The government of Zanzibar, one of Africa’s most prized travel destinations, has announced that a new tax and residency program is now available for foreigners wanting to live and invest in the island. The game-changing measure comes on the back of significant infrastructure and tourism-friendly initiatives that allowed the idyllic Tanzanian region to weather much of the storm brought on by the Covid-19 pandemic in 2020.
The number of tourists visiting Zanzibar has increased fivefold in the past 20 years, Back in 2000, it was reported that around 100,000 tourists visited Zanzibar, in 2019 over 500,000 tourists were recorded visiting the country.
The government, through the Zanzibar Commission for Tourism, are devoted to attracting more visitors and are actively promoting domestic tourism. Tourism is one of Zanzibar’s key economic sectors.
Booming Tourism Industry
As many of the world’s tourist destinations have been overdeveloped there is a real appetite for finding locations that offer a perfect balance of amenities, modern comforts and luxury whilst enjoying an unspoilt destination which is beautiful and ready to be explored.
The Africa Report 2020/21 by global real estate company Knight Frank, recorded GDP growth of 5.7% for Tanzania and that in 2019 the Tanzanian real estate sector had grown by 4.5%.
Zanzibar’s new tax and residency investment scheme set to open paradise to the world.The Government of Zanzibar has introduced key measures to make the idyllic region attractive to foreign investors seeking to invest in Africa.
Until now, the Investments Act of 2018 provided procedures and criteria for Strategic Investment Status (SIS) projects with incentives and allowances to real estate developers, however the same was not offered to those wanting to buy property in the country.
The result has been that Zanzibar has not been able to attract any notable real estate development, where countries like Mauritius, UAE, Oman, Singapore and others have thrived after implementing this strategy.
Investor-friendly Legislation
With the introduction of the new investor programme, announced by the Government recently, foreign buyers will now enjoy a number of benefits, thereby luring investment and boosting Zanzibar’s image as a safe investment destination as well as the broader Tanzanian economy.
Real estate investors can now acquire a residency permit as an investor, meaning the party will be allowed to live in Zanzibar as a non-citizen. However, it is not mandatory for investors to live in Zanzibar permanently.
New tax and residency benefits for real estate buyers:
- No Income tax on worldwide income and wealth
- Resident permit for VILLA buyer (plus spouse) and up to four children under 20 years of age
- First buyer pays only 50% of normal capital gains on sale of unit, at 5% instead of 10%
- Foreign ownership allowed
- Registration of ownership to be done by Zanzibar Investment Promotion Authority (ZIPA)
- No VAT on unit rental or sales
- Income tax is halved only on local income – 15% instead of 30% (applicable to foreigners only)
- Repatriation of profit is allowed after tax
- Residence permits are only valid for the duration the buyer owns the property (renewable every two years at $3050 for the main investor and $550 for each dependent)
- No work permit is given, but may be applied for separately by the employer
- No minimum stay is required to claim benefits
- Business investors wanting to invest in ventures such as restaurants, bars, watersports and retail operations will receive similar benefits as real estate investors through approved “Strategic Investment” projects only.
Here is a list of new tax and residency benefits for business investors:
- Foreign ownership is allowed
- No business licence fee for the first three months
- Company tax: Income tax free for first five years. After the first five years: Only 50% tax to be levied. (Income Tax is 30% so it will only be 15%)
- Repatriation of profit allowed after tax
- 100% exemption on withholding tax on interest paid to foreign banks
- Deduction of depreciation rate of 100% within five years
- Residence and work permits for investor and employees.
- Pennyroyal Ltd is the long-term investor, developer and manager of Blue Amber Zanzibar, and the first real estate project to be awarded SIS by Zanzibar’s government.
Investments in Tourism Sector
Blue Amber is a luxury mixed-use, waterfront, resort development spread across 411 hectares along the Muyuni coastline in the north-eastern part of Zanzibar. It incorporates residential, hotel, tourism, and community and public amenities.
It is the only “Strategic Investment” real estate development on Zanzibar with an untouched natural beach, offering views of pristine Muyuni Beach and Mnemba Island.
Construction of the first villa residences and visitors centre commenced in the first quarter of 2020 and are due for completion within the next 18 to 24 months. Subsequent phases will include the development of further hotel, residential and retail sub-projects around the anchor developments.
Phase 1 of the project is expected to be completed in the next two years.
With the introduction of the new investment programme and its myriad of benefits, the developers are expecting to see great interest among buyers from abroad, especially against a backdrop of Tanzania bucking global travel trends last year.
Tanzania, and Zanzibar in particular, surpassed expected visitor numbers in 2020 despite enormously unfavourable conditions stemming from the pandemic.
Tanzania recorded more than 620000 foreign tourists in the 2020/21 financial year – almost 200000 more than anticipated.
The speedy implementation of Standard Operating Procedures requiring visitors to present medical proof of their Covid-19 status – measures that also applied to stakeholders in the local tourism sector – played a key role in the country’s success.
The effective strategies implemented by the government caught the attention of the World Travel and Tourism Council, which awarded Tanzania a ‘Safe Travels Stamp’ in August – a major feat considering international fears around Covid-19.
From the time the pandemic arrived on African shores, the country’s leaders were proactive in their approach, forging ahead with plans to make Tanzania more attractive to foreign investors.
In January, Zanzibar president Hussein Ali Mwinyi signed a memorandum of understanding (MoU) for the construction of a $230-million port in North Unguja.
Once completed, the project will include berths for containers, liquid bulk goods, natural gas offshore services and infrastructure for the rehabilitation of marine vessels.
On the 30th of May, Terminal 3 at Amani Karume International Airport (AAKIA) opened to improve the quality of services and customer care for visitors to the island.
About Blue Amber Zanzibar:
Blue Amber is a mixed-use, waterfront, resort development spread across 411 hectares along the Muyuni coastline in the north-eastern part of Zanzibar and incorporates residential, hotel, tourism, as well as community facilities and public amenities within its uses.
Blue Amber is being developed by Pennyroyal Ltd and is the first real estate project to be awarded “Strategic Investment” status (SIS) by the government of Zanzibar. SIS provides non-citizens the opportunities to become permanent residents and receive a host of attractive tax benefits if they acquire property within developments with SIS.
The development will be executed in several phases. Phase one involved the site clearing, boundary wall construction, and road infrastructure works. Construction of the first villa residences and visitors centre commenced in the first quarter of 2020 and are due for completion within the next 18 to 24 months.
Subsequent phases will include the development of further hotel, residential and retail sub-projects around the anchor developments. Phase 1 of the project is expected to be completed in the next four years.
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