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24th Aug 2022

Architect Africa Online

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Zanzibar’s new tax and residency investment scheme set to open paradise to the world

Government introduces key measure to make idyllic region attractive to foreign investors seeking to invest in Africa

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 to live and invest in the island.

The game-changing measure comes on the back of significant infrastructural 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.

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, but did not offer the same 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, Dubai, Oman, Singapore and others have thrived after implementing this strategy.

With the introduction of the new investor program, announced by the Government on Tuesday, foreign buyers will now be afforded the opportunity to enjoy a number of benefits, thereby luring investment and boosting Zanzibar and broader Tanzania’s economy.

Real estate investors are now able to acquire a residency permit as an investor, meaning the party will be allowed to live in Zanzibar as a non-Citizen. They are also not required to live in Zanzibar permanently.

New tax and residency benefits for real estate buyers:

1)      No Income tax on worldwide income and wealth

2)      Resident permit for VILLA buyer plus Partner and up to 4 children under 20 years of age

3)      First buyer pays only 50% of normal capital gains on sale of unit, at 5% instead of 10%

4)      Foreign ownership allowed

5)      Registration of ownership to be done by Zanzibar Investment Promotion Authority (ZIPA)

6)      No VAT on unit rental or sales

7)      Income tax is halved on local income only, 15% instead of 30%(applicable to foreigners only)

8)      Repatriation of profit allowed after tax

9)      Residence permit is only valid for the duration the buyer owns the property (renewable every 2yrs at $3050 for main investor and $550 for each dependent)

10)  No Work permit given, but may be applied for separately by the employer

11)  No minimum stay 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.

New tax and residency benefits for business investors:

1)      Foreign ownership allowed

2)      No business license fees for first 3 months

3)      Company tax: Income tax free for first 5yrs. After first 5yrs: 50% (Income Tax is 30% so it will be 15% only)

4)      Repatriation of profit allowed after tax

5)      100% exemption on withholding tax on interest paid to foreign banks

6)      Deduction of depreciation rate of 100% within 5yrs

7)      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.

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 island. 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 visitor’s 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 program 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.

The country, and Zanzibar in particular, surpassed expected visitor numbers in 2020 despite enormously unfavorable conditions stemming from the pandemic.

Tanzania recorded more than 620,000 foreign tourists in the 2020/21 financial year – almost 200,000 more than was 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 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.

In July, Terminal 3 at Amani Karume International Airport (AAKIA), will be opened to improve the quality of services and customer care for visitors to the island.

The post Zanzibar’s new tax and residency investment scheme set to open paradise to the world appeared first on Everything Property.

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