 8 of 2020, mandates that companies disclose their beneficial owners to the Registrar of Companies with initial demand required compliance effective 1 January 2021.

But the deadline was extended to 31 December 2021 and has now been pushed further to 15 April 2025.

Despite these extensions, authorities warn that penalties for failure to comply will be strictly enforced including penalties ranging from Sh5 million to Sh10 million.

Non-compliant companies will face restrictions on key business operations including the inability to submit annual returns, make changes to company details, request company status reports, register charges, peruse or certify original documents, and access online registration system (ORS) accounts.

Dentons EALC East African Law Chambers managing partner, Ms Stella Ndikimi said the push for beneficial ownership disclosure is part of a broader initiative to enhance corporate transparency and accountability.

She said many global financial systems suffer from deliberate opacity, allowing individuals and entities to conceal ownership through complex structures.

“This lack of transparency has been linked to corruption, money laundering, tax evasion, and other illicit financial activities that undermine the integrity of financial systems and erode trust in both the private and public sectors,” she told The Citizen through the phone.

Ms Ndikimi said Tanzania’s economy, while experiencing growth in sectors such as mining, agriculture, and tourism, still faces challenges related to illicit financial flows and the need for improved governance.

“By implementing measures requiring companies to disclose their ultimate beneficial owners, Tanzania can increase trust and accountability within its corporate environment,” she said.

According to her, this initiative aligns with Tanzania’s broader economic goals, including its ambition to transform into a middle-income economy.

Strengthening corporate governance and improving transparency will help attract foreign investment while curbing corruption and tax evasion.

Furthermore, she noted that transparency would enhance tax enforcement and ensure companies meet their fiscal responsibilities, ultimately strengthening domestic resource mobilisation.

“Transparency will attract legitimate investment, increase investor confidence, and align with global standards, fostering international cooperation in combating financial crimes,” she said.

Economic expert, Dr Donath Olomi stressed the importance of maintaining a robust verification system for ownership records, particularly in preventing financial and security-related crimes.

"This is a standard procedure, similar to those conducted in previous years. It is essential to verify the individuals and entities operating businesses within the country," he said.

He added that verifying company ownership ensures compliance with national laws and prevents criminal activities such as money laundering.

According to Dr Olomi, the process is especially relevant for industries designated for Tanzanians, such as insurance and clearing and forwarding services.

Similarly, economic analyst Prof Abel Kinyondo underscored the importance of the beneficial ownership law, pointing out that it had remained largely unimplemented until concerns arose from the Kariakoo business district.

“The Beneficial Ownership Information law aims to identify the true owners of businesses and investments. The Kariakoo situation provides a clear example of why this law is necessary,” he said.

Prof Kinyondo explained that some foreign investors, restricted by Tanzanian investment laws requiring a minimum capital investment of $100,000, use local citizens as proxies to register businesses.

He clarified that while the Tanzanian citizen appears as the legal owner, the foreign investor retains full control and financial benefits, enabling tax evasion and avoidance of regulatory requirements.

Beyond economic concerns, he warned that such opaque ownership structures pose national security risks.

“A foreign individual, potentially involved in terrorism or money laundering, may use a Tanzanian citizen’s identity to register a business. Since the real owner is not listed, they can continue illegal activities under the cover of a legitimate business,” he explained.

He urged the Business Registrations and Licensing Agency (BRELA) to strictly enforce the law to protect both the economy and national security.

Policy analyst Silas Olang emphasised the importance of public access to beneficial ownership information, stating that true transparency requires open ownership records.

"This issue has many aspects, but its core principle is transparency, particularly for many international companies with numerous stakeholders behind them," he said.

He explained that without ownership disclosures, it is difficult to determine the true beneficiaries behind business operations in Tanzania.

"Looking at a company registered in Tanzania, you cannot easily tell which foreign companies it is linked to, and ultimately, you may find that the beneficial owner is just one or two individuals," he said.

He noted that transparency also aids due diligence by revealing company owners, their business activities, and potential conflicts of interest.

"For instance, a company might receive undue advantages despite being unqualified. On closer investigation, it may emerge that the person awarding contracts is also a stakeholder in the beneficiary company," he explained.

Public disclosure of beneficial ownership can help prevent corruption, money laundering, and unethical business practices.

However, Mr Olang cautioned that many countries keep ownership data private, limiting public accountability.

“If the public cannot access this information, there is no accountability. Beneficial ownership transparency requires an entire network of connections to be revealed,” he insisted.

With the  April 15, 2025 deadline fast approaching, Tanzanian companies must ensure compliance with beneficial ownership regulations to avoid penalties and business restrictions.