Zimbabwe VAT & Digital Tax Changes 2026

Zimbabwe’s 2026 National Budget introduces several tax adjustments aimed at stabilising revenues and supporting the transition to the next National Development Strategy. Among the most notable changes for VAT and indirect tax is the increase in the standard VAT rate from 15% to 15.5%, effective 1 January 2026. The measure forms part of a broader fiscal package designed to balance reduced reliance on the Intermediated Money Transfer Tax (IMTT) while safeguarding the government’s revenue base.

VAT Increase: From 15% to 15.5%

Effective 1 January 2026, the standard VAT rate will increase by 0.5 percentage points, rising from 15% to 15.5%.
Although the adjustment appears marginal, it is intended to partially offset the reduction of the IMTT on ZiG-denominated transactions, which will fall from 2% to 1.5%. 

The 2% IMTT on USD transactions remains unchanged, reflecting the dominance of USD-denominated activity in the economy.

This VAT increase implies:

• a VAT-inclusive price uplift of roughly 0.43%,

• required updates to ERP systems, POS software, invoicing solutions, and tax tables, and

• the need to reassess pricing strategies and contract terms that extend beyond the effective date.

In an economy where consumption taxes are broadly applied and compliance costs are already significant, even a small VAT rise has a wide impact across supply chains and consumer spending.

Interaction Between VAT and IMTT

The Budget positions the VAT increase as a compensatory measure for reduced IMTT revenues. The government aims to encourage greater use of the ZiG currency by lowering the IMTT on ZiG electronic transactions. However, because most high-value transactions remain USD-denominated, the bulk of IMTT collections will continue to come from the unchanged 2% USD levy.

From a policy perspective, the shift effectively trades a modest cut on a narrow tax base (ZiG IMTT) for a broad-based increase in consumption taxation. This means more taxpayers will experience the VAT adjustment than those who directly benefit from the IMTT relief.

Digital Tax Developments: Introduction of a Digital Services Withholding Tax

The 2026 Budget also introduces a Digital Services Withholding Tax (DSWT) on payments to offshore digital platforms, replacing the existing VAT on imported digital services. The new regime applies to services such as:

• streaming platforms,

• ride-hailing and delivery apps,

• online content platforms, and

• satellite-based internet services.

Financial institutions and other paying agents will be required to withhold and remit the tax, shifting compliance obligations away from non-resident suppliers and reducing reliance on self-assessment regimes that historically had low uptake.

For cross-border digital service providers, the shift from VAT to a withholding model signals a move toward simplification and improved enforceability, but may also create pricing and contractual implications for local users.

Policy Rationale and Regional Alignment

The Finance Minister emphasised that rapid digitisation has increased the consumption of online services predominantly supplied by foreign companies lacking physical presence in Zimbabwe. These transactions, he noted, often escape domestic taxation, resulting in revenue losses and competitive distortions for local providers subject to full domestic tax rules.

The minister referenced Nigeria, Kenya, Uganda, Tanzania, and Sierra Leone as examples of African jurisdictions that have updated their tax frameworks to address the digital economy, positioning Zimbabwe within a broader regional trend.

Implications for Businesses and Tax Teams

VAT Rate Change

• Update VAT codes, ERP tax tables, e-invoicing systems and POS tools.

• Review VAT-inclusive pricing, customer contracts and long-term agreements.

• Address transitional issues for December 2025 / January 2026 supplies.

Digital Services Withholding Tax

• Identify all payments made to offshore digital platforms that will fall under the DSWT.

• Review vendor contracts for gross-up terms and determine who bears the withholding cost.

• Adjust internal payment processes for banks, mobile-money channels and treasury operations.

IMTT Recalibration

• Review transaction-payment channels and assess whether shifting between ZiG and USD payments affects IMTT exposure.

• Update finance and treasury policies accordingly.

Conclusion

Zimbabwe's 2026 fiscal plan signals a major pivot to consumption-based taxation and stricter regulation of digital services supplied from abroad. While the increased VAT and the new 15% Digital Services Withholding Tax move the nation toward regional norms for taxing the digital economy, they create immediate new challenges for business compliance and pricing strategies. For these aligned reforms to be successful in the long run, policymakers must ensure they bolster state revenue without unnecessarily hindering digital growth or escalating costs for end-users.

Sources: All Africa, Ecofin Agency