Zimbabwe will overhaul its taxation framework for foreign digital services beginning January 2026, replacing the existing Value Added Tax (VAT) system with a new withholding tax model, Finance Minister Mthuli Ncube has announced.
The shift marks the end of the VAT regime introduced on 1 January 2023 under the Finance Act No. 8 of 2022, which required offshore digital service providers—such as Netflix, Spotify, and other international platforms—to register with ZIMRA and remit VAT if their annual turnover exceeded ZWL 500,000 or its foreign currency equivalent.
However, Minister Ncube said the current arrangement has proven impractical and inefficient, as it forces non-resident tech companies with no physical presence in Zimbabwe to navigate complex tax registration and filing systems. Enforcement was also challenging for ZIMRA, which had to track thousands of global digital operators.
Under the new model:
✔️ Local companies that process customer payments (such as banks, mobile money operators, and card processors) will be required to withhold tax before money is remitted to foreign service providers.
✔️ This simplifies compliance and makes enforcement easier for ZIMRA.
✔️ The withholding tax rate is still to be finalised but is expected to fall within the 5% – 10% range, with the exact percentage to be announced when new regulations are gazetted.
Minister Ncube said the approach is “focused on the payment itself,” making it more efficient for authorities and reducing administrative burdens on foreign businesses.
The new system is expected to strengthen tax collection from the booming digital services sector, which includes entertainment platforms, online software, cloud services, streaming sites, and other cross-border digital providers.
