Tax Reforms for Zanzibar as per Financial Bill 2023/24

The Zanzibar government has outlined significant tax reforms in the Financial Bill 2023/24, with a projected revenue collection of TZS 2.84 trillion for the financial year. These changes bring about adjustments that businesses should carefully consider to remain compliant and optimize their operations. Here are the key updates:

1. Value Added Tax Act, No. 4 of 1998

The VAT rate for banking, postal, and telecommunication services has been increased from 15% to 18% of the taxable value. This adjustment aligns with the standard VAT rate and could have implications for pricing strategies and cost structures within these sectors.

2. Property Tax Act, No. 14 of 2008

Property tax will now apply to properties used by owners for residential purposes, with a levy rate of 0.1% of the property’s value. This change broadens the scope of property tax and impacts homeowners who will now need to factor this additional cost into their financial planning.

3. Finance (Public Revenue Management) Act, No. 9 of 2015

The Minister has been granted authority to amend the source and rates of infrastructure tax without requiring prior approval from the House of Representatives. This change introduces greater flexibility in adjusting infrastructure taxes, which could lead to swift updates in tax policy based on emerging economic needs.

4. Stamp Duty Act, No. 7 of 2017

Clarification has been made that stamp duty is not applicable on exempt supplies and imports as listed in the Second Schedule of the Value Added Tax Act. This clarification helps businesses better understand which transactions are exempt from stamp duty, ensuring accurate tax filing and compliance.

5. Vocational Education and Training Act, No. 11 of 2008

Significant reforms include the reduction of the Skills Development Levy (SDL) rate from 5% to 4%. Additionally, the threshold for employers required to account for SDL has increased from four employees to five. Employers with three to five employees are now required to submit NIL semi-annual SDL returns, with a penalty of not less than TZS 500,000 for failure to file. These changes aim to ease the burden on smaller businesses while still promoting vocational training through SDL contributions.

6. Tax Administration and Procedures Act, No. 7 of 2009

The abolishment of penalties for late payment of taxes provides some relief for taxpayers, though penalties for late filing still remain. Additionally, the interest rate on unpaid taxes has increased from “statutory rate plus 5%” to “statutory rate plus 10%,” signaling a stricter stance on overdue tax liabilities. The Commissioner General has also been empowered to withdraw assessments issued in error, though this authority cannot be delegated to other officers. Furthermore, a new requirement mandates the Commissioner General to issue a proposal for settlement to aggrieved taxpayers, who must respond within 21 days. This measure is designed to enhance the dispute resolution process and encourage timely settlements.

These tax reforms introduce new considerations for businesses and individuals alike, with implications spanning from increased compliance requirements to potential cost adjustments. Stay informed, and work with us today to navigate these changes effectively.