FINANCE LAW UPDATE: FOREIGN CURRENCY BAN: WHAT TANZANIAN BUSINESSES NEED TO KNOW

• What significant legal change has been made regarding foreign currency transactions?
• What are the exceptions to the restriction on using foreign currency?
• What practices related to foreign currency transactions are now prohibited?
• What must businesses do to comply with the new law?
• How are domestic transactions affected by the new regulations?

1.0 Introduction

Recently, in the period from the years 2023 to 2024, Tanzania has faced a foreign currency shortage, especially the United States Dollar. This has led to several public notices and guidelines from the Regulators aimed at restricting the use of foreign currency for in-country transactions. The notable ones are a Public Notice issued by the governor of the Bank of Tanzania on 20th June 2023, the directives provided by the Minister of Finance in his 2024/2024 budget speech and the consequential amendment of the Bank of Tanzania Act. 

Breakthrough Attorneys has prepared this Article as a guide to businesses and service providers on the current limitations on foreign currency transactions in Tanzania.

2.0 What is the law now?

The Finance Act, of 2024 has amended the Bank of Tanzania Act by adding section 26(2) to the Act. The added section now makes it an offence for any person to transact in any other currency than the Tanzanian Shilling. This is an addition to the provision that pre-existed before the amendment which only provides the Tanzanian Shilling as the only legal tender for transactions in Tanzania without stating the implications in case a person uses a foreign currency.

3.0 What is allowed and what is not

Following the changes introduced to the Bank of Tanzania Act, it is now officially an offence to transact in USD contrary to what the law provides. The provision of section 26(2) of the Bank of Tanzania Act mandates the Minister of Finance to prescribe Regulations to provide the manner in which individuals and businesses in Tanzania may transact in foreign currency.

However, since the said Regulations have not been published it is important to comply with the law as it is. Hence, we have listed below the dos and don’ts related to foreign currency transactions in Tanzania.

1. When can a business in Tanzania use foreign currency?
   Despite the general restriction to transacting in foreign currency, the following will not be a violation of the law as it is on the date of this Article;
   1. Payments from a non-resident person to a Tanzanian business may be quoted and paid in foreign currency. This means invoices directed to clients outside of Tanzania can be quoted in the respective currency of the client.
      
   2. Payments made by a Tanzanian to a person or business outside the United Republic of Tanzania may be quoted and paid in foreign currency.
   3. Payment of fees to the government or its agencies where the prescribed fee is in foreign currency.
   4. Payments by tourists and non-residents for accommodation, travel, airport and visa, transit trade and cargo handling. 
2. Prohibited foreign currency transactions?
   Following the above-explained developments, the following practices related to foreign currency transactions are prohibited.
   
   1. Invoices issued by Tanzanian businesses to persons resident in the United Republic of Tanzania cannot be quoted or paid in foreign currency. This means all prices for all types of goods and services in Tanzania should be quoted in Tanzanian shillings.
   2. Using exchange rates which do not align with the prevailing market rates is prohibited. As per the notice of the Governor of the Bank of Tanzania, the exchange rate which will be used for making payment must not exceed the prevailing market exchange rate.

   The implication of the above is that any resident of the United Republic of Tanzania can only use Tanzanian shillings to make payments to another resident, that resident persons should not be obliged to make payment to another resident of the United Republic of Tanzania for any good or service in foreign currency.

4.0 Conclusion

In conclusion, the recent amendments to the Bank of Tanzania Act and the accompanying ministerial directives have significantly altered the landscape of foreign currency transactions in Tanzania. The legal framework now strictly prohibits domestic transactions in foreign currency, emphasizing the Tanzanian Shilling as the sole legal tender for such transactions. Breakthrough Attorneys reminds businesses and service providers to adhere to these requirements to avoid legal repercussions. It is crucial to stay informed about any further regulations as may prescribed by the Minister of Finance to ensure full compliance with the evolving legal environment.

 

Important Notice:

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.