- INTRODUCTION
The recent call for voluntary tax compliance by the Commissioner General of the TRA on 26 July 2025 has sparked much discussion and confusion among Tanzanian business persons, specifically those operating in the digital marketplace. The Commissioner’s call stressed voluntary compliance by digital platform operators, including those in the short-term rental and accommodation industry, as well as owners and operators of short-stay accommodation facilities, to register with the TRA and begin paying their relevant taxes from 1st August to 30th August.
What the Commissioner stated regarding the taxation of digital platforms for short-stay accommodation listing and operators constitutes the Digital Service Tax (DST) in the digital marketplace which since 2022 has been incorporated in Tanzania’s taxation regime. Notably, there has been a global movement towards inclusive taxation of digital businesses. Tax authorities across different jurisdictions, including the TRA, have imposed taxes on digital services, specifically services offered via the digital space by corporations or individuals who are non-residents of that particular jurisdiction for tax purposes.
Traditional tax legislation was initially framed to address only conventional businesses, those with a physical presence, and those that met the minimum tax registration thresholds. However, these traditional tax systems have proven inadequate in addressing the realities of modern digital economies. It is because of these inadequacies and legislative loopholes that jurisdictions, including Tanzania, have joined the global movement to tax digital services supplied via electronic and digital means.
- DIGITAL TAXATION FOR ONLINE ACCOMMODATION MARKETPLACES AND PLATFORMS
Undeniably, short-term rentals and accommodation facilities are taking over the role that was previously held by traditional accommodation facilities like hotels, motels, and lodges. This has moved governments to encourage operators of short-stay accommodation, famously known as Airbnbs, to obtain relevant business licences and permits, as well as register for tax purposes so that they are on equal footing with traditional accommodation facilities, which must pay taxes and obtain relevant business licences and permits. Previously, in 2018, the government, through the Ministry of Tourism, had planned to mount a “house-to-house” hunt to ensure that all short-stay accommodation operators are registered within a 50-day grace period.
Despite these initiatives, our laws were inadequate, especially regarding taxation of the services offered by these owners. Digitalplatforms for short-stay accommodation listings never paid taxes despite receiving commission for their intermediary role between clients and the operators of the rented facilities.
This changed in 2022 when the Finance Act, No. 5 of 2022 amended the Income Tax Act to expand the definition of the term “business” to include transactions conducted through the internet or other electronic means in the digital marketplace. The amendments also provided a definition of what a “digital marketplace” means: a platform that enables direct interaction between buyers and sellers of electronic services. Moreover, the VAT Act has defined “electronic services” under section 51 to include services delivered via telecommunications networks, websites, web hosting, remote maintenance of programs and equipment, software, databases, images, text and information, music, films, games, and broadcast television.
Additionally, the recently enacted Finance Act, Act No. 11 of 2025, through section 128, has amended section 51(2) of the VAT Act by deleting paragraph (h) and substituting it with the following: “Online intermediation services or platforms, including an online accommodation marketplace and payment services platform.” The amendment significantly expanded the definition of electronic services and, in more specific terms, covered digital short-stay accommodation listing platforms, such as Airbnb, Booking.com, Meta, Flatio, Cozycozy, etc, and other platforms that list and advertise short-term home rentals and accommodation facilities.
As a result, with the law becoming more detailed and encompassing broader provisions for digital short-stay accommodation listing platforms, which are now classified as a digital marketplace, there is a requirement to adhere to applicable tax regulations. This compliance involves registering with the TRA, acquiring a Taxpayer Identification Number (TIN), and obtaining a Value Added Tax Registration Number (VRN).
The platforms must charge 18% of VAT for the services they offer, specifically to the operators of accommodation facilities and short-term rentals. For example, if a platform like Airbnb.com, Booking.com, or Meta charges a 10% commission for listing a short-term rental or accommodation facility on an online platform (digital marketplace), the fee must be either inclusive or exclusive of 18% VAT. In either case, 18% of the VAT must be collected by the listing platform and remitted to the TRA. Digital platforms are required to pay Income Tax on Digital Services at a rate of 2% of the payments collected from digital users and subscribers and remit the same to the Tanzania Revenue Authority (TRA).
For instance, on popular platforms such as Airbnb, if a guest books an apartment for USD 75 per night for two nights, the total price would be USD 150. The amount is typically broken down as follows: approximately USD 128.64 is allocated as the apartment service fee (payable to the host/owner), while USD 21.43 is charged as the Airbnb service fee. The service fee includes an 18% Value Added Tax (VAT), which Airbnb is statutorily required to remit to the TRA. In addition, Airbnb, as a platform, is required to declare and pay a 2% Income Tax on Digital Services from the remaining balance after VAT.
