VAT, income tax for non-resident digital service firms

All non-resident digital service providers are now required to pay value added tax (VAT) and income tax at rates of 14,5 percent and 5 percent respectively, according to latest information from the Zimbabwe Revenue Authority (Zimra).

Specifically, VAT is at 14,5 percent of the invoiced amounts, while income tax is 5 percent of the gross receipts.

Zimra head of corporate communications Francis Chimhanda said the tax is applicable to all non-resident digital service providers.

“The tax is applicable to all non-resident suppliers of digital services to Zimbabwe as follows: Every person who provides services as a satellite broadcasting service or provides or delivers goods and services as an electronic commerce operator which receives revenues in excess of five hundred thousand United States dollars (US$500 000) in any year of assessment from the provision or delivery of such goods or services to persons resident in Zimbabwe, shall pay tax on such revenues charged and levied at 5 percent of the gross receipts,” he said.

“The supply of radio and television services from outside Zimbabwe to an address in Zimbabwe or of electronic services by an electronic commerce operator domiciled outside Zimbabwe to a person resident in Zimbabwe shall be deemed to be a supply made in Zimbabwe and subject to VAT at 14,5 percent.”

Zimbabwe seems to be making significant headway in efforts to tax non-resident digital service providers after US over-the-top content platform Netflix announced to subscribers recently that it would be adding VAT to its packages.

“Starting March 5, 2021, a value-added tax (VAT) will be included in your Netflix price. Your monthly price including tax will be US$8,99,” said Netflix in a notice to subscribers.

Netflix’s plans range from US$8,99 to US$13,99 a month.

This is the second big non-resident digital entity to pay Zimbabwean tax after Facebook said it would be charging Zimbabwean advertisers VAT last August.

The plan to tax non-resident digital service providers was announced in the 2019 National Budget by Finance Minister Professor Mthuli Ncube, and is line with trends across the globe.

In the United States, the sales tax laws were last year updated to include digital goods and services, with 28 states taxing digital products.

And currently the Australian Government is pushing through a law that will compel companies such as Facebook and Google to pay for news content from Australian news outlets or face compulsory arbitration.-ebusinessweekly.co.zw