VAT on Digital Service in Zanzibar

• Introduction
• Legal Basis
• Key Definitions
• Scope of VAT on Non-Resident Digital Services and Foreign Tour Operator
• Registration and Requirements
• Verification and Issuance of VAT Registration Number
• Obligations of Registered Non-Residents
• Payment Procedures

GUIDELINE FOR REGISTRATION OF NON-RESIDENT DIGITAL SERVICE PROVIDERS FOR VAT ON DIGITAL SERVICE AND FOREIGN TOUR OPERATOR

1. Introduction

This guideline provides procedures and requirements for registering non-resident persons who supply digital or electronic services to consumers and foreign tour operator who supplies guests to any person in Zanzibar. It aims to facilitate voluntary compliance and ensure efficient administration of the Value Added Tax (VAT) on Digital Service and applicable to non-resident suppliers of electronic services and foreign tour operators. Zanzibar operates as a semi-autonomous region within the United Republic of Tanzania. The VAT is an independent tax for Zanzibar, which must be collected and remitted to ZRA for all revenue generated within Zanzibar.

2. Legal Basis

The requirement for non-resident suppliers carrying on economic activities in Zanzibar without a fixed place to register and pay VAT is provided under the Value Added Tax (VAT) Act Number 4 of 1998 through Finance Act No. 4 of 2024, by introducing Sections 4A and 4B.

As well as supported under Digital Service Tax Regulations known as ‘The Tax Administration Procedures (Simplified Registration for Non-resident Suppliers of Electronic Services and Foreign Tour Operators) Regulations, 2022’.

3. Key Definitions

“Electronic service” includes a supply or transaction made through internet, telecommunication network or through digital market place, provision of downloadable content, e – book, subscription based media, over-top services including streaming television shows, films, music, podcast, software programmes including software, drivers, website filters, and firewalls; electronic data management including website hosting, online data warehousing, file-sharing and cloud storage services; music and games; search engine, automated helpdesk, tickets for live events, e-learning, digital media; services that link the supplier to the recipient including transport hailing services or platforms; and any other service provided through digital market place and any other digital platform or services;

“Foreign tour operator" means tour operator who supplies guests to any person in Zanzibar and has no permanent place of business, residence, or its center of management and control in Zanzibar;

"Non-resident supplier of electronic services" means electronic service provider who has no fixed place of business, residence, or its center of management and control in Zanzibar;

"Taxable supply" means any digital or electronic service consumed by a user located in Zanzibar.

4. Scope of VAT on Non-Resident Digital Services and Foreign Tour Operator

The Scope of VAT on Non-Resident Digital Services in electronic services as illustrated in the key definitions of electronic service above and for foreign tour operator who supplies guests to Zanzibar.

Non-resident Digital Services suppliers & to the consumers and for foreign tour operator suppliers providing services to hotels, local tour operators and guests personal are required to be registered regardless of turnover, as there is no threshold.

VAT at the rate of 18% applies to non-resident suppliers of electronic services and foreign tour operators. Input tax credit is not allowed.

5. Registration and Requirements

Registration is done online through the ZRA registration portal: https://portalzidras.zanrevenue.org Access Digital Services Taxation Portal Apply on VAT digital service taxation and fill all necessary information's, documentations, including business registration details and service agreements.

6. Verification and Issuance of VAT Registration Number

ZRA will verify all information provided, including digital platform details, service categories, and compliance history and upon successful verification, ZRA will issue a VAT Registration Number and confirmation certificate and finally the supplier will receive online login credentials to enable filing and payment of returns.

7. Obligations of Registered Non-Residents

Registered suppliers must file returns electronically and pay all tax due on or before the 20th day of the month following the end of the accounting period.

Non-resident suppliers are exempt from using Virtual Fiscal Devices when issuing receipts or invoices.

8. Payment Procedures

Payments shall be made electronically through ZRA-approved channels, including SWIFT bank transfers designated online through the ZRA online portal after file returns and receive control number.