What you need to know about the Digital Services Withholding Tax (DSWT) at 15%?
This proposed tax measure introduces two significant changes to the taxation of digital and electronic commerce activities in Zimbabwe, effective January 1, 2026, as part of the country’s efforts to modernize its tax system and ensure equitable competition.
1. Digital Services Withholding Tax (DSWT) at 15%
The DSWT is a new mechanism designed to capture revenue from foreign-based digital service providers who have no physical presence in Zimbabwe, which previously allowed them to bypass domestic tax obligations.
| Feature | Details |
| Tax Rate | 15% (Withholding Tax). |
| Effective Date | January 1, 2026. |
| Tax Base | Payments made by residents of Zimbabwe (individuals and businesses) to offshore digital platforms. |
| Scope of Services | It targets a wide range of services, including:E-hailing fees (e.g., payments to international ride-hailing apps).Online Content Charges (e.g., subscription fees for streaming services like Netflix, Spotify, Amazon Prime).Satellite-based Internet Access Fees (e.g., subscriptions for providers like Starlink).Other fees paid for digital goods or services supplied by non-resident companies. |
| Collection Mechanism | At the point of payment. Local financial intermediaries—including banks, mobile money operators, and other regulated payment processors—are required to withhold the 15% tax before transferring the funds abroad. This shifts the compliance burden from the foreign service provider to the local payer/intermediary, ensuring real-time collection. |
| Replacement of VAT | This withholding tax is introduced in place of VAT on imported services, streamlining the taxation of these cross-border digital transactions. |
| Impact on Consumers | Since the tax is withheld at the point of payment, it is highly likely that the final cost of these digital services to Zimbabwean consumers will effectively increase by 15%, unless the foreign service provider chooses to absorb the tax. |
2. Electronic Commerce Operators’ Tax (ECOT) Threshold Removal
This measure focuses on the existing Electronic Commerce Operators’ Tax (ECOT), which is a gross income tax levied on e-commerce operators.
| Feature | Details |
| Existing Tax | 5% tax on the gross income received by e-commerce operators delivering goods or services to persons resident in Zimbabwe. |
| Previous Threshold | The tax previously only applied to operators whose revenue exceeded US$500,000 in any year of assessment. |
| Proposed Change | Removal of the US$500,000 qualifying threshold. |
| Effective Date | January 1, 2026. |
| Decision Impact | This change means that all e-commerce operators in Zimbabwe, regardless of their annual revenue, will be required to register for the Digital Services Tax (ECOT) and account for the 5% tax. The removal of the threshold significantly widens the tax net, bringing smaller, local, or international e-commerce businesses into the formal tax system. |
Effective January 1, 2026, Zimbabwe is set to implement two major policy shifts in the taxation of digital and electronic commerce activities. These measures, proposed by the Minister of Finance, are designed to modernize the country’s tax system, enhance revenue mobilization, and ensure a more equitable competitive environment for local businesses.
The core of the policy changes involves the introduction of a high-rate withholding tax on offshore digital payments and the removal of a significant revenue threshold for domestic e-commerce operators.
1. The New 15% Digital Services Withholding Tax (DSWT)
The most notable change is the proposed Digital Services Withholding Tax (DSWT) at a rate of 15% on payments made to foreign-based digital service providers. This move directly targets offshore platforms that generate revenue from Zimbabwean consumers but lack a physical presence in the country, thereby avoiding domestic tax obligations.
The DSWT will replace the existing Value Added Tax (VAT) framework on imported services, streamlining the process of taxing these cross-border transactions.
Key Features of the 15% DSWT:
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Tax Rate: 15% Withholding Tax.
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Effective Date: January 1, 2026.
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Tax Base: Payments made by Zimbabwean residents (individuals and businesses) to offshore digital platforms.
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Scope of Services Targeted:
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Online Content Charges: Subscriptions for streaming services (e.g., Netflix, Spotify, Amazon Prime).
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Satellite-based Internet Access Fees: Payments to satellite internet providers (e.g., Starlink).
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E-hailing Fees: Payments to international ride-hailing applications.
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Other fees for digital goods or services supplied by non-resident companies.
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The Collection Mechanism and Consumer Impact:
To facilitate efficient, real-time collection, the compliance burden is shifted to local financial institutions. Banks, mobile money operators, and other regulated payment intermediaries will be required to withhold and remit the 15% tax at the point of payment before transferring funds to the offshore platform.
Decision Impact: The direct consequence for Zimbabwean consumers and businesses is that payments for digital services outside the country will attract this mandatory 15% withholding tax. Unless the foreign service provider chooses to absorb the cost, this measure is expected to increase the final price paid by the user.
2. Widening the Tax Net: Removal of the ECOT Threshold
The second major change involves an existing tax on electronic commerce operators—the Electronic Commerce Operators’ Tax (ECOT), which is a gross income tax levied at a rate of 5%.
Previously, the 5% ECOT only applied to e-commerce operators whose annual revenue exceeded US$500,000. The new proposal involves the removal of this qualifying threshold, also effective January 1, 2026.
Key Features of the ECOT Change:
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Existing Tax Rate: 5% on gross income for e-commerce operators supplying goods or services to residents in Zimbabwe.
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Previous Requirement: Revenue had to exceed US$500,000 in a year to qualify.
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Proposed Change: Removal of the US$500,000 qualifying threshold.
Decision Impact:
The removal of the threshold significantly widens the tax net. It means that every e-commerce operator in Zimbabwe, regardless of its annual revenue, will be required to register for the Digital Services Tax (ECOT) and account for the 5% tax. This move is aimed at ensuring smaller, local, and emerging digital businesses are formally included in the national tax system, fostering greater compliance and tax base expansion.
