Zimbabwe: Digital services withholding in lieu of nonresident VAT collection
Effective January 1, 2026
The Zimbabwe Revenue Authority (ZIMRA) on January 19, 2026, published Public Notice 05 of 2026, clarifying the new withholding tax mechanism on digital services provided by nonresidents, effective January 1, 2026.
Background
Effective January 1, 2026, Zimbabwe amended, through its 2026 Finance Act, section 13A of the Value Added Tax (VAT) Act, retaining the VAT requirements for digital services provided by nonresident suppliers but introducing a digital services withholding tax mechanism. This mechanism mandates intermediaries to withhold tax when consumers in Zimbabwe pay foreign suppliers for digital services, while physical goods remain subject to VAT and customs duty at the port of entry.
Overview of the new withholding mechanism
Scope
In Zimbabwe, VAT is applied differently based on how services are supplied: for non-digital services, recipients self-account for VAT, while for digital services, foreign sellers must register and account for VAT under section 13A of the VAT Act. Examples of digital services include streaming, cloud computing, online subscriptions, digital content downloads, app-based services, and platform-mediated transport-hailing services.
Registration and collection requirement
Nonresident sellers of digital services must register for and collect VAT at the standard rate of 15.5% if they meet the registration threshold of US$25,000 in any 12-month period, provided their prices are VAT-inclusive. Nonresident sellers registered for VAT are required to issue fiscalised tax invoices and must be onboarded onto the Fiscalisation Data Management System (FDMS).
New withholding mechanism
Intermediaries must withhold tax at a rate of 15.5% for payments to foreign sellers not registered for VAT in Zimbabwe, or at a tax fraction of 3/23 for those registered for VAT. The tax is withheld during foreign payment processing, while payments to local providers of electronic services are exempt. Intermediaries, including financial institutions such as banks, mobile money operators, and microfinance institutions, are obligated to remit the tax to the Commissioner-General, issue withholding certificates to consumers, maintain payment records, and cooperate with ZIMRA for verification purposes.
When digital services are consumed in Zimbabwe but payment is made outside Zimbabwe, the nonresident seller is required to charge and account for VAT directly to ZIMRA, if registered for VAT in Zimbabwe.
Previously registered nonresident sellers remain registered, and they can claim withheld amounts as a credit against the VAT owed on their sales of digital services when submitting VAT returns, paying only the remaining balance. ZIMRA will reconcile VAT returns with withheld amounts and provide updates to nonresident sellers.
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Chinedu Nwachukwu | chinedunwachukwu@kpmg.com