Typically, the platform requires guests to declare their method of payment through internationally accepted channels such as Visa, Mastercard, American Express, Discover, or PayPal. Once the card details are entered, the platform processes the payment by deducting the relevant amount from the guest’s account, holding it on behalf of the property owner or host, and later remitting it to the host.
Similarly, in online platforms such as Booking.com, once a guest selects a preferred accommodation facility, the platform displays both the original and discounted prices. Service fees shown include 18% VAT. Thereafter, the guest is prompted to select a payment method. The platform may either charge the guest directly and subsequently remit the payment to the service provider, or alternatively, allow payment upon checkout, in which case the property owner or host settles the applicable platform charges thereafter.
The above taxes and compliance stem from the two sets of regulations introduced following the Finance Act 2022. The regulations are the Income Tax (Registration of Non-Resident Electronic Service Providers) Regulations G.N. No. 478U of 2022, the VAT (Registration of Non-Resident Electronic Service Suppliers) Regulations G.N. No. 478Q of 2022, and Income Tax (Registration of Non-Resident Electronic Service Suppliers) (Amendment) Regulations, GN No. 448X of 2023. These regulations define the scope for taxing digital services under both income tax and VAT regimes and address the two key nexuses of taxation: source and residence, thereby ensuring robust tax coverage.
Under these regulations, non-resident suppliers offering electronic services, including online accommodation marketplaces to Tanzanian users, are required to register with the TRA, obtain a TIN and VRN regardless of the prescribed registration threshold, and file tax returns and remit payments to the Commissioner General. Like resident service providers, non-resident digital service providers, including operators of accommodation and short-term rental accommodation listing platforms like Airbnb and Booking.com, must file monthly tax returns, as per section 37 of the Tax Administration Act, although the same are filed through a simplified process outlined in the aforementioned regulations.
Additionally, the regulations also impose penalties for non-compliance, including filing false or misleading statements, failure to remit taxes on the due date, and general penalties under section 88B of the Tax Administration Act.
- DIGITAL TAXATION FOR SHORT-STAY ACCOMMODATION OPERATORS
The Income Tax (Registration of Non-Resident Electronic Service Providers) and the VAT (Registration of Non-Resident Electronic Service Suppliers) Regulations specifically cover non-resident platforms offering online accommodation facilities listing and advertising services. As such, the users of such services, specifically the beneficiaries, who are the owners and operators of accommodation and short-term stay rental homes, by being residents for tax purposes under the Income Tax Act, are also required to comply with relevant tax laws and regulations.
To comply with the law, property operators must register with the TRA, obtain a TIN, and secure a VRN if they meet the minimum registration threshold or register as intending traders for VAT purposes. Operators must voluntarily conduct tax assessments to determine the tax payable per year and register and procure an Electronic Fiscal Device (EFD). Moreover, they are required to obtain relevant business licences and permits from either the municipal council or the Business Registration and Licensing Authority (BRELA).
- FINAL REMARKS
It is important to note that digital service taxes are specifically intended to apply to digitally offered services. These taxes were statutorily introduced to capture revenue from services such as subscription-based platforms, digital marketplaces, software sales, online media, booking and advertising platforms, and the gig economy. As such, the VAT on digital services and income digital service tax are payable only by non-residents who supply electronic services digitally.
Accordingly, if a resident sells physical goods through a digital platform such as Instagram, Facebook, Twitter, or other social media, they are not subject to the digital services tax. This is primarily because the goods sold are not digital in nature. Rather, they are advertised virtually through a digital platform, and residents are already subject to other statutory tax obligations and compliance, including 30% corporate income tax. Additionally, the current regulations governing the digital services tax apply only to non-resident entities with no permanent establishment or physical presence in Tanzania. As such, there is currently no legal framework that imposes an income digital service tax or value-added tax specifically on social media platforms through which Tanzanian residents advertise their physical goods.
Authored by:
Benedict Ishabakaki and Fredy Mushi
Victory Attorneys & Consultants,
IT Plaza Building, 1st Floor,
Ohio Street/Garden Avenue,
P.O. Box 72015, Dar es Salaam.
Mobile No: 0752089685/0754959726
Email: info@victoryattorneys.co.tz
