Zanzibar: Nonresident digital services providers to register for VAT

The Zanzibar Revenue Authority (ZRA) recently published guidelines for registration for VAT on digital services by nonresident providers of digital services to customers in Zanzibar.

Background

Zanzibar is a semi-autonomous region within the United Republic of Tanzania and maintains a separate VAT system administered by the Zanzibar Revenue Authority. The ZRA guidance describes digital services tax as a Union Tax, while VAT on electronic services in Zanzibar is administered and collected independently by the ZRA under Zanzibar tax law.

Scope

Digital services are defined as sales of anything other than goods or real property that are delivered or made available through electronic or digital means, including online communication services or the internet, where such services are sold to Zanzibar for use or consumption within Zanzibar.

The regime applies to a broad range of digital services, including software and software updates; downloadable digital content, e-books, films, and subscription-based media; images, text, data, and information services; access to databases and information systems; search engines and automated helpdesk services; website hosting and other electronic data management services, including online data warehousing, file-sharing, and cloud storage; social networking services; self-education and e-learning products, including distance learning programs, internet-based courses, educational webcasts, webinars, and digitized publications; streaming and other over-the-top (OTT) services; music, films, television programs, video content, and online gaming and wagering activities; electronic booking and ticketing services; and political, cultural, artistic, sporting, scientific, and other electronically delivered broadcasts and events. The scope also includes commissions earned by platforms, including those in the sharing and gig economy.

VAT rate

Digital services supplied by nonresident providers to non-VAT-registered persons in Zanzibar are subject to VAT at a rate of 18%, which is higher than Zanzibar’s standard domestic VAT rate of 15%.

Business-to-business (B2B) vs. business-to-consumer (B2C)

The VAT collection obligation on nonresident providers applies to B2C sales.

B2B is defined as sales to VAT-registered persons, and B2C is defined as sales to non-VAT-registered persons. A nonresident provider of digital services is not required to collect VAT on sales made to a VAT-registered person in Zanzibar. Instead, VAT is accounted for by the recipient under the reverse charge mechanism, provided the customer has furnished its Zanzibar VAT registration number to the seller.

The rules further provide that a nonresident seller must treat customers as non-VAT-registered persons unless the customer provides documentation demonstrating that it is registered for VAT in Zanzibar. When the customer provides incorrect information, the seller will not be held liable, provided it can demonstrate that it neither knew nor could reasonably have been expected to know that the information was inaccurate.

Customer location

Digital services provided by a nonresident are sourced to Zanzibar when provided to an unregistered person and either (1) the payment proxy (such as the customer's credit card, debit card, or bank account information) is located in Zanzibar, or (2) the customer's location proxy indicates Zanzibar, including the billing address, home address, internet address (IP address), or the mobile country code associated with the customer's SIM card.

Marketplace rules

Zanzibar has not introduced a deemed-supplier rule making a platform liable for VAT on the underlying services supplied by third-party merchants. Accordingly, where a platform merely connects suppliers and customers, the underlying nonresident suppliers remain responsible for VAT on their own supplies to non-VAT-registered customers in Zanzibar. A platform is nevertheless responsible for VAT on its own taxable services, including qualifying commissions or other platform service fees.

Registration

Nonresidents making taxable sales of digital services in Zanzibar must register, regardless of their gross receipts. Simplified registration is completed online through the ZRA’s VAT Electronic Service Registration Portal (ZIDRAS – Zanzibar Integrated Domestic Revenue Administration System), available at portalzidras.zanrevenue.org, by submitting business registration details (including a company certificate from the country of origin, business contact details, website/platform information, and the entity’s home-country tax identification number). Upon completion, the business receives a registration number and certificate of registration via the portal to enable filing and payment of returns.

Compliance

Registered nonresident sellers must file VAT returns electronically on a monthly basis and pay all tax due in USD on or before the 20th day of the month following the end of the relevant accounting period. Registered nonresident sellers must also keep records explaining all transactions relevant to their VAT-liable supplies to Zanzibar for at least seven years, in English (or in a form that can easily be converted to English), stored either electronically or in paper form, and must be able to produce them upon request.

VAT invoice

For sales of digital services to non-VAT-registered recipients in Zanzibar, formal VAT invoices are not required; customer receipts are sufficient.

Penalties

The ZRA guidance does not prescribe a separate penalty regime specifically for nonresident suppliers of electronic services. Applicable penalties, interest, and other enforcement consequences should therefore be determined under the general Zanzibar VAT and tax administration legislation.

Implementation timeline

According to the ZRA guidance, VAT on electronic services supplied by nonresident businesses was introduced on August 16, 2022, followed by partial implementation. The ZRA published complete business guidance in April 2026 and states that the scheme is already in force. As an exceptional transitional measure, nonresident businesses that have not yet registered are instructed to register as a preparatory step but are permitted until January 1, 2027, to adapt their systems and begin collecting and remitting VAT. Businesses unable to meet that date are encouraged to contact the ZRA to discuss their circumstances.
 

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Chinedu Nwachukwu | chinedunwachukwu@kpmg.com