Zanzibar is on track to join the likes of Mauritius, Dubai, and Singapore as an investors paradise as the government continues to introduce measures to attract foreign investment to the country.
One of the government’s game-changing measures is a new tax and residency program that is now available for foreigners wanting to live and invest in the island.
The 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.
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, Dubai, Oman, Singapore, and others have thrived after implementing this strategy.
With the introduction of the new investor programme foreign buyers will now be afforded the opportunity to enjoy a number of benefits, thereby luring investment and boosting Zanzibar as well as the broader Tanzania’s economy.
Real Estate Investors
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:
- No Income tax on worldwide income and wealth
- Resident permit for VILLA buyer plus Partner 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 fees for the first three months
- Company tax: Income tax free for first five years. After the first five years: 50% (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.
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.
Development and Investment Opportunities
In a groundbreaking move to further attract foreign investors, the government has also opened up ten of the archipelago’s idyllic smaller islands for high-end investment and development opportunities.
The programme, which is being implemented by the Zanzibar Investment Promotion Authority (ZIPA), is based on the government’s vision for the diversification of high-end investments.
The smaller islands or islets, boasting pristine beaches, fertile soil, abundant marine resources and populations eager to work on potential developments, are ideal for specialised investment projects, according to ZIPA executive director, Shariff Shariff.
“The small islands surrounding Zanzibar are major assets that have enormous potential for both investors and the island’s residents,” Shariff says.
The ten islets each possess their own unique characteristics offering diverse selling points and opporunities. The islets include Changuu (Prison Island),Bawe Island, Chumbe Island, Kwale Island, Misali Island,Njao Island, Matumbini, Pamunda and Chapwani.
Expressions of Interest
Zanzibar’s government recognises that these islets possess sensitive ecosystems and are already home to thriving fishing and agricultural communities. As such, potential developments require careful planning, handling, guidance and oversight, and potential investors will need to adopt a holistic approach in implementing future projects.
Says Shariff: “Our investors Expressions of Interest should provide information demonstrating that they possess experience and the ability to develop, operate and manage investment projects.
“They should also demonstrate financial capacity, and skills in conserving environments, biodiversity, cultural heritage and community development. Interested Investors should specify the intended small island/islands for investment and provide detailed information on the kind of high-end investment intended.”
Expressions of Interest must be submitted with the receipt of a US$1,500 non-refundable payment (Account name ZIPA, PBZ Account A/C No. 0400424000, Swift Code PBZATZTZ) at Maruhubi Complex, Zanzibar Investment Promotion Authority Head Office, Malawi Road, Room Number 223 or via email: email@example.com (PDF format).
The deadline for submission of Expression of Interest is 30 September 2021 at 10 am (Eastern Africa Time).
Short-listed prospective investors will be contacted to proceed with other application procedures.