The Indian Ocean islands of Zanzibar have launched a new tax and residency programme for foreigners to live and invest on the islands.
The measure comes on the back of significant infrastructural and tourism-friendly transformations by the President of Zanzibar, Dr. Hussein Ali Mwinyi that allowed the Isles to address the economic constraints caused by the Covid-19 pandemic in 2020.
So far, the Zanzibar Investments Act of 2018 provides procedures and criteria for Strategic Investment Status (SIS) projects with incentives and allowances to real estate developers but does 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, Maldives and others have thrived after implementing this strategy.
With the introduction of the new investor program recently announced by the government, foreign buyers will now be allowed 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 that those development partners will be allowed to live in Zanzibar as non-citizen and not required to live permanently.
Some of the new tax and residency benefits for real estate buyers are 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 and first buyer pays only 50 percent of normal capital gains on the sale of the unit, at 5 percent instead of 10 percent.
Other benefits include allowed foreign ownership, registration of ownership to be done by Zanzibar Investment Promotion Authority (ZIPA), no VAT on unit rental or sales, income tax is halved on local income only, 15 percent instead of 30 percent (applicable to foreigners only).
Under the new strategy, the government allows repatriation of profit after-tax, a residence permit is only valid for the duration the buyer owns the property (renewable every 2 years at USD3050 for main investor and USD550 for each dependent), no work permit given, but may be applied for separately by the employer and no minimum stay required to claim benefits.
Also, the business investors wanting to invest in ventures such as restaurants, watersports and retail operations will receive similar benefits as real estate investors.
The new initiative will ensure that Zanzibar benefits economically and welcomes investors in various sectors of economic development especially in the services, energy and transportation sectors.
Earlier this year, Zanzibar signed a Memorandum of Understanding (MoU) for the construction of a USD230 million port at Mangapwani-Bumbwini in Unguja North ‘B’ District.
Once implemented, the project that will include berths for containers, liquid bulk goods, natural gas offshore services and infrastructure for the rehabilitation of marine vessels, will reduce unemployment for youth and strengthen Zanzibar’s economy.
During last year’s general elections campaign, Dr. Mwinyi pledged to create 300,000 jobs in five years, mostly from the private sector.
Zanzibar currently relies on the tourism industry to run its economy by more than 27 percent. However, tourism revenues have declined significantly due to the effects of the coronavirus.