AN ANAYLSIS ON THE IMPLICATION OF THE AMENDMENT OF SECTION 238 OF THE ZANZIBAR COMPANIES ACT, 2013 VIA SECTION 29 OF THE ZANZIBAR FINANCE ACT

By: Adv. Abr. Stephen Msechu

On 21st September, 2021 the Minister of Trade and Industrial Development of the Revolutionary Government of Zanzibar informed the public via a public notice on the amendment of section 238 of the Companies Act of 2013. The notice informed the public that all companies that were formerly incorporated in Tanzania Mainland and were issued with a Certificate of Compliance in Zanzibar should pursue for a fresh incorporation in Zanzibar within 90 days. According to the amendment which was effected through Section 29 of Zanzibar Finance Act, 2021 companies that will not comply with the notice shall be removed from Zanzibar’s Register of Companies and as a result it will lose its legality of operating in Zanzibar.

According to LawAge the following are the legal and economic implications that may emanate from the amendment:

1. Increase of revenue by the Revolutionary Government of Zanzibar. Income Tax is a Union matter and is collected by TRA both in Tanzania Mainland and Zanzibar. With the amendment, income tax will be split between Tanzania Mainland and Tanzania Zanzibar for companies with operations in both parts of the Union as the company is incorporated in both parts. This was not the case before the amendment. Moreover, Zanzibar will also get other forms of levies and revenues especially those which are paid to the Registrar of Companies.
2. Rise of companies’ operation cost and corporate governance requirements if they maintain the Tanzania Mainland Company. Affected companies will have to choose on whether to wind up the Tanzania Mainland company or to keep it operating especially if they have other operations in Tanzania Mainland. Those companies that will maintain their existence in Tanzania Mainland will have to pay other government related expenses, levies and taxes in both parts of the United Republic of Tanzania. Such levies include different fees payable to the Registrar of Companies among others. It should be noted that Income Tax payable will not be affected as the only thing that will change is that it will be split into two between Tanzania Mainland and Zanzibar authorities.

• Increase in the number of companies that will be incorporated in Zanzibar thus increasing business opportunities to Zanzibar professionals. Most companies Incorporated in Tanzania Mainland and had operations in Zanzibar found it easy to seek for a Certificate of Compliance rather than registering a new company. With the changes, such companies will have no option but to be re-incorporated in Zanzibar thus increasing the number of companies and they will increase business to professionals who service companies such as Certified Public Accountants and Lawyers. Previously audits and legal compliance of companies were done in Tanzania Mainland.