TAX UPDATES IN ZANZIBAR
This summary highlights key tax and regulatory changes recently passed in Zanzibar, focusing on VAT, Excise Duty and Hotel Levy. This serves as a quick reference for taxpayers and businesses to understand compliance requirements and emerging tax obligations.
Amended Definition of “Resident” under the VAT Act, 1998
Section 2 of the Value Added Tax Act, 1998 has been amended by deleting the previous definition of the term “Resident” and replacing it with the following:
“Resident” means an individual, company, trust, association, partnership, government entity, or any other legal entity whose residence or establishment is in Zanzibar.
This amendment clarifies the scope of entities considered as residents for VAT purposes in Zanzibar.
Simplified Registration for Non-Resident Suppliers
A new Subsection (5) has been introduced under Section 4A of the Value Added Tax Act, 1998, providing that:
“Where it is not practicable for a non-resident person to appoint a tax representative due to business circumstances, such person shall apply to the Commissioner General for registration in accordance with the procedures prescribed in the Tax Administration and Procedures (Procedures of Simplified Registration for Non-Resident Supplier of Electronic Services and Foreign Tour Operators) Regulations, 2022.”
This amendment aims to facilitate compliance by non-resident suppliers of electronic services and foreign tour operators.
Restriction on Zero-Rating of Certain Services under the VAT Act, 1998
Section 9 of the Value Added Tax Act, 1998 has been amended by adding a new subsection (3) immediately after Subsection (2), which states:
“Notwithstanding the provisions of subsection (1) and (2), a supply of services is not zero-rated if:
(a) the supply is of a right or option to receive a subsequent supply of something else in Zanzibar; or
(b) the services are supplied under an agreement with a non-resident but are rendered to a person in Zanzibar who is not registered.”
This amendment clarifies conditions under which the zero-rating of services does not apply, particularly for supplies linked to Zanzibar and non-registered recipients.
Amendment to Section 18(4) of the Tax Administration Act — Transfer of Powers to Extend Tax Filing Deadlines from Minister to Commissioner General
Section 18(4) of the Tax Administration Act, 2009 has been amended to empower the Commissioner General, after consultation with the Minister, to extend the due date for filing tax returns.
The extension may apply generally, to a specific sector, or to a group of taxpayers where reasonable grounds for such extension exist.
This amendment shifts the authority from the Minister to the Commissioner General, streamlining decision-making in granting filing deadline extensions based on business circumstances or sector-specific needs.
Introduction of Mandatory System Integration with the Authority and Penalties for Non-Compliance under Section 23 of the Tax Administration Act, 2009
Section 23 of the Tax Administration Act, 2009 have been amended by introducing new provisions, aimed at strengthening tax compliance through electronic system integration.
- New Subsection (2):
Any person operating an electronic system shall integrate such system with the system of the Authority for tax purposes.
- New Subsection (9):
A person who fails to integrate their system with the system of the Authority in accordance with Section 23 commits an offence and, upon conviction, shall be liable to a fine of not less than TZS 10 million or imprisonment for a term of not less than two years.
These provisions enforce mandatory integration of electronic systems with the Authority’s system to enhance transparency, monitoring, and effective tax collection. The introduction of specific penalties underscores the seriousness of compliance obligations for businesses operating electronic platforms.
Expansion of the Definition of “Dutiable Value” to Include Other Imported Services (Excluding Financial Services)
The Excise (Management and Tariff) Act, 2017 has been amended by inserting a new paragraph (f) under the interpretation of the term “dutiable value.”
(f) In relation to other imported services (excluding financial services), the dutiable value shall be the amount of money, charges, or the total value of services acquired from foreign providers.
This amendment broadens the scope of excisable services by clarifying that imported services with exception of financial services are subject to excise duty based on their value, charges, or amounts paid to foreign suppliers. It aims to enhance tax compliance on cross-border service transactions.
Restriction of Duty Exemption on Imported Vehicles Aged Over Five Years
Section 15 of the Excise (Management and Tariff) Act, 2017 has been amended by adding a new Subsection (3) to clarify the scope of duty exemptions on imported excisable goods.
Subsection (3): The exemption from payment of excise duty shall not apply to vehicles aged over five years from their manufacturing date.
This provision seeks to discourage the importation of older vehicles by removing duty exemptions previously applicable, thereby promoting newer vehicles in the market.
Introduction of Deductible Amount from Hotel Levy for Taxes Paid Outside Zanzibar
Section 3 of the Hotel Levy Act,1995 has been amended by introducing a new subsection providing that:
There shall be a deductible amount from the hotel levy due, equivalent to the amount of tax payable by a person outside Zanzibar.
This change allows for a deduction against hotel levy obligations in Zanzibar where the taxpayer has incurred a tax liability outside Zanzibar, thereby preventing double taxation on the same income or service.
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