The Zimbabwe Revenue Authority has issued a detailed explanation regarding the application of the new Digital Services Withholding Tax, following legislative changes that came into effect on January 1.
Earlier confusion around the DSWT stemmed from potential double taxation, difficulties in distinguishing digital services from physical goods and unclear responsibility for withholding the tax.
Finance, Economic Development and Investment Minister, Professor Mthuli Ncube, recently explained the DSWT on imported digital services like streaming (Netflix), ride-hailing (InDrive, Bolt), clarifying that DSWT is only a mechanism to enforce existing VAT and level the playing field, and not necessarily a new tax, with banks automatically deducting it from payments to foreign providers.
According to public notice 05 of 2026, the tax is applied through a mandatory withholding mechanism where local financial intermediaries must deduct the tax at the point of payment.
This enforcement follows the amendment of Section 13A of the Value Added Tax Act, which seeks to modernise revenue collection from the digital economy.
Under the new law, the tax authority has shifted the responsibility of collection to a broad list of “intermediaries,” which includes commercial banks, building societies and mobile money operators such as EcoCash and OneMoney.
These institutions are now required to withhold the tax whenever a consumer in Zimbabwe processes a payment to a non-resident digital supplier. ZIMRA clarified that the registration status of the foreign supplier determines the withholding tax rate.
A rate of 15,5 percent is applied to payments made to suppliers not registered for VAT in Zimbabwe, while a tax fraction of 3/23 is withheld for those already registered with the authority.
The scope of the tax covers a wide array of automated and platform-mediated services consumed within the country’s borders.
These include online subscriptions for streaming platforms, cloud computing, online advertising, and downloadable digital content such as e-books and films.
The tax also applies to modern tech-enabled services, including platform-based transport hailing and services provided by Artificial Intelligence (AI) platforms.
ZIMRA noted that physical goods purchased online are excluded from this specific tax, as they continue to be assessed for VAT and customs duty at physical ports of entry.
Under the new framework, all non-resident suppliers with an annual turnover exceeding US$25 000 are mandated to register for VAT via the Tax Administration and Revenue Management System (TaRMS).
The suppliers must issue fiscalised tax invoices and are onboarded onto the Fiscalisation Data Management System (FDMS) to ensure transparency.
Intermediaries are required to remit the collected taxes to the ZIMRA by the 15th of every month.
Furthermore, these financial institutions must issue withholding certificates to consumers, detailing the transaction date, the name of the foreign supplier, and the exact amount of tax deducted.
While the net has widened, the revenue authority maintained that services ordinarily zero-rated or exempt in Zimbabwe will remain protected.
This includes electronic educational and medical services, which will not attract the DSWT even when supplied by non-resident entities.
Local VAT-registered operators who pay for these digital services may still claim input tax, provided they hold a valid tax invoice issued by the foreign supplier.
Government authorities emphasized that the 15,5 percent withholding tax is not a “blanket punishment” on all international card transactions, despite early bank advisories suggesting a broader application.
The authorities clarified that the tax exclusively targets imported digital services, such as streaming and satellite internet, and specifically excludes the purchase of physical goods from offshore retailers.
They said the DSWT is an administrative mechanism to enhance collection rather than an entirely new tax burden, as imported services have legally been subject to VAT since 2004.
Further clarifications were issued to correct the misconception that online shopping for physical items, such as laptops or clothing, would now attract an additional 15,5 percent fee at the point of payment.
ZIMRA has reiterated that tangible goods remain subject to traditional customs duties and VAT at physical ports of entry, meaning the withholding tax does not apply to these transactions.-herald
