This article highlights key Value Added Tax (VAT) changes introduced by the Finance Act (No. 7) of 2025 and effective from 1 January 2026, ^[1]  including the increase in the standard VAT rate, the replacement of the definition of a tax invoice and introduction of fiscalised invoicing, restrictions on zero-rating with implications for mergers and acquisitions, the introduction of digital tax measures, and the expansion of VAT-exempt supplies. This article excludes VAT amendments specific to the mining sector, which are addressed separately in a dedicated mining tax and regulatory update.

What is VAT?
VAT is an indirect tax on consumption, charged on the supply of taxable goods and services. It is levied on transactions and also on the importation of goods and services. The principal legislation is the Value Added Tax Act (Chapter 23:12).

1.0 What is the General Rate of VAT?
With effect from the 1^st of January 2026 the general rate of VAT in Zimbabwe is 15.5%. Section 34 of the Finance Act (No.7) 2025 which was gazetted on the 29th of December 2025 provides as follows;

With effect from the 1^st January, 2026,the Schedule to Chapter IV of the Finance Act [Chapter 23:04] is amended in Part I (“General Rate of Value Added Tax”) by the deletion of “fifteen per centum” and the substitution of “fifteen comma five per centum”.

2.0 Replacement of the Definition of “Tax Invoice” and Insertion of the Definition of “Fiscal Device”[2]
The VAT Act has been amended by replacing the definition of “tax invoice” and introducing a new definition of “fiscal device” or “electronic fiscal device”. These amendments fundamentally alter the legal nature of a valid tax invoice for VAT purposes in Zimbabwe.

“tax invoice” means a fiscal tax invoice provided by a registered operator, and printed by a fiscal device used by a registered operator, which has verifiable transaction details same as transmitted to the ZIMRA Fiscalisation Data Management System (FDMS) and display valid upon verification on the FDMS validation portal and compliant with the requirements of section twenty (20) of the VAT Act;”;

(b) by the insertion of the following definition— “fiscal device” or “electronic fiscal device” means an electronic device, machine, application, system or software that is compatible with the requirements of Fiscalisation Data Management System (FDMS), approved by the Commissioner for the purposes of recording taxpayer’s business transactions and transmitting to the FDMS. These includes any Electronic Tax Register, Electronic Fiscal Printer, Electronic Signature Device, Fuel Fiscal Device and/or Virtual Fiscal Device/Software Application;”

Effect of the New Definition of “Tax Invoice”
A tax invoice is no longer merely a document issued by a registered operator containing prescribed particulars. Under the amended definition, a tax invoice must now:

• be a fiscal tax invoice;
• be printed by an approved fiscal or electronic fiscal device;
• have transaction details that are identical to those transmitted to the ZIMRA Fiscalisation Data Management System (FDMS); and
• be verifiable and validated on the FDMS portal in compliance with section 20 of the VAT Act.

3.0 RESTRICTION OF ZERO-RATING FOR TRANSFER OF A TRADE AS A GOING CONCERN[3]
Section 10 of the VAT Act has been amended as below;

Paragraph (e) of section 10(1) has been repealed and substituted to now read:

“the supply of a trade or part of a trade which is capable of separate operation, to the Public Service Pension Fund, where the supply is on a going concern basis.”

The amendment replaces a commercially neutral, condition-based zero-rating regime with a highly targeted, entity-specific exemption. The former paragraph (e) enabled VAT-neutral transfers of businesses as going concerns across the economy, subject to rigorous safeguards. The current paragraph (e) removes this general relief and confines zero-rating almost exclusively to transactions involving the Public Service Pension Fund, fundamentally altering the VAT treatment of business disposals in Zimbabwe from 1 January 2026.

The amendment may have the following effect as set out below;

• Transfers of a business as a going concern to any other entity (including private pension funds, corporates, or SPVs) no longer qualify for zero-rating.
• Such transfers are now standard-rated supplies, attracting VAT at the prevailing rate.
• Business sales, restructurings, and asset transfers outside PSPF now carry a direct VAT cost, impacting:
  • M&A transactions,
  • corporate reorganisations,
  • asset transfers within groups.

Repealed sections:

• Paragraph g of Section 10 (1) which previously zero rated agricultural goods or services as prescribed in terms of section 78 of the VAT Act Chapter [23:12].
• Paragraph j of Section 10 (1) which previously zero rated goods consisting of medicines or allied substances within the meaning of the Medicines and Allied Substances Control Act.
• Paragraph q of Section 10 (1) which previously zero rated services supplied by the operator of a facility designated in terms of the Tourism Act as a tourist facility of a class specified in First Schedule to the Tourism (Designated Tourist Facilities) (Declaration and Requirements for Registration) Regulations, 1996, published in Statutory Instrument 106 of 1996.

4.0 AMENDMENT TO SECTION 11 (EXEMPT SUPPLIES) [4]
Three new categories of VAT-exempt supplies have been inserted into section 11 of the VAT Act.

