Zimbabwe’s new digital services tax: The double-edged sword

MARTIN MASITERA / FUNGAI CHIMWAMUROMBE

With effect from January 1, 2026, Zimbabwe introduced a Digital Services Withholding Tax (DSWT), which is levied on payments made to foreign digital service providers.

As with any other tax regime, the DSWT poses a lot of desirables and undesirables which are bound to be subject to the confusion and misunderstanding experienced by the general public.

The first port of call will be to analyse the benefits of the system as juxtaposed to its shortcomings.

It is trite that all tax regimes are primarily promulgated as a move aiming to enhance revenue mobilization but these may pose challenges to the tax payer.

 What is the DSWT?

The DSWT is a tax on payments made by Zimbabwean consumers to foreign offshore digital platforms, including foreign owned e-hailing services, online content subscriptions (e.g Netflix, Prime Video, X), digital advertising (Google, Meta), and satellite-based internet access (Starlink).

The key features of this tax regime include a 15% tax of the total amount paid and a collection mechanism primarily controlled by local financial institutions such as banks and mobile money operators who will withhold the tax and remit it to the revenue collecting authority.

Desirables of the Digital Services Withholding Tax

Increased Revenue Collection: The tax is expected to generate significant revenue for the government, which can be used to fund public services and infrastructure development.

With the growth of digital transactions for online services from entities that are not physically present in the country, the Revenue Collection Authority and Government have lost out on revenue since most of these transactions escape the tax net of the Government.

By taxing the consumer directly, the Government is able to legally minimize such revenues leakages.

Fairness: DSWT aims at creating a fairer tax environment by levelling the playing field for local businesses, ensuring they are not unnecessarily disadvantaged when competing with well-established foreign digital giants for the local market share. The offshore entities can now be equally taxed and this consequently creates an attraction for home-grown services of the same nature.

Economic Sovereignty: By taxing foreign digital services, Zimbabwe asserts its economic sovereignty in the digital age. Local businesses may benefit from a more level playing field, while foreign digital service providers will need to adapt to the new tax regime on Zimbabwean terms.

Undesirables of the Digital Services Withholding Tax

Operational Challenges – Implementing the tax may be complex, with concerns about separating goods from services and ensuring compliance. ZIMRA have already admitted to the difficulties in distinguishing between goods and services online.

Increased Costs – The tax may lead to higher costs for consumers, potentially slowing digital adoption and usage and leaving the country behind as other nations enjoy continued digital age success due to lax and favourable regulation for both indigenous and foreign entities.

Double Taxation – Some services were already be subject to VAT thus not escaping the Government’s tax net and potentially leading to double taxation and increased costs for consumers. However the Government has announced its intentions to counter this by making sure that Taxpayers already accounting for VAT on imported services will not be liable for DSWT on the same transactions, avoiding double taxation.

Adverse Impact on Consumers and Businesses – The DSWT may lead to unintended consequences such as increased costs for consumers, as foreign platforms may pass on the tax burden.

The DSWT system marks a significant step towards Zimbabwe modernizing its tax system and capturing revenue from the growing digital economy.

Although the introduction of the DSWT aims at promoting tax fairness and revenue growth, its implementation will definitely require careful monitoring to mitigate potential challenges and ensure a smooth transition.

The legal framework definitely needs refining to bring about consistency and clarity which will go a long way in boosting confidence and compliance with the tax regime.

Martin Masitera is a Senior Associate at Zenas legal practice can be contacted on What’sApp +263 77 621 8956 and emailed on martin@zenaslegalpractice.com

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted at fungai@ zenaslegalpractice.com