Introduction
Recent legislative reforms in Zanzibar have introduced several important tax and regulatory changes affecting businesses and taxpayers. These amendments primarily impact the Value Added Tax (VAT) framework, Excise Duty, and the Hotel Levy regime.
The changes aim to strengthen tax compliance, enhance transparency in tax administration, and adapt the legal framework to evolving business models such as digital services and cross-border transactions.
This article provides a concise overview of the most significant tax amendments recently introduced in Zanzibar, helping businesses understand their new compliance obligations and regulatory requirements.
Amendment to the Definition of “Resident” under the VAT Act, 1998
Section 2 of the Value Added Tax Act, 1998, has been amended by replacing the previous definition of the term “Resident.”
Under the new definition:
“Resident” means an individual, company, trust, association, partnership, government entity, or any other legal entity whose residence or establishment is in Zanzibar.
This amendment broadens and clarifies the scope of entities considered residents for VAT purposes, ensuring that businesses operating or established in Zanzibar fall clearly within the VAT framework.
Simplified VAT Registration for Non-Resident Suppliers
A new Subsection (5) has been introduced under Section 4A of the Value Added Tax Act, 1998, to facilitate VAT registration for non-resident suppliers.
The amendment provides that:
Where it is not practical for a non-resident person to appoint a tax representative due to business circumstances, such a person may apply directly to the Commissioner General for registration under procedures provided in the Tax Administration and Procedures (Procedures of Simplified Registration for Non‑Resident Supplier of Electronic Services and Foreign Tour Operators) Regulations, 2022.
This provision aims to simplify tax compliance for:
- Non-resident digital service providers
- Foreign tour operators
- Cross-border service providers operating in Zanzibar
Restriction on Zero-Rated Services under the VAT Act
Section 9 of the Value Added Tax Act, 1998, has been amended by introducing Subsection (3).
Under this amendment, services will not qualify for zero-rating if:
- The supply involves a right or option to receive a subsequent supply within Zanzibar, or
- Services are supplied under an agreement with a non-resident entity but delivered to a person in Zanzibar who is not VAT-registered.
This clarification limits the misuse of zero-rating provisions and ensures that services consumed within Zanzibar remain subject to VAT where applicable.
Transfer of Authority to Extend Tax Filing Deadlines
Section 18(4) of the Tax Administration Act, 2009, has been amended to transfer the authority to extend tax filing deadlines.
Previously, this power was held by the Minister responsible for finance. Under the new amendment, the Commissioner General now has the authority to extend the deadline for filing tax returns after consulting the Minister.
The extension may apply to:
- All taxpayers
- A specific sector
- A particular group of taxpayers
This change aims to improve administrative efficiency and enable faster responses to business or sector-specific circumstances.
Mandatory Integration of Electronic Systems with the Tax Authority
Section 23 of the Tax Administration Act, 2009, has been amended to introduce mandatory integration of electronic systems with the tax authority.
System Integration Requirement
Any person operating an electronic system must integrate that system with the system of the tax authority for tax administration purposes.
Penalties for Non-Compliance
Failure to comply with this requirement constitutes an offence. Upon conviction, the offender may face:
- A fine of not less than TZS 10 million, or
- Imprisonment for a term of not less than two years.
These measures aim to strengthen tax monitoring, transparency, and digital compliance among businesses operating electronic platforms.
Expansion of “Dutiable Value” for Imported Services
The Excise (Management and Tariff) Act, 2017, has been amended by introducing a new paragraph under the definition of “dutiable value.”
Under the amendment:
Imported services (excluding financial services) are now subject to excise duty based on the total value of services acquired from foreign providers, including:
- Charges paid
- Fees paid
- Total transaction value
This expansion ensures that cross-border services are properly captured within the excise duty framework.
Restriction on Duty Exemptions for Older Imported Vehicles
Section 15 of the Excise (Management and Tariff) Act, 2017, has also been amended to limit duty exemptions for imported vehicles.
Under the new provision:
Excise duty exemptions will not apply to vehicles that are more than five years old from the date of manufacture.
This policy aims to:
- Discourage the importation of older vehicles
- Promote environmentally efficient vehicles
- Improve the quality of vehicles in the local market
Deductible Amount for Taxes Paid Outside Zanzibar under the Hotel Levy Act
Section 3 of the Hotel Levy Act, 1995, has been amended to introduce a deductible tax credit mechanism.
Under this amendment:
A taxpayer may deduct from the hotel levy payable in Zanzibar an amount equivalent to taxes already paid outside Zanzibar on the same income or service.
This change helps prevent double taxation for businesses operating across jurisdictions.
Conclusion
The recent tax law amendments in Zanzibar introduce significant changes affecting VAT, excise duty, and hotel levy compliance. These reforms aim to modernize tax administration, strengthen compliance monitoring, and align Zanzibar’s tax system with modern digital and cross-border business practices.
Businesses operating in Zanzibar should carefully review these changes and ensure their tax systems, accounting processes, and compliance procedures align with the new regulatory requirements.
Professional Tax and Regulatory Assistance
For professional assistance with:
- Tax compliance in Zanzibar
- VAT registration and advisory
- Business registration and licensing
- Investment advisory services
Should you require assistance, kindly reach out to our team directly at www.gerpatsolutions.co.tz info@gerpatsolutions.co.tz, Mob: +244 742 826 955