Although Zanzibar is part of the United Republic of Tanzania, it has a separate VAT system from mainland Tanzania, administered by the Zanzibar Revenue Authority (ZRA). The ZRA has, therefore, issued specific guidance for non-resident digital service providers supplying customers in Zanzibar. Notably, the guidance also distinguishes between Digital Services Tax (DST) and VAT on digital services.

DST and VAT Rules for Digital Service Providers

The ZRA noted that DST is a Union Tax, meaning it falls within the tax framework applicable at the United Republic level. On the other hand, VAT charged on digital services supplied to customers in Zanzibar is administered and collected by the ZRA under Zanzibar's own tax legislation. The VAT regime covers a broad scope of digital services, other than goods or real property, that are delivered or made available electronically or digitally, including services provided through the internet and purchased for use or consumption in Zanzibar.

This broad definition of digital services includes common digital services such as software and updates, e-books, films, music, streaming and other subscription-based content, online gaming, cloud storage, file-sharing, website hosting, databases, search engines, social media, online advertising, and information services. Additionally, e-learning and distance education, webinars, electronic booking and ticketing, electronically delivered cultural, sporting, and other events, as well as OTT services, also fall within the scope.

For VAT registration, non-resident businesses supplying taxable digital services in Zanzibar must register regardless of the amount of their sales or gross receipts. Also, foreign companies must be aware that an 18% VAT rate applies to the supply of digital services to individuals in Zanzibar. This rate is notable because it is higher than Zanzibar's standard domestic VAT rate of 15%, meaning the digital services regime applies a specific higher rate to these cross-border supplies.

Zanzibar does not currently apply a deemed-supplier rule to digital marketplaces. As a result, when a platform simply connects third-party sellers with customers, the non-resident suppliers remain responsible for VAT on their own taxable digital services. However, the platform itself must account for VAT on its own taxable services, such as commissions or other platform fees.

Conclusion

Zanzibar introduced VAT on digital services supplied by non-resident businesses on August 16, 2022, though the regime was initially implemented only partially. The ZRA has since published comprehensive guidance, effective April 2026, confirming the VAT regime is now fully in force. Non-resident digital service providers that have not yet registered should do so as a preparatory step and have until January 1, 2027, to update their systems and ensure compliance with Zanzibar VAT rules for digital services.