In a move to modernise revenue collection and ensure global platforms with no physical presence in Zimbabwe contribute to the economy, Zimbabwe’s Finance Act 2025 introduced the new Digital Service Withholding Tax as it overhauled the traditional VAT on imported services for non-resident digital service providers.
Effective January 1, 2026, payments made to offshore digital platforms, including e-hailing fees, online content charges, and satellite-based internet access fees, cloud and hosting fees, will be subject to a 15.5% withholding tax in line with the updated VAT rate.
How will the funds be collected?
Unlike the old system, where foreign companies voluntarily registered and remitted VAT, the new regime places the responsibility on intermediaries.
When a Zimbabwean pays for a Netflix, Starlink, Google Cloud subscription, or Bolt ride, local financial institutions and mobile money operators must withhold tax at the point of transaction
Stanbic Bank, for example, informed its depositors via text message on January 3 of the effective charge on international internet and card payments.
There is a reprieve for businesses that already account for VAT on imported services under existing corporate arrangements, as they are exempt from this specific withholding tax.
What could be the impact on consumers and businesses?
Consumers could face a layered burden in cases where both the 15% DSWT and the Intermediated Money Transfer Tax (IMTT), charged at 2% on USD transactions (common for international payments), and to 1.5% on ZiG ones, apply to the same transaction, compounding to 17%.
Zimbabweans might also see higher subscription costs and ride-hailing fees, as offshore platforms might pass the new taxation cost directly to the consumer
What other countries charge as a digital service tax
Zimbabwe’s new tax contradicts the common Digital Services Tax adopted by countries across the continent, falling within the range of 1.5% to 6%. Kenya charges the lowest at 1.5% on gross digital revenue, Tanzania 2%, Uganda 5%, while Nigeria charges 6%.
This 15% rate, compared to what other countries charge, is stricter, prioritising immediate domestic revenue gains over attracting long-term foreign investment.
For businesses that rely on imported digital services, structural cost increases might be the new reality, leading to strained budgets for digitalization.
Non-residential digital companies in Cameroon will also face a new taxation in 2026, as parliament adopted the Finance Act 2026, which introduces the Significant Economic Presence standard.
Taxpayers are considered to have a SEP if:
- Their gross receipts from digital service to customers in Cameroon exceeded FrancsFA 50 million
- They have more than 1,000 users and customers in Cameroon.
Non-residential digital companies with SEP are subject to a 3% tax on gross income from Cameroon‑sourced digital activities, acting as the final corporate tax.
Alternatively, companies might pay corporate income tax at the standard rate of 30% on their net profit, but only if their profit margins are less than 10% and a local accounting presence.
This law, similar to that of Zimbabwe, targets E-commerce and marketplaces, streaming and social media, e-hailing, and cloud and SaaS providers.
To show compliance with these regulations, companies must file a return reporting Cameroon-sourced gross income by the 15th of every month and register on the Directorate General of Taxation’s (DGI) online platform.
Cameroon will use technical indicators like geolocation and IP addresses, and commercial indicators to curb tax evasion.
While this tax creates a level playing field for local players who were paying the corporate tax, foreign companies might increase subscription prices to cover the new cost.
Our view at Velex Advisory
As the month goes by, both ZIMRA and DGI will begin conducting compliance enforcement, and businesses that are still in a wait-and-see phase will face the consequences.
At Velex Advisory, we work with businesses already operating in Africa or seeking to move into other jurisdictions on the continent.
- Doing market entry research and evaluation
- Helping businesses in assessing operational risks
- Engage with local regulators to ensure compliance
If you are planning to do business in Africa, we are your most valued partner for governance and regulatory compliance.
Read: What Operators Need To Know About The New LSLGA 5% Withholding Tax
