Zanzibar VAT vs Mainland VAT: Two Acts, Two Rates, Two Thresholds

This page is the two-jurisdiction VAT operating file: which Act, rate and threshold govern a supply on the Mainland, in Zanzibar or across the channel, and how one business keeps two ledgers apart. It is not a Mainland VAT primer and not a Union income-tax guide.

• Which taxes cross the channel: Union vs non-Union taxes
• The legal person on the island: Zanzibar registration at BPRA
• Mainland mechanics in full: Tanzania VAT guide

As at 14 September 2026. Live rates and return dates sit on the TRA and ZRA portals; this file rests on Cap. 148, the Zanzibar Act of 1998 and the Tax Administration Act, Cap. 438.

VAT is outside the Union list, so two Acts run

The First Schedule to the Constitution of the United Republic of Tanzania, 1977 lists income tax, corporation tax, customs and excise as Union matters; value added tax is absent. The Mainland therefore taxes consumption under the 2014 Act, in force since 1 July 2015 and collected by the Tanzania Revenue Authority, while Zanzibar taxes it under its 1998 statute, collected by ZRA, successor to the Zanzibar Revenue Board under the Zanzibar Revenue Authority Act, 2022.

Neither authority reads the other’s Act: a TRA VAT certificate has no standing at a ZRA counter. Income tax stays Union, assessed by TRA on both sides, so a Stone Town hotel files VAT with ZRA and corporate tax with TRA.

Rate and threshold, side by side

A Finance Act on either side can move any row each July; the portals win over this table.

Register the place before the tax: one TIN, two VAT numbers

A Mainland company opening a shop, hotel or depot on Unguja first registers as a foreign company with the Business and Property Registration Agency under the Zanzibar Companies Act, 2013; ZRA issues no VAT number to a legal person BPRA has not seen. In reverse, a Zanzibar company selling from Dar es Salaam registers with BRELA before TRA opens a file. An activity on the reserved list in GN No. 487A of 2025 is screened at the licensing desk before either application; a VAT number does not cure a licence the company cannot hold.

The Taxpayer Identification Number is Union: TRA issues it under Cap. 438 for income tax on both sides. The VAT numbers are not: TRA prints one on the Mainland certificate, ZRA another through ZIDRAS, and each invoice quotes the number of the side where the supply is made. Neither side’s sales count toward the other’s threshold.

Goods across the channel: the rate-difference entry

Cap. 148 applies to Mainland Tanzania only. Goods arriving at Dar es Salaam from Unguja or Pemba enter the Mainland VAT territory, and where Zanzibar VAT was paid on them the Mainland charge is the difference between the two rates: three percentage points at 18% against 15%. Goods moving the other way, with 18% paid, meet no further ZRA charge because the island rate is lower. The TRA customs desk assesses both on the entry paperwork, customs being a Union function TRA runs at every port; put the first consignment to that desk in writing before it sails.

The Zanzibar VAT receipt must travel with the goods; without it the Dar es Salaam desk sees no tax paid and charges the full Mainland rate on the customs value. Imports from outside the United Republic into Zanzibar pay duty at the East African Community Common External Tariff to TRA and import VAT at the Zanzibar rate on the same entry; a ZIPA certificate under the Zanzibar Investment Promotion and Protection Act, 2018 may relieve listed capital goods, not trading stock, and never the duty to register.

Services and the place-of-supply gap

Services carry no receipt. Cap. 148 zero-rates exported services when the recipient is outside Mainland Tanzania at the time of supply, and taxes imported services in the Mainland recipient’s hands by reverse charge. A Zanzibar customer sits outside Mainland Tanzania and inside the United Republic, and no joint reading says which limb catches a Dar es Salaam consultant billing an Unguja hotel. Obtain a private ruling from the Commissioner General under Cap. 438 for a recurring cross-channel line and a written ZRA answer on whether the island recipient must self-account; until both arrive, price on the higher rate and settle by credit note.

Input tax stays on the side that charged it

Each Act defines input tax as tax charged under that Act. Zanzibar VAT on an island purchase is credit on the ZRA return and nothing on the TRA return; Mainland VAT on a Dar es Salaam purchase is the mirror. A two-sided ledger needs two purchase day-books and two sets of tax invoices, each showing the correct authority’s number.

On the Mainland the credit needs a fiscal receipt from an electronic fiscal device, as Cap. 438 requires, and lapses six months after the invoice date; a refund of excess credit carries a certificate of genuineness signed by an auditor registered with the National Board of Accountants and Auditors. ZRA runs its own fiscal-receipt regime and refund route, and a Mainland auditor’s certificate is not the Zanzibar form.

Registration sequence for a two-sided operator

1. Fix the legal person on each side: BRELA for the Mainland; BPRA foreign-company registration for a Mainland company entering Zanzibar.
2. Hold one TIN: issued by TRA; the same number goes on both applications.
3. Test each side’s turnover against its own threshold: counting only supplies made on that side.
4. Apply to TRA: form ITX245.02.E on the Taxpayer Portal with lease and sales evidence; officers visit the premises before the certificate issues.
5. Apply to ZRA: through ZIDRAS with the BPRA certificate and the Zanzibar business licence.
6. Configure the fiscal devices: one rate per side; a Mainland EFD does not report to ZRA.
7. Diarise two return dates and two payment references: the 20th for TRA, the Zanzibar Act’s day for ZRA.
8. Write to both authorities on the cross-channel lines and file the replies with the certificates.

