🎧 Listen to This Article
Zanzibar Imposes 15% VAT on Non-Resident Digital Service Providers
In a significant move aligning itself with global digital tax norms, Zanzibar has confirmed the application of its 15% value-added tax (VAT) to non-resident providers of digital services to consumers. The measure, legislated under the Zanzibar Finance Act 2024, took effect following earlier regulatory groundwork laid in 2022.
This makes Zanzibar the latest in a growing list of over 120 jurisdictions worldwide to introduce VAT obligations on cross-border digital services — marking a continued trend of taxing the digital economy at the point of consumption.
Scope and Application
The new VAT regime applies exclusively to business-to-consumer (B2C) transactions, meaning foreign providers selling digital services directly to individuals in Zanzibar are now required to charge and remit VAT at the standard 15% rate.
Business-to-business (B2B) sales remain outside the direct charge mechanism. In such cases, the local business recipient is responsible for accounting for VAT under the reverse charge rule — a structure that avoids unnecessary administrative burdens for non-resident suppliers engaged solely in B2B transactions.
Importantly, there is no registration threshold for foreign digital providers. This zero-threshold requirement effectively means that even a single B2C sale triggers the obligation to register for VAT in Zanzibar.
Furthermore, the regime is distinct from mainland Tanzania’s VAT framework, requiring a separate registration and compliance process for digital service providers already active across the border.
Services Captured
Digital services liable to Zanzibar VAT include, but are not limited to:
- Software and mobile applications
- Website and server hosting
- E-learning services (excluding those involving live human interaction)
These services, when delivered via the internet or other electronic networks, fall within the taxable scope, regardless of the provider’s location.
Determining Jurisdiction
To establish whether a digital service is consumed in Zanzibar — and therefore subject to VAT — providers are required to rely on available customer data. Acceptable indicators include:
- Payment method and billing address (e.g., local credit/debit cards)
- Internet protocol (IP) address
- Any other similar geolocation or user data
There is no requirement to issue tax invoices, simplifying compliance for digital service providers with automated or high-volume sales flows.
Role of Marketplaces
In cases where a resident digital marketplace facilitates sales on behalf of a non-resident supplier, the VAT obligation shifts to the local platform. This provision mirrors similar “deemed supplier” rules adopted in the European Union, South Africa, and other digital VAT regimes — emphasizing the regulatory push toward securing tax compliance through platforms with local economic presence.
For further details, clarification, contributions, or any concerns regarding this article, please contact us at [email protected]. We value your feedback and are committed to providing accurate and timely information. Please note that our privacy policy will handle all inquiries
