The shift in the Value Added Tax (VAT) rate from 15% to 15.5%, as stipulated in the Finance Act, 2025 (Act No. 7 of 2025), presents a significant, though seemingly small, technical challenge for businesses. A successful migration requires meticulous planning across accounting, IT, sales, and legal departments to ensure compliance and avoid costly errors, penalties, or transactional disputes.
Lucent Consultancy suggest a step-by-step guide on how businesses must migrate or transition to the new VAT rate, effective January 1, 2026 (or the designated operative date).
The Migration Imperative: From 15% to 15.5%
The core challenge lies in the transition period—specifically, how to correctly apply the tax rate when a transaction spans the effective date, especially for invoices, payments, and goods shipments.
1. IT and System Recalibration (The Technical Core)
This is the most critical and non-negotiable step. All systems that calculate, record, or report VAT must be updated simultaneously.
| System | Action Required | Compliance Risk of Failure |
| Enterprise Resource Planning (ERP) / Accounting Software | Update the VAT master data tables. Ensure the system is configured to apply the 15.5% rate for all transactions initiated on or after the effective date. | Incorrect VAT reporting on returns, leading to penalties and potential under-collection from customers. |
| Point of Sale (POS) Systems & Cash Registers | All POS terminals, physical and digital, must have the VAT calculation module updated. This includes self-service kiosks. | Overcharging customers (leading to consumer complaints) or under-calculating tax (leading to ZIMRA liability). |
| E-commerce Platforms & Invoicing Software | Update all online checkout carts, tax calculation plugins, and automatic invoice generation templates. | Inaccurate pricing displayed to customers and non-compliant digital invoices. |
| Fiscal Devices | Ensure all installed fiscal devices are recalibrated (or replaced, if necessary) to reflect the new 15.5% rate. The Finance Act, 2025, also mandates that invoices include a QR code/TIN for ZIMRA verification, which should be integrated during this update. | Inability to issue legally compliant invoices and potential premises lockdown by ZIMRA. |
2. Pricing and Sales Strategy
The new rate directly impacts the final price of standard-rated goods and services.
| Strategy Component | Action Required | Impact on Business |
| Price Adjustment | Decide whether to absorb the 0.5% increase or pass it on to the customer. | Absorbing the tax shrinks gross profit margins. Passing it on requires updating all price lists, shelf labels, menus, and marketing material. |
| Quoting & Contracts | Review all current open quotations, tender submissions, and long-term contracts (especially those spanning the effective date). Prices must clearly state whether they are VAT-inclusive or exclusive, and which VAT rate applies. | If a quote is accepted before the change but the service is delivered after the change, the 15.5% rate applies, requiring an adjustment or absorbing the difference. |
3. Transition Period Management (The Crux of Migration)
VAT liability is determined by the time of supply rules. Businesses must establish clear cut-off procedures for the exact moment the rate changes.
The Golden Rule: The VAT rate applicable is the one in effect at the time the tax point (time of supply) occurs.
| Scenario | Example Action Required | Applicable Rate (15% or 15.5%) |
| Goods/Services Supplied BEFORE Jan 1, 2026 | Invoice issued and payment received on Dec 31, 2025, for a service completed on that day. | 15% |
| Goods/Services Supplied AFTER Jan 1, 2026 | Invoice issued on Jan 2, 2026. | 15.5% |
| Deposits & Part Payments (Payment before Supply) | A 50% deposit received on Dec 15, 2025, for goods to be delivered on Jan 15, 2026. | The deposit portion is taxed at 15%. The remaining 50% (paid on or after Jan 1, 2026) is taxed at 15.5%. |
| Continuous Supplies | A subscription service covering Dec 2025 and Jan 2026. | The payment must be apportioned. The portion of the service covering the period up to Dec 31, 2025, is 15%. The portion from Jan 1, 2026, onwards is 15.5%. |
| Credit Notes & Returns | A credit note issued after Jan 1, 2026, for a sale originally made at the 15% rate before Jan 1, 2026. | The original rate of 15% must be used for the credit note to match the original transaction’s VAT. |
4. Communication and Training
Internal and external communication is essential to manage expectations and ensure compliance.
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Staff Training: All accounting, sales, and warehouse staff must be trained on:
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The new rate and effective date.
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The transition rules (time of supply) for partially completed or paid transactions.
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The new process for generating compliant invoices (including the QR code/TIN requirement).
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Supplier Communication: Notify all suppliers that their invoices to your business must reflect the 15.5% rate for supplies made on or after January 1, 2026. Incorrect input tax claims are a common error during rate changes.
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Customer Notification: Inform key customers, especially corporate clients, about the price adjustments well in advance. This manages their budgeting and prevents billing disputes.
Summary of Compliance Actions
| Department | Task Priority | Checkpoint |
| IT/Tech | High | ERP/POS/E-commerce tax master data updated to 15.5% and fiscal device upgrade for QR/TIN compliance. |
| Finance | High | Final VAT return (pre-rate change) prepared; Chart of Accounts confirmed; Price lists adjusted. |
| Sales/Legal | Medium | Review of all open quotes, long-term contracts, and subscription billing cycles for apportionment. |
| HR/Training | Medium | Training completed for all staff involved in billing, sales, and supply chain logistics. |
By executing these steps with precision, a business can successfully navigate the VAT rate migration, minimizing system errors, ensuring ZIMRA compliance, and maintaining healthy customer and supplier relationships.
