Zimbabwe’s Finance Minister, Mthuli Ncube, announced that the country will abandon its current Value Added Tax (VAT) regime on foreign‑provided digital services and introduce a withholding‑tax model starting January 2026. The VAT system, which came into force on 1 January 2023 under the Finance Act No. 8 of 2022, required non‑resident suppliers of electronic services to register with the Zimbabwe Revenue Authority (ZIMRA) and remit VAT once their annual turnover exceeded ZWL 500 000 (or its foreign‑currency equivalent).
Under the outgoing framework, offshore platforms such as Netflix and Spotify were expected to register locally, charge VAT to Zimbabwean customers and forward the tax to ZIMRA. Minister Ncube said the arrangement proved “inefficient” because it forced companies without a physical presence in Zimbabwe to navigate a complex local filing process. He added that enforcement was hampered by the sheer number of non‑resident digital businesses operating in the country.
The new withholding‑tax approach shifts the compliance burden to local entities that process payments for foreign digital services. “This new system makes it simple because it is focused on the payment itself,” Ncube explained. “It is our local companies that are facilitating the payment that have an obligation to withhold the tax, which is easier for ZIMRA to enforce.”
The exact withholding rate has not yet been finalised. Minister Ncube indicated that it would likely fall between 5 percent and 10 percent, with the precise figure to be published when the regulations are gazetted. The change aims to streamline tax collection and reduce administrative hurdles for both foreign service providers and ZIMRA.