Papers each desk asks for

Mainland: form ITX245.02.E; BRELA certificate of incorporation with memorandum and articles; TIN certificate; business licence under the Business Licensing Act, Cap. 208; lease or title for the premises; bank letter; sales invoices, contracts or a signed turnover projection for an intending trader; directors’ passports or National IDs; the EFD supplier’s quotation.

Zanzibar, on ZIDRAS: BPRA certificate; the same TIN; Zanzibar business licence; premises evidence on Unguja or Pemba; directors’ identity; turnover evidence past TZS 100 million; for hotels, the ZIPA certificate and the bed-night register, since ZRA’s infrastructure tax on tourist bed-nights is a separate line assessed from the same premises.

Illustrative arithmetic, not a quotation: one distributor, two returns

A distributor sells TZS 900,000,000 of taxable goods from Dar es Salaam and TZS 300,000,000 from Zanzibar in a year, net of VAT, so both sides cross their own threshold. Mainland output tax is TZS 162,000,000 at 18%; purchases of TZS 600,000,000 on fiscal receipts give input tax of TZS 108,000,000, leaving TZS 54,000,000 for TRA across twelve monthly returns. Zanzibar output tax is TZS 45,000,000 at 15%; island purchases of TZS 200,000,000 give TZS 30,000,000 of credit, leaving TZS 15,000,000 for ZRA.

Two common errors: a Zanzibar till set to 18% collects TZS 54,000,000 instead of TZS 45,000,000, and the TZS 9,000,000 excess is tax shown on an invoice, which the supplier does not keep and the customer cannot recover, so every invoice is credited and reissued. A Mainland till set to 15% collects TZS 135,000,000 against TZS 162,000,000 owed; the TZS 27,000,000 gap comes out of margin with interest and penalty under Cap. 438.

A Mainland branch selling TZS 150,000,000 would be unregistered there and right to charge no Mainland VAT, while an island branch at TZS 300,000,000 must charge 15%: the rate follows the side and its registration, never the group total.

Where two-sided VAT files stall

• One EFD configured at 18% shipped to Zanzibar; every island invoice over-charges three points until ZRA’s audit letter.
• The Mainland VAT number printed on Zanzibar invoices; ZRA refuses the customer’s input credit and the customer refuses to pay.
• Group turnover added together to argue the Mainland registration covers the island; ZRA back-dates registration to the month TZS 100 million was crossed.
• Zanzibar-made goods trucked to Dar es Salaam without the ZRA receipt; the customs desk charges 18% on the full value.
• A Mainland company trading in Zanzibar without BPRA foreign-company registration; ZIDRAS has no legal person to attach to.
• A TRA refund claim supported by an accountant’s letter rather than an NBAA-registered auditor’s certificate of genuineness.

What has moved recently

The Finance Act 2023 raised the Mainland registration threshold from TZS 100 million to TZS 200 million from 1 July 2023. On the island, the Zanzibar Revenue Board became the Zanzibar Revenue Authority, filing moved on to ZIDRAS, and the 1998 Act now carries an 18% rate for the financial, insurance, telecommunications and digital lines beside the 15% standard rate, so an insurer pays one rate on both sides and a retailer does not. Confirm the live schedule on tra.go.tz and the ZRA VAT page; a June budget on either side can move either threshold.

Desks this file does not replace

TRA owns Cap. 148, the Union income tax on both sides and customs at every port including Zanzibar’s; it audits the Mainland VAT ledger and the whole company’s income tax. ZRA owns the 1998 Act, the infrastructure tax on bed-nights and the island’s other domestic levies, and audits the Zanzibar VAT ledger; expect both teams in one year, each testing the split. BRELA and BPRA own the legal person on their side. TISEZA and ZIPA own investment certificates; neither cancels a registration duty.

A Mainland assessment is objected to before the Commissioner General within 30 days of service under Cap. 438, with a deposit of one-third of the assessed tax or the undisputed amount, then the Tax Revenue Appeals Board. A ZRA assessment is objected to under Zanzibar’s Tax Administration and Procedures Act on its own time limit and deposit rule; a TRA objection lodged against a ZRA assessment is no objection at all. Zatra prepares both applications, reconciles both ledgers and sequences the letters; it signs no auditor’s certificate, argues no appeal and issues no certificate.

What to confirm before you act

• Both thresholds and both rates from the TRA and ZRA portals on the day of application.
• The legal person on either side: BRELA extract, BPRA certificate, branch or separate company.
• The ZRA return due day and payment channel on ZIDRAS.
• Both authorities’ written position on your cross-channel goods and services.
• The device class each authority accepts for fiscal receipts and the rate loaded on each.
• The objection deposit and time limit on each side, diarised before any assessment arrives.