Zimbabwe will introduce a new withholding tax model on foreign digital services starting January 2026, replacing the current Value Added Tax (VAT) system. Finance Minister Mthuli Ncube announced the shift, citing inefficiencies in the VAT framework introduced in 2023 under the Finance Act No. 8 of 2022. That system required offshore digital service providers—such as Netflix and Spotify—to register locally and remit VAT if their annual turnover exceeded ZWL 500,000 or its foreign currency equivalent.
The outgoing VAT model faced challenges in enforcement and compliance, particularly for non-resident companies with no physical presence in Zimbabwe. These firms were expected to navigate local tax filing procedures, which proved cumbersome and difficult for the Zimbabwe Revenue Authority (ZIMRA) to monitor effectively. Thousands of digital businesses operating remotely made oversight complex, prompting the government to reconsider its approach.
Under the new system, local companies that facilitate customer payments to foreign digital providers will be responsible for withholding the tax. Minister Ncube said this method simplifies administration and improves enforcement. “It is focused on the payment itself,” he explained, noting that the withholding tax rate will be set in upcoming regulations and is expected to fall between five and ten percent.
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