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Investment Incentives

Investiment Guide

Download our Investment Guide 2019-2020.

Investment Incentives

Made under section 31(2) of The Zanzibar Investment Promotion and Protection  Authority Act No. 14, 2018

Zanzibar  has a stable and predictable fiscal regime that, among other things, recognize the importance of the companies to recover their investment costs prior to the payment of corporate tax. Foreign investors are allowed to own 100% of their businesses. It  also offers lucrative incentive package to strategic investors. Some of the incentives provided by law are categorized as follows:
A. INVESTMENTS WHOSE GRANTED STRATEGIC INVESTMENT STATUS 
1. Approved investor who has been granted Strategic investment status may, where appropriate, be granted the following benefits, incentives and allowances during implementation of the Approved Investment:
  1. exemption from all duties and taxes on importation and local purchases of construction goods and materials during the project construction;
  2. exemption of income tax on interest on capital borrowed from foreign banks;
  3. five years grace period on payment of Land Lease;
  4. hundred percent foreign ownership is allowed;
  5. engagement of foreign contractors is allowed; and
  6. five years grace period on payment of land lease for marina in tourism investment;
  7. starting period of land lease agreement is thirty three years; and
  8. starting period of marina lease agreement is thirty three years.

2. Approved investor who has been granted Strategic investment status may, where appropriate, be granted the following benefits, incentives and allowances during operation of the Approved Investment:

  1. hundred percent exemption of Corporate tax for the first five years and fifty percent exemption of the prevailing tax thereafter;
  2. hundred percent exemption of Profit Tax for repatriate Profit;
  3. hundred percent exemption for Accelerated Depreciation for five years;
  4. hundred percent exemption of income tax on interest on capital borrowed from foreign banks;
  5. hundred percent allowance on Research and Development expenditure;
  6. hundred percent retention of all profits after tax;
  7. hundred percent foreign ownership is allowed; and
  8. hundred percent exemption of business license fee for the first three months of soft opening.

3. Developer investing in Real Estate Development may be granted the following benefits, incentives and allowances:

  1. hundred percent exemption on withholding tax on payment of interest;
  2. hundred percent exemption on stamp duty in contract;
  3. hundred percent exemption accelerated depreciation within five years;
  4. hundred percent exemption on capital gain on purchased property;
  5. starting period of land lease agreement is thirty three years;
  6. starting period of marina lease agreement is thirty three years;
  7. five years grace period on payment of land lease; and
  8. five years grace period on payment of marina lease.

4. Buyer who has purchased property of the value not less than United States Dollars One Hundred Thousands in Real Estate Development may be granted the following benefits, incentives and allowance:

  1. Resident Permit for Real Estate Buyer and his husband/wife/spouse and four children who are under twenty years;
  2. fifty percent exemption on stamp duty in Real Estate Buyer’s contract;
  3. fifty percent exemption on capital gain on purchased properties;
  4. hundred percent foreign ownership is allowed;
  5. hundred percent exemption from worldwide income for foreigner; and
  6. hundred percent allowance for free repatriation of profit after tax.

 

B. BENEFITS, INCENTIVES AND ALLOWANCE DURING OPERATION OF THE APPROVED SPECIAL INVESTMENT PEMBA
1. Approved Investor who has been granted status of being Special Strategic Investor in Pemba may, where appropriate, be granted the following benefit, incentive and allowance during the construction of the Approved Special Investment Pemba:

  1. hundred percent exemption from all duties and taxes on importation and local purchases of construction goods and materials during the project construction;
  2. hundred percent foreign ownership is allowed:
  3. hundred percent exemption on research and development;
  4. hundred percent exemption on payment of land leasefor the first five years and fifty percent of tax required to be paid later.
  5. engagement of foreign contractors are allowed with consideration of the local contractors;
  6. hundred percent exemption on Value Added Tax for construction services;
  7. hundred percent exemption from payment of marina lease for the first five years and fifty percent of the lease shall be paid later.
  8. hundred percent exemption from payment of land lease for the first five years and fifty percent of the lease shall be paid later.
  9. forty nine years of land lease agreement.
  10. forty nine years of marina lease agreement.
2. Approved Investor who has been granted status of being Special Strategic Investor in Pemba may, where appropriate, be granted the following benefit, incentive and allowance during the Operation of the Approved Special Investment Pemba:

