Government has clarified the scope and intent of the Digital Services Withholding Tax (DSWT) introduced under Finance Act No. 7 of 2025, emphasizing that the measure is not a new tax but an administrative mechanism to improve the collection of Value Added Tax (VAT) on imported digital services.
In a statement issued yesterday, Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, said the DSWT was designed to address longstanding challenges in collecting VAT from offshore digital service providers operating in Zimbabwe without a physical presence, which have resulted in revenue leakages and unfair competition for local service providers.
“Imported services have been chargeable to VAT since the introduction of VAT legislation in 2004, and these provisions were strengthened through Finance Act No. 3 of 2019 to explicitly incorporate non-resident electronic commerce operators.
Notwithstanding this framework, effective collection of VAT on imported digital services has remained challenging, leading to revenue leakages and an uneven competitive environment,” Prof Ncube added.
He said the DSWT was designed to shift the point of VAT collection to regulated payment intermediaries such as banks, mobile money operators and other financial institutions, enabling tax to be collected at source when payments are made to non-resident service providers.
“The Digital Services Withholding Tax was introduced to improve the collection of VAT on imported services, and not as an additional tax.
It is an administrative mechanism intended to enhance tax compliance and facilitate efficient and consistent collection at source,” Prof Ncube stated.
The Minister said the tax applies to payments made to non-resident suppliers for imported digital services already chargeable under the VAT Act.
“The tax does not apply to imported goods, which remain liable to customs duty, VAT and other applicable taxes at the point of importation in terms of existing legislation,” he said
He also addressed concerns about possible double taxation, saying taxpayers who are already accounting for and remitting VAT on imported services will not be liable to the withholding tax on the same transactions.
“The measure is not intended to result in double taxation,” Prof Ncube said.
Clarifying reports suggesting that all international card transactions would be taxed, the Minister said such interpretations were incorrect.
“Any communication suggesting that the tax applies uniformly to all international card transactions irrespective of the underlying supply is inconsistent with the policy or legislative intent,” he said.
Professor Ncube said engagements with financial institutions were ongoing to ensure correct application of the tax, while detailed administrative guidance would be issued by the Zimbabwe Revenue Authority.
“The DSWT is a compliance mechanism designed to safeguard the country’s tax base, promote equity in the tax system and modernise revenue administration in line with the digitalisation of the economy,” he said.
Meanwhile, the DSWT comes as Zimbabwe continues to modernise its tax system in response to the rapid growth of the digital economy and increasing cross-border consumption of online services, which has complicated traditional tax collection methods in many jurisdictions.
Government has in recent years tightened tax administration frameworks to protect the revenue base while promoting fairness between local service providers and offshore digital platforms operating in the domestic market.
