Summary
Summary
The Digital Services Withholding Tax regime in Zimbabwe replaces the current VAT system for non-resident digital service providers, aiming to enhance tax collection and revenue.
As we have reported, the government of Zimbabwe previously announced, in November, as part of the presentation of the Finance Act 2025, that it plans to introduce significant reforms to the VAT system. One of the changes was the increase in the general VAT rate; the second change was the introduction of the Digital Services Withholding Tax (DSWT) regime.
The Digital Services Withholding tax regime represents an entirely new approach to VAT collection on the provision of digital services or digital goods by non-resident digital service providers. The Government decided to replace the current VAT regime, which has shown many deficiencies in the collection of VAT on imported services.
New Regime Timeline
The Digital Services Withholding Tax(DSWT) regime came into effect on January 1, 2026.
New Framework – Digital Services Tax
Digital Services Withholding Tax will expand the tax base, enhance enforcement mechanisms, and, most importantly, increase tax revenue for the tax administration. DSWT is a new VAT regime for non-resident digital service providers or sellers of intangible goods.
Operative mode of DSWT regime can be summarized as follows:
- Domestic financial institutions have the responsibility to collect and remit DSWT for payments made to foreign digital service providers
- VAT is going to be collected at the point of payment on the gross amount
- Responsible payment service providers shall submit a DSWT return and remit collected tax within 30 days from the date the payment has been made
- The accountable PSPs that don’t collect withholding VAT or make a late payment of collected tax, in most cases, shall pay fines and interest on top of the owed tax
- Withholding tax shall be deducted from most of the payments made to non-resident providers of services(including digital services), digital products, and physical products
- DSWT rate is 15% of the payment amount made to a non-resident supplier
DSWT replaces the VAT Regime
The primary objective of introducing a new tax regime for non-resident providers of digital services is to replace the existing regime, which hasn’t been as effective in raising tax revenue. The non-resident providers of digital services have, for different reasons, “found” a loophole in the tax system to avoid the VAT collection for these supplies.
This created an uneven playing field. From now on, with the DSWT regime in place, this “creative tax avoidance” and similar practices will be significantly reduced, as local payment service providers will be held accountable for tax collection deficiencies.
The PSPs that are in scope of the new provisions should withhold tax at the point of payment, and, from a practical perspective, this will be much more effective and easier to monitor by the tax authorities.
Domestic PSP withholds tax on most international payments (there are some exceptions depending on the nature of the service) to non-resident digital service providers; subtracts the VAT withholding amount from the gross payment, and remits the balance to the indicated account of the tax authorities.
New VAT regime and Implications
The new withholding regime effectively means that even non-VAT-registered non-resident digital service providers, including platform operators, will be taxed through it. This measure will unquestionably increase tax revenue and reduce the disparity between VAT-registered and non-registered providers of digital services.
Takeaway
Non-resident providers of digital services or digital products should be aware that, starting January 1, 2026, their supplies to Zimbabwe residents or payments received from domestic bank accounts will be subject to the DSWT regime.
Author: Aleksandar Delic
The pricing strategies for cross-border provision of digital services and products to Zimbabwean customers will most likely differ, with additional costs associated with international payments to non-resident providers of electronic services.
Indirect Tax Manager – E-commerce
Frequently Asked Questions
The Digital Services Withholding Tax is a new VAT collection mechanism introduced by Zimbabwe for non-resident providers of digital services and intangible goods. It shifts VAT collection from suppliers to domestic payment intermediaries to improve enforcement and revenue collection.
The Digital Services Withholding Tax regime came into force on January 1, 2026, following its announcement in the Finance Act 2025.
Domestic payment service providers and financial institutions are responsible for withholding the tax at the point of payment to non-resident digital service providers and remitting it to the tax authorities.
The Digital Services Withholding Tax is charged at a rate of 15% on the gross payment to a non-resident supplier.
The new regime replaces the previous VAT framework for imported digital services by collecting tax at the point of payment. This reduces reliance on voluntary compliance by foreign suppliers and closes loopholes that previously allowed VAT to go uncollected.
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