Zanzibar Finance Act 2024: Key Tax Changes

In June 2024, the Zanzibar Minister for Finance and Planning presented the budget for the financial year 2024/25. This budget brought significant amendments to several tax laws, which were passed by the House of Representatives and became law through the Finance (Public Revenue Management) Act 2024, signed by the President of Zanzibar on 27 June 2024. The following is a summary of the key tax changes introduced by the Act, effective from 1 July 2024.

Summary of Key Changes

Value Added Tax (VAT) Act:

Increased VAT Rate: The VAT rate on insurance and digital services has increased from 15% to 18%.
Mandatory VAT Registration for Non-Residents: Non-resident businesses operating in Zanzibar without a physical presence must now register for VAT through a local representative.
VAT Collection on Digital Services: The Tanzania Revenue Authority (TRA) has been authorized to collect VAT on electronic services provided by non-residents to customers in Zanzibar.

Excise Duty Act:

Electronic Stamps on Excisable Imports: Imported goods subject to excise duty are now required to carry electronic tax stamps to ensure compliance and consumer protection.

Property Tax Act:

Extended Deadline for Property Tax Payments: The due date for property tax payments has been extended from 30th September to 31st December annually.

Detailed Analysis

Definitions: Amendments and Introductions

Resident: A “resident” is now defined as an individual whose permanent home is in Zanzibar, clarifying distinctions between residents and non-residents, particularly for VAT purposes.
Imported Services: Defined as services supplied by a non-resident to a taxable person, applicable only to VAT-registered recipients.
Exempt Supplies: Redefined to include only those specified in the Second Schedule to the VAT Act.
Import: Now specifically refers to bringing goods into Zanzibar from outside the United Republic of Tanzania, ensuring clarity on what constitutes an import for VAT purposes.
Transfer: Now includes goods of Tanzanian origin supplied between Mainland Tanzania and Zanzibar, further defining tax obligations for cross-regional transactions.

Value Added Tax (VAT) Act: Detailed Changes

VAT Registration Requirement for Non-Residents
Non-resident businesses engaged in economic activities within Zanzibar, but without a physical presence, must register for VAT if their taxable turnover exceeds TZS 100 million. These businesses are required to appoint a local tax representative responsible for all VAT-related obligations, including registration and payment of VAT on behalf of the non-resident.
- This amendment aligns with Mainland Tanzania’s VAT laws, ensuring that VAT is levied on all qualifying transactions within Zanzibar, regardless of a physical business presence.
VAT on Digital Services
The Commissioner of the Zanzibar Revenue Authority (ZRA) can now delegate the collection of VAT on electronic services provided by non-residents to the Commissioner General of the TRA. This aims to streamline the VAT payment process for digital services, leveraging the existing simplified VAT registration system on the TRA’s website.
- Businesses providing electronic services to Zanzibar customers must comply with these new VAT obligations, even without a physical presence in the region.
Increased VAT on Insurance and Digital Services
The VAT rate on insurance and digital services has been increased to 18%, aligning with the rate for banking, postal, and telecommunication services introduced in 2023. This change aims to simplify VAT administration across Mainland Tanzania and Zanzibar.

Excise Duty Act: Detailed Changes

Electronic Tax Stamps: All imported excisable goods must now bear electronic tax stamps. This measure enhances compliance, curbs tax evasion, and combats counterfeit goods proliferation.

Property Tax Act: Detailed Changes

New Deadline for Property Tax Payments: The payment deadline has been moved to 31st December each year, providing taxpayers with additional time to meet their obligations. Property tax remains payable annually to the ZRA, with rates determined based on the property type and usage

These changes reflect the Zanzibar government’s commitment to strengthening the tax administration framework, ensuring compliance, and aligning Zanzibar’s tax laws with those of Mainland Tanzania. Businesses operating in Zanzibar must adapt to these new requirements to remain compliant and optimize their operations.