Zanzibar Hotel Tax Disputes: ZRA Compliance Guide

By GERPAT Solutions | Business Licensing, Tax Compliance and Regulatory Advisory

Zanzibar’s tourism sector plays a significant role in the local economy, supporting hotels, restaurants, resorts, tour operators and online travel agencies (OTAs). As the sector grows, hospitality businesses must pay close attention to their tax obligations, recordkeeping practices and regulatory requirements administered by the Zanzibar Revenue Authority (ZRA) and other relevant authorities.

Disagreements may arise when tax assessments do not match a business’s actual revenue, when booking-platform commissions are treated incorrectly, or when electronic booking records differ from declared turnover. Understanding the applicable tax framework and maintaining reliable business records can help hospitality operators manage these risks.

This guide explains the principal tax considerations, common assessment disputes and practical compliance measures for hotels, restaurants and accommodation businesses operating in Zanzibar.

Key Highlights

• Hospitality tax compliance: Hotels and restaurants should identify the taxes and levies applicable to their activities and registration status.
• Revenue reconciliation: Booking records, payment-platform settlements and accounting reports should be reconciled regularly.
• OTA transactions: Contracts and settlement statements can help clarify the relationship between accommodation providers and booking platforms.
• Assessment disputes: Businesses should review the legal basis, calculations and supporting evidence for any disputed assessment.
• Mainland and Zanzibar operations: Businesses operating across both jurisdictions should assess their obligations separately and coordinate compliance where necessary.

1. Understanding the Tax Obligations of Hotels and Restaurants in Zanzibar

Hospitality businesses may be subject to different taxes, levies and regulatory charges depending on their activities, turnover, legal structure and applicable legislation.

Hotel and Restaurant Levy

The Hotel and Restaurant Levy is an important consideration for businesses operating accommodation and food-service establishments in Zanzibar. Operators should confirm whether their activities fall within the relevant statutory definitions, the applicable rate, the correct taxable base and the required filing and payment procedures.

Disputes may occur when the authority and the business disagree about the transactions covered by the levy or the amount of revenue subject to it.

Value Added Tax (VAT)

VAT may apply to taxable supplies of accommodation, food, beverages and other services, subject to the applicable registration rules, exemptions and legislation.

Businesses should distinguish VAT reporting from the reporting of other taxes and levies. Where more than one charge applies to a transaction, the relevant legal provisions should be reviewed to determine the proper tax base and calculation method.

Other Applicable Taxes and Charges

Depending on the nature of the business, additional obligations may include:

• Infrastructure or other tourism-related charges, where legally applicable.
• Property tax and relevant municipal charges.
• Stamp duty on instruments subject to the applicable law.
• Union taxes administered by the Tanzania Revenue Authority (TRA), including income tax obligations where applicable.
• Business registration, licensing and sector-specific compliance requirements.

Not every charge applies to every hospitality business. Operators should verify the relevant legislation, rates, exemptions and administrative requirements before preparing their tax returns or responding to an assessment.

2. Electronic Booking Systems, PMS Records and OTA Compliance

Hotels increasingly use Property Management Systems (PMS), point-of-sale systems, online booking platforms and electronic payment services to manage reservations and revenue.

These systems can support accurate reporting, but they can also create discrepancies if bookings, cancellations, commissions, refunds and actual receipts are not recorded consistently.

Hospitality businesses should verify any ZRA notice or directive concerning electronic records, system integration or reporting requirements, including its legal basis, effective date, scope and implementation deadlines.

Practical compliance measures include:

• Maintaining accurate records of reservations, cancellations, refunds and complimentary stays.
• Reconciling PMS reports with accounting records and bank statements.
• Retaining contracts and settlement reports from OTAs.
• Ensuring that electronic records can be retrieved and produced when lawfully required.
• Documenting system changes, reporting interruptions and data corrections.

Where an assessment relies on electronic booking information or estimated turnover, the business should examine the data used, the methodology applied and whether the figures accurately reflect taxable transactions.

3. Common Causes of Hotel and Restaurant Tax Disputes

A. Disagreement Over the Taxable Revenue

A hotel may report revenue based on the amounts earned from accommodation and other services, while the authority may calculate the tax using a different revenue figure.

The parties may disagree over whether the relevant amount includes discounts, commissions, refunds, service charges or other components. The correct treatment depends on the legislation governing the particular tax.

Recommended action: Prepare a transaction-level reconciliation that explains the difference between gross booking values, adjustments, platform deductions and amounts received.

B. Online Travel Agency Commissions

International and local booking platforms may collect payments from customers and deduct commissions before remitting funds to hotels.

For example, a guest may pay a booking platform USD 200, while the hotel receives USD 170 after a USD 30 commission deduction. The tax treatment cannot automatically be determined by looking only at the net bank receipt or the gross booking price. It depends on the applicable tax rules, contractual arrangements and the nature of the transaction.

Hotels should retain OTA agreements, customer invoices, commission statements, settlement records and evidence of refunds or adjustments.

C. Complimentary Rooms, Discounts and Group Reservations

Promotional stays, complimentary rooms, discounted group bookings and arrangements involving non-cash consideration may create valuation questions.

Businesses should document the commercial purpose of these arrangements, the amounts charged, any consideration received and the treatment applied in their accounts. They should also establish whether the relevant tax legislation provides specific valuation rules.

