Zanzibar imposes VAT on foreign digital services

In recently published guidance from the Zanzibar Revenue Authority (ZRA) provides covers the practical operation of the rules first introduced in 2022. It also signals that enforcement will begin from 2027.

Zanzibar is a semi-autonomous region of Tanzania.

18% VAT on B2C digital services

Non-resident suppliers of electronic services must charge 18% VAT on supplies to non-VAT registered customers in Zanzibar.

The rules apply regardless of turnover, meaning there is no registration threshold for overseas businesses.

Covered digital services include:

• SaaS and software downloads
• Cloud hosting and data storage
• Streaming media and OTT services
• E-books, music, films and digital publications
• Online gaming and wagering
• Search engines and automated support services
• Online education and webinars
• Social media and information services
• Electronic booking and ticketing
• Platform commissions and marketplace service fees

B2B remains outside the collection obligation

The regime follows the now familiar international approach of taxing B2C supplies whilst leaving B2B transactions to the reverse charge.

Where a Zanzibar customer provides a valid local VAT registration number, the overseas supplier does not charge VAT. Instead, the customer accounts for the tax under the reverse charge mechanism.

Suppliers may rely on customer declarations provided they could not reasonably have known the information was incorrect.

Determining customer location for VAT

A sale is treated as consumed in Zanzibar where indicators point to the customer being located there, including:

• Payment instrument issued in Zanzibar
• Billing or home address
• IP address
• Mobile country code associated with the SIM card

These location proxies are broadly consistent with the digital VAT rules now adopted across many jurisdictions.

No deemed supplier rules for marketplaces

Unlike several other countries, Zanzibar has not introduced deemed supplier rules for digital marketplaces.

This means platforms are generally not responsible for VAT on third-party supplies made through their marketplace. Instead, the underlying non-resident supplier remains liable for VAT.

Platforms are, however, responsible for VAT on their own commissions and platform service fees.

VAT Registration and compliance

Registration is completed through the ZRA’s online portal using a simplified process for overseas businesses.

Registered suppliers must:

• Charge 18% VAT on qualifying B2C sales
• File monthly VAT returns
• Submit returns by the 20th day of the following month
• Pay VAT in US dollars to the designated ZRA account
• Keep transaction records for seven years
• Maintain records in English or readily convertible into English

Formal VAT invoices are not required for B2C digital supplies. Customer receipts are sufficient.

Transitional period until January 2027

Although the regime is already legally operational, the ZRA has granted non-resident businesses until 1 January 2027 to complete implementation.

Businesses are encouraged to register immediately and use the remaining months to configure billing systems, tax engines and compliance processes. Suppliers expecting difficulties meeting the deadline should engage with the ZRA before the grace period expires.

VATCalc view

Zanzibar joins the growing list of jurisdictions requiring overseas digital businesses to register and collect local VAT. Whilst the rules broadly follow international practice, businesses should note two unusual features: the 18% VAT rate, which exceeds the standard domestic VAT rate, and the absence of marketplace deemed supplier rules.

Africa & Middle East VAT on digital services