  1. hundred years exemption of business license fee for the first one year.
  2. hundred percent exemption of corporate tax for the first five years and fifty percent exemption of the prevailing tax thereafter.
  3. hundred percent foreign ownership is allowed.
  4. hundred percent exemption on withholding profit after payment of tax.
  5. hundred percent exemption on withholding tax on payment of interest for ten years forforeign and local banks.
  6. hundred percent exemption for Accelerated Depreciation for three year.
  7. hundred percent exemption on research and development activities; and
  8. hundred percent exemption of profit tax for repatriated profit.
3. Developer who has been granted status of being Special Strategic Investor in Pemba in Real Estate Development may, where appropriate, be granted the following benefit, incentive and allowance:

  1. hundred percent exemption on withholding tax on payment of interest.
  2. hundred percent exemption on stamp duty in contract.
  3. hundred percent exemption on accelerated depreciation within five years.
  4. hundred percent exemption on capital gain on purchased property.
  5. hundred percent exemption on Value Added Tax for construction services during the project construction.
  6. forty nine years of land lease agreement.
  7. forty nine years of marina lease agreement.
  8. fifty percent exemption of profit tax on repatriation profit.
  9. hundred percent exemption of income tax.
  10. allowance of conducting business activities and services in the business cities in   accordance with provisions of the Act
  11. hundred percent exemption on VAT on selling or renting of real estate..

C.  APPROVED INVESTMENTS  OUTSIDE FREE ECONOMIC ZONES

1. Incentives for investor investing outside Free Economic Zones.

  1. exemption from payment of import duty, excise duty Value Added Tax and other similar taxes on machinery, equipment, spare parts, vehicles and other input necessary and exclusively required by that enterprise during construction period indicated in the Investment Certificate;
  2. exemption from payment of business license fee for the first three months of trial operation;
  3. corporate tax exemption for up to five years;
  4. hundred percent foreign ownership;
  5. hundred percent retention of all profits after tax;
  6. hundred percent allowance Research and Development; and
  7. hundred percent allowance for free repatriation of profit after tax.

2. Additional incentives to investment in manufacturing sector only

  1. exemption from payment of any tax on all goods produced for exports;
  2. exemption from payment of trade levy for raw materials and industrial inputs procured from Tanzania Mainland;
  3. exemption from payment of import duty, Value Added Tax and Other similar taxes on raw and packaging materials during project operations;
  4. exemption of Income Tax on interest on registered borrowed capital; and
  5. hundred percent allowance investment deduction on capital expenditure within five years;

3. Additional incentives to investment in Real-estate business only

  1. exemption of income tax on interest on borrowed capital;
  2. stamp duty exemption;
  3. hundred percent allowance investment deduction on capital expenditure within five years; and
  4. capital gains tax on properties sold or purchased.

Procedures for Corporate TAX Exemption

Investors may apply for corporate tax exemption after fulfilling the following conditions:

  • Invest at least 75% of the capital specified in the Business plan/feasibility study;
  • Start business operation

The application must be accompanied with:

  • Audited Final Accounts
  • Progress Report of the project
  • Tax clearance certificate
  • Valid Business license

Please note: Application for Corporate Tax exemption shall be made in the first year of business operation.

PROCEDURES  FOR EXEMPTION OF IMPORT DUTIES AND SIMILAR TAXES

Investor shall submit to ZIPA Bill of Quantity and a list of all capital goods to be imported as well as to be purchased locally for consideration and where appropriate be granted exemption. The list should be submitted in both hard and soft copy.

Exemption of Import duties

For each consignment of approved imported materials, investor may apply for exemption in writing to ZIPA at least 2 weeks before arrival of goods in Zanzibar and submit together with the application 2 sets of the following documents:

  • Bill of Lading/Air way Bill/Consignment notes/Local sale advise
  • Customs Single Bill of Entry
  • Invoice and
  • Packing list

Value Added Tax  Relief on local purchase

For every goods to be purchased locally, investor may apply for Value Added Tax (VAT) relief to ZIPA and submit two sets of the following:

  • A dully filled Value Added Tax form issued by Zanzibar Revenue Board
  • Two copies of pro forma invoice

Note:  Investor shall pay 5% of the amount exempted to ZIPA as service charge, except for  Strategic investment.