D. Estimated or Imputed Turnover

An assessment based on estimated turnover may be challenged where the assumptions do not reflect the establishment’s actual operations.

Factors such as seasonal closures, low occupancy, renovations, cancellations, room-rate variations and temporary service interruptions may affect revenue.

To assess the accuracy of an estimate, operators should compile occupancy reports, room-rate records, invoices, bank statements, audited accounts and other relevant evidence. Industry comparisons may be useful, but they should be supported by reliable data and should account for differences between establishments.

E. Differences Between PMS Data and Tax Returns

Electronic systems and tax returns may report different figures because of timing differences, cancelled reservations, duplicate entries, currency conversions or inconsistent accounting classifications.

Businesses should investigate discrepancies promptly and document any corrections. A clear audit trail can help demonstrate how reported figures were calculated.

4. How to Respond to a ZRA Tax Assessment or Dispute

A hotel or restaurant that disagrees with a tax assessment should act promptly and follow the procedure applicable to that assessment.

The following steps provide a practical starting point:

1. Review the assessment. Identify the tax period, tax type, amount assessed, penalties, interest, reasons for the assessment and any stated response deadline.
2. Verify the legal basis. Confirm the legislation, regulations and procedural rules applicable to the particular tax and assessment.
3. Reconcile the figures. Compare the authority’s calculations with the business’s accounting records, PMS reports, OTA settlements and payment evidence.
4. Collect supporting documents. Prepare contracts, invoices, returns, bank statements, occupancy records and correspondence relevant to the disputed items.
5. Submit the appropriate response. Use the prescribed objection or review procedure, comply with filing requirements and clearly explain the factual and legal grounds for disagreement.
6. Address payment or deposit requirements. Verify any applicable statutory payment, deposit or waiver requirements and obtain professional guidance before relying on an exception.
7. Consider further review or appeal. If the dispute remains unresolved, determine the appropriate appeal forum, applicable deadline and procedural requirements.

Important: Do not assume that the objection deadline, payment requirements or appeal route are identical for every Zanzibar tax. These matters should be checked against the current legislation and the particular notice received from the authority.

5. Documents to Prepare for a Hospitality Tax Dispute

Good recordkeeping can make a material difference when a business challenges an assessment.

Relevant documents may include:

• Daily, monthly and annual PMS occupancy and revenue reports.
• OTA contracts, booking summaries, commission invoices and settlement statements.
• Customer invoices, receipts, credit notes and refund records.
• Bank statements and merchant payment reports.
• Filed tax returns and proof of tax payments.
• Financial statements and relevant accounting ledgers.
• Records of complimentary rooms, discounts, cancelled bookings and group reservations.
• Business licences, tax registration records and correspondence with the authorities.
• A written reconciliation explaining the difference between reported revenue and the assessed amount.

The documents required will depend on the tax in dispute, the assessment period and the grounds on which the business is challenging the assessment.

6. Managing Tax Obligations Across Mainland Tanzania and Zanzibar

Hospitality groups may operate hotels, restaurants, tour services or related businesses in both Mainland Tanzania and Zanzibar. Although some tax matters are governed by Union legislation, Zanzibar also has its own laws and administrative arrangements for relevant taxes and levies.

Businesses should not assume that registration, reporting, tax rates or procedures in one jurisdiction automatically satisfy the requirements of the other.

Where companies share management services, trademarks, employees, booking infrastructure or other resources, the arrangements should be properly documented. Intercompany charges and cross-jurisdictional transactions should be reviewed under the applicable tax rules.

Coordinated recordkeeping can help businesses identify inconsistencies and respond more effectively to inquiries from the relevant authorities.

7. How GERPAT Solutions Supports Hospitality Businesses

GERPAT Solutions provides business advisory, licensing and corporate compliance support for companies operating in Tanzania and Zanzibar.

For hotels, restaurants, accommodation providers and tourism-related businesses, our support may include:

• Reviewing business registration and licensing requirements.
• Organising tax registration and compliance documentation.
• Coordinating the collection and reconciliation of relevant business records.
• Supporting responses to regulatory information requests.
• Helping businesses identify potential compliance gaps and prepare documentation for professional review.
• Coordinating with appropriate tax professionals where a dispute requires specialist tax representation or advice.

The appropriate support depends on the nature of the dispute, the applicable legislation and the professional services required.

Conclusion

Tax disputes involving hotels, restaurants and online travel agencies can arise from differences in revenue calculations, platform commissions, electronic records or the interpretation of applicable tax rules.

Hospitality businesses in Zanzibar can reduce avoidable risks by maintaining reliable transaction records, reconciling booking systems with accounting data and responding promptly to official notices.

Before challenging an assessment, businesses should establish the legal basis of the tax, verify the applicable procedures and organise evidence that directly addresses the disputed figures.

Need assistance with hospitality business compliance in Zanzibar?

GERPAT Solutions supports business formation, licensing and corporate compliance in Tanzania and Zanzibar.

Reach to out Team at www.gerpatsolutions.co.tz , info@gerpatsolutions.co.tz, +255 742 826 955

Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Tax legislation, rates, administrative directives and appeal procedures may change. Businesses should verify current requirements with the relevant authorities and obtain advice appropriate to their circumstances.