Taxes in Zanzibar
Two tax worlds on one island.
Fumba Town lies in a free zone with its own rules. Today only companies and rental income are taxed there. Outside the zones, general Tanzanian tax law applies. Here are both, without sugar-coating.
- effectively 0 %
- on foreign income in the free zone, as of today
- 10 %
- on rental income in the free zone
- 2 years
- foreign income tax-free outside the zones, once in a lifetime
- no treaty
- between Germany and Tanzania
The free zone
Why different rules apply in Fumba Town.
Fumba Town lies in the Fumba Free Economic Zone, one of five free zones that the investment authority ZIPA has run since 1992.
Own rules instead of union law
According to ZIPA, general Tanzanian tax law does not apply in the free zones. Special rules defined for the zones apply instead.
Two things are taxed
The special rules cover only companies and rental income, the latter at 10 %. For all other income, including your income from abroad, there is currently no rule.
Today's position, no guarantee
ZIPA confirms this gap itself and intends to close it later. Nobody knows today what the rule will then look like. Plan with today’s position and keep an eye on developments.
Outside the zones
Union law and the two-year window.
If you buy or live outside the ZIPA zones, you are in the regular system. The Income Tax Act applies equally on the mainland and in Zanzibar.
Worldwide income
Residents pay tax on their worldwide income at 0 to 30 %. So Tanzania does not tax only domestic income.
Two years free
If you have been resident in Tanzania for no more than two years in total in your lifetime, you count as a short-term resident and pay tax only on Tanzanian income. Income from abroad stays tax-free during this time.
A grey area afterwards
The window exists only once. After that, the normal rates are in the law. How strictly this is enforced in practice is open. Do not plan on permanent tax freedom here.
Overview
The tax rates at a glance.
In the free zone, e.g. Fumba Town
- Foreign income
- currently no rule, effectively 0 %
- Rental income
- 10 %
- Companies
- under the zone's own rules
- Resale
- 10 % on the increase in value
According to ZIPA. A resale example: you buy for 100,000 USD and sell for 150,000 USD, the tax is 10 % on 50,000 USD, so 5,000 USD. The ZIPA buyer package states 5 % instead of 10 % for ZIPA projects. Have the rate confirmed before you sell.
Outside the zones
- Income tax for residents
- progressive 0 to 30 % on worldwide income
- Short-term resident (max. 2 years in a lifetime)
- Tanzanian income only, foreign income 0 %
- Non-residents: employment income from Tanzania
- 15 % final
- Capital gains on local investments
- residents 10 %, non-residents 30 %
- Corporate tax
- 30 %; with Strategic Investment Status 0 % for 5 years, then 15 % for 10 years
- VAT Zanzibar
- 15 % (18 % for banks, telecoms and digital services; mainland 18 %)
For both
- Wealth tax, inheritance tax
- none (check your individual case)
- Double tax treaty with Germany
- none (as of 1 January 2026)
- Automatic exchange of information (CRS)
- no participation, no start date set (as of May 2026)
Tax residence
When you become tax resident in Tanzania.
There are three triggers, and each one is enough on its own. They apply to everyone living on the island, including in Fumba Town. Only then is it decided whether the zone's rules or union law apply.
Permanent home
You have a permanent home in Tanzania and are there even briefly during the tax year. If you use your property as your main home, you are almost always resident.
183 days
You spend 183 days or more in Tanzania during the tax year.
122 days on average
You were in the country for more than 122 days on average in the current year and the two previous years.
The residence permit alone does not make you tax resident, and neither does the Golden Visa. If you rent out your home and only come on holiday, you remain non-resident and pay tax in Tanzania only on income from Tanzania.
Your home country
Without a clean exit, the free zone does not help.
There is no double tax treaty between Germany and Tanzania. If you remain taxable in Germany, you have no protection against being taxed twice. Other countries have their own rules, so check yours.
The move must be real
German tax liability only ends if you give up your home in Germany and verifiably move the centre of your life. You do not have to sell, renting it out is enough. If you keep the home and only spend the winter away, you remain fully taxable.
Tax office questionnaire
About three to twelve months after deregistering, the German tax office regularly sends a questionnaire with 16 questions about the move. Answer it carefully and with evidence.
Exit tax
If you hold at least 1 % of a company, Germany taxes the hidden reserves when you leave. For a country outside the EU it is due immediately, instalments are only available on application and usually against security.
Extended tax liability
Because Zanzibar is a low-tax location, Germany’s extended limited tax liability can apply. Certain income then remains taxable in Germany for up to ten years if you keep substantial economic interests there.
Running a company remotely
Managing a German GmbH from Zanzibar creates risks around the place of management and permanent establishments. Sort this out before you move.
Austria and Switzerland
Austria treats the move as a sale of your capital assets, at 27.5 % on the gain. Switzerland has no exit tax on private capital assets, what matters there is a clean deregistration and the withholding tax on pension funds.
Pensions, companies, crypto
Three special cases.
German pension
The German state pension remains taxable in Germany, as do civil service pensions. With an application for unlimited tax liability you keep the basic allowance. There is no social security agreement: health insurance is entirely private.
Companies
Corporate tax is 30 %. ZIPA investors can apply for an exemption for five years and customs relief during construction. A company may be 100 % foreign-owned.
Cryptocurrencies
Tanzania has no rules for cryptocurrencies, and the central bank has warned against them for years. Use is possible, but there is no legal certainty. The tax treatment depends on the individual case.
Tanzania does not take part in the automatic exchange of information. That is not a hiding place: requests in individual cases remain possible, and anyone who remains taxable in Germany must declare their foreign accounts themselves.
In short
Who Zanzibar suits from a tax point of view.
A good fit
- Buyers in a free zone such as Fumba Town: effectively tax-free on foreign income as things stand today, plus residence through the property
- Landlords who only visit: you remain non-resident and only pay tax on the rental income
- People relocating for a limited time outside the zones: two years of foreign income tax-free by law
- Entrepreneurs with a ZIPA project: up to five years of corporate tax exemption on application
Rather not
- Anyone expecting permanent tax freedom as a guarantee: you can only rely on today's rules
- Anyone keeping their home and centre of life in Germany: German tax liability then continues
- Anyone looking for a second citizenship: Tanzania does not allow dual citizenship
- Anyone who wants full ownership of the land: you acquire a leasehold, not a freehold
Tax advice
Have your case checked before you move.
We are property advisers, not tax advisers. For tax planning we work with Perspektive Ausland and the law firm STM Corporate Group. The information on this page also comes from them.
Typical topics: leaving Germany, exit tax, pensions, buying in the free zone and the two-year window.
Perspektive Ausland (German)Questions
More questions about taxes?
As of October 2026. General information, not tax or legal advice. Rules can change, the authorities and your tax adviser are binding.
Which property fits your plan?
We show you the projects in the Fumba Town free zone and put you in touch with tax advice.