(a) Agricultural Goods and Services – Paragraph (k)

VAT exemption now applies to:
“the supply of such agricultural goods or services as are prescribed in regulations made in terms of section 78, but subject to such conditions as may be prescribed therein.”

(b) Medicines and Allied Substances – Paragraph (l)
VAT exemption applies to:

“goods consist of medicines or allied substances within the meaning of the Medicines and Allied Substances Control Act [Chapter 15:05] which are prescribed for the purposes of this subsection.”

(c) Rural Electrification Services – Paragraph (m)
VAT exemption applies to:

“provision of electrification services to rural communities through funding from the Rural Electrification Fund established in terms of the Rural Electrification Fund Act [Chapter 13:10].”

The insertion of paragraphs (k), (l), and (m) into section 11 expands VAT exemptions  to support agriculture, healthcare, and rural electrification.

5.0 VAT ON IMPORTED SERVICES [5]
Section 13 of the VAT Act governs the collection of VAT on imported services, the determination of their value, and applicable exemptions. The insertion of subsection (6) introduces a currency-of-payment requirement for VAT on imported services.

New Subsection (6)
The newly inserted subsection provides that:

VAT payable in respect of imported services under section 6(1)(c) must be paid in United States dollars, or the equivalent in any other foreign currency, calculated at the international cross rate of exchange prevailing at the time of the transfer.

The insertion of subsection (6) into section 13 of the VAT Act fundamentally changes the mechanics of paying VAT on imported services. VAT must be settled in foreign currency.

6.0 DIGITAL SERVICES TAX & DEEMED LOCAL SUPPLIES [6]
Section 13A of the VAT Act has been repealed and substituted, introducing a new statutory framework for taxing imported goods and services supplied through digital and electronic means. The new section 13A provides that certain goods and services supplied from outside Zimbabwe are deemed to be supplied in Zimbabwe where payment is made from Zimbabwe or where the recipient is resident in Zimbabwe. This applies irrespective of whether the foreign supplier has a physical presence or permanent establishment in the country.

Central to the new framework is the introduction of a digital withholding services tax, which is:

• charged on payments for imported goods, services, and electronic services;
• withheld at source by intermediaries (such as banks, payment processors, and financial institutions); and
• remitted to the fiscus in accordance with the Second Schedule.

The amendment expressly brings electronic commerce operators defined broadly to include offshore digital platforms providing services via telecommunications networks within Zimbabwe’s VAT enforcement perimeter. This shifts the compliance burden away from non-resident suppliers and places it on local intermediaries facilitating cross-border payments.

7.0 INSERTION OF THE SECOND SCHEDULE DIGITAL SERVICES WITHHOLDING TAX [7]
The insertion of the Second Schedule operationalises the new section 13A of the VAT Act by providing the procedural and enforcement framework for the digital services withholding tax.
This Schedule is designed to:

• ensure effective collection of tax on cross-border digital and electronic services;
• shift compliance obligations to local financial intermediaries; and

Key Definitions and Scope

(a) Intermediary
An “intermediary” is defined as any financial institution as contemplated under the Intermediated Money Transfer Tax (IMTT) provisions of the Income Tax Act. This would include

• Banks
• Payment service providers
• Mobile money operators
• Other regulated financial institutions

      who are all potentially statutory withholding agents for digital services withholding tax.

Obligation to Withhold and Remit Tax

(a) Duty to Withhold
Every intermediary must:

• withhold digital services withholding tax from any amount paid for remittance outside Zimbabwe in respect of:
  • imported goods;
  • imported services; or
  • electronic services deemed to be supplied in Zimbabwe under section 13A.

(b) Timeframe for Payment
The withheld tax must be paid to the Commissioner within 30 days of payment, unless an extension is granted.

Personal Liability and Penalties

(a) Personal Liability
An intermediary who:

• fails to withhold; or
• withholds but fails to remit

is personally liable to pay:
the amount of tax not withheld or not remitted; and
a penalty equal to 15% of the tax due.

For Foreign Digital Platforms
Tax collection is effectively enforced without registration in Zimbabwe.

The VAT amendments introduced by the Finance Act (No. 7) of 2025 are significant. These changes have wide-ranging implications for financial institutions, digital and electronic platforms, and other businesses engaged in cross-border, transactional, or technology-enabled activities, in addition to traditional VAT-registered operators. Institutions should urgently review their VAT compliance frameworks, invoicing systems, contractual arrangements, and transaction structures ahead of implementation, as the failure to adapt may result in increased tax exposure, cash-flow constraints, and regulatory penalties.

For assistance with VAT and tax law–related enquiries, please feel free to contact us at info@mmmlawfirm.co.zw

[1] Gazzetted on the 29^th of December 2025

[2] Section 35 of the Finance Act

[3] Section 37 of the Finance Act.

[4] Section 38 of the Finance Act

[5] Section 43 of the Finance Act

[6] Section 44 of the Finance Act

[7] Section 49 of the Finance Act