Shareholding Structure:  Criteria for Assessing Dividend’s Withholding Tax.
June 02, 2023

By Adv. Rayson Elijah Lucas

Head Corporate & Commercial Property Department


Structuring a company is one of the most important aspects prior to registration since the setup of the company will determine how the company operates, corporate governance and shareholding structure and tax liabilities both to the company as well as shareholders.

Once the company starts operation, the main interest of shareholders will be on generating profit which is later distributed as dividends. The key issue when dividends are distributed will be the taxes connected to dividend payout. The company set up, composition, listing therefore affect tax liabilities to the shareholders while receiving such dividends to certain extent.


To understand, the circumstances in which the company setup affects dividend taxes, let us examine Section 82 of Income Tax Act, Cap 332 [R.E 2019] which provides that; –

“Where a resident person-

  1. pays a dividend, interest, natural resource payment, rent or royalty; and
  2. N/Athe person shall withhold income tax from the payment at the rate provided for in paragraph 4(b) of the First Sched”


Therefore, from the provision above it is clear that, the tax payable on payment of dividends is Withholding Tax but this payment shall be subject to paragraph 4(b) of the First Schedule which provides that:-

payments to which section 82 applies

– (i) in the case of dividends –

(aa) of a corporation listed on the Dar es Salaam Stock Exchange or to which subsection (2) of section 54 applies– five percent; or

(bb) of any other corporation – ten percent;”


Now before moving further explanation, since section 54 of Income Tax has come in, it is prudent to examine it. This section provides to the effect that:

54.(2)A dividend distributed by a resident corporation to another resident corporation shall be taxed at the rate provided for in the First Schedule where the corporation receiving the dividend holds twenty five percent or more of the shares in the corporation distributing the dividend and controls, either directly or indirectly, twenty five percent or more of the voting power in the corporation


Thus, critical examination and interpretation of the cited provisions above, reveals that

  1. When a company is listed on the Dar es Salaam Stock Exchange, the Withholding Tax payable is 5%
  2. When a resident company pays another resident company that holds 25% or more shares and control directly or indirectly 25% of the voting power of the paying company, the payable withholding Tax is 5%
  3. When the company is not listed in Dar es Salaam Exchange and shareholders are natural persons, the Withholding Tax payable is 10%
  4. When the company is not listed on Dar es salaam Stock Exchange and a shareholder is a corporation but not holding more than 25% of shares and do not have control of voting power by more than 25%, the withholding Tax Payable is 10%.


Consequently, before registering a company, it is important to assesses and explore the tax reliefs available to every type of company structure and composition.  Setting up of the company either through shareholding structure, shareholders, whether natural or corporation affects the tax payable during the distribution of dividends. From the analysis above, it is clear that, listing a company to DSE or having a company with a shareholder who is a resident corporation and holds more than 25%  of shares can benefit the shareholder by 5% tax relief during the distribution of dividends compared to any other corporation.


Victory Attorneys and Consultants are tax, corporate and compliance experts. Contact us for assistance and advice on ensuring tax advisory or compliance matters. Victory Attorneys & Consultants can be reached through Mobile No: +255 754 959 726 or Email:


DISCLAIMER: This article is not intended to provide legal advice but to provide general information on the matter covered in the Article. The article does not constitute and is not to be relied upon as legal advice. Victory Attorneys & Consultants shall not be responsible for any loss in the event this Article is relied upon without seeking our professional advice first.


Victory Attorneys & Consultants © 2024

Augustine Dominic Shio

Managing Partner

Augustine Dominic Shio is also known as Mr Shio is a highly sought-after and widely recognized criminal law expert with more than 30 years of experience advising and assisting corporations and individuals charged with white-collar crimes.


Before founding the firm Mr Shio held several positions in the public sector, he served as a Principal State Attorney at the Attorney General’s Chambers, Legal Advisor at the President’s Office (Commission for Enforcement of the Leadership Code), Director of Legal Services and Complaints at the Ministry of Home Affairs and retired as a Deputy Director of Public Prosecutions at the Directorate of the Public Prosecutions.

Mr Shio is a recipient of the Presidential Medal for his distinctive public services and ethics of the highest order. His distinguished aptitude in handling complex criminal cases, particularly money laundering, economic and organized crimes has enabled the firm to handle high profile criminal cases in Tanzania.

Practice Focus

As the firm’s head of the Financial & Organized Crimes Department, Mr Shio represents corporations and individuals in the telecoms, media & ICT, mining, oil & gas and banking sectors in high profile criminal cases. He has advised and prepared legal compliance models and for large scale agribusiness operators, public listed companies and securities dealers and brokers in line with sector-specific laws.

He possesses vast experience in advising multinational corporations on money laundering and tax evasion throughout the life span of their commercial transactions.

Mr Shio has represented clients in major plea bargaining negotiations at the office of the Director of Public Prosecutions. He is renowned for closing some of the best pleas deals in the country on behalf of many locals and expatriates charged with money laundering, economic and organized crimes and cybercrimes. Additionally, Mr Shio consults and assists criminally charged individuals to secure pre-trail and post-trial bail on serious criminal charges.


Mr Shio holds a Bachelor’s Degree (LL.B Hons) from the University of Dar es Salaam, Certificate in Criminal Justice and Treatment of Offenders from the United Nations Institute (Fuchu, Japan). He is a certified criminal law expert in Money Laundering and Terrorism.

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