Running a Limited Company (LTD) with equal ownership (50% each) requires a clear system for paying directors, employees, taxes, and dividends. Below is an example of how such a company can operate financially in Tanzania with quarterly dividends.
1. Company Structure
- Two shareholders/directors → each owns 50% of the company and works actively.
- Two employees (non-directors):
- Employee A: TZS 300,000/month
- Employee B: TZS 250,000/month
2. Example Company Figures (Monthly)
- Sales: TZS 10,000,000
- Direct costs: TZS 3,500,000
- Operating costs: TZS 2,000,000
3. Salaries (Paid Monthly)
Directors
- Director A: 600,000
- Director B: 600,000
PAYE Calculation:
- PAYE = 38,500 + 20% × (600,000 – 520,000) = 54,500
- Net salary = 545,500
Employees
- Employee A = 300,000
- Employee B = 250,000
(PAYE applies if above threshold; here Employee B likely exempt.)
4. Monthly Profit Calculation
- Gross profit before salaries = 4,500,000
- Less directors’ salaries = 1,200,000
- Less employees’ salaries = 550,000
- Profit before tax = 2,750,000
Corporate Tax (30%)
- 30% × 2,750,000 = 825,000
- Net profit after tax = 1,925,000
5. Quarterly Dividend Calculation
Dividends are distributed every 3 months.
Step 1: Profit for 3 months
- Net profit after tax per month = 1,925,000
- × 3 months = 5,775,000
Step 2: Retained Earnings (30%)
- Retained = 30% × 5,775,000 = 1,732,500
Step 3: Dividend Pool (70%)
- Dividends = 70% × 5,775,000 = 4,042,500
- Each director gross dividend = 2,021,250
- Less 10% withholding tax = 202,125
- Net dividend per director = 1,819,125
6. Take-Home Income
Monthly (Salaries Only)
- Director A net salary = 545,500
- Director B net salary = 545,500
Quarterly (Including Dividends)
- Director A: 545,500 × 3 = 1,636,500 (salaries for 3 months)
- Net dividend = 1,819,125
- Total quarterly take-home = 3,455,625
- Director B: same = 3,455,625
Employees still receive their monthly salaries normally.
7. Yearly Summary (Per Director)
- Net salaries = 6,546,000
- Net dividends = 7,276,500
- Total annual income = 13,822,500
Company retains = 1,732,500 × 4 quarters = 6,930,000 per year.
Key Takeaways
- Directors are compensated with monthly salaries + quarterly dividends.
- Employees receive fixed monthly salaries.
- Corporate tax = 30% of profit before dividends.
- 70% of profit after tax is distributed as dividends quarterly; 30% retained.
- Dividend tax = 10% withholding tax.
- This system ensures predictable cash flow for directors and sustainable company growth.
Wasiliana Nasi
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