Mthuli Ncube adds more confusion to digital tax

Finance Minister Professor Mthuli Ncube has clarified that the newly introduced Digital Services Withholding Tax (DSWT) applies only to prescribed imported digital services and does not cover imported goods, amid public confusion over the measure.

In a statement, Minister Ncube explained that the DSWT, established under Finance Act Number 7 of 2025 and effective from January 1, 2026, targets payments made to non-resident suppliers for services such as digital streaming, online content, e-hailing platforms, online advertising, and satellite-based or other cross-border digital access services.

"The tax does not apply to imported goods, which remain liable to customs duty, VAT, and other applicable taxes at the point of importation," the minister said, emphasising that online purchases of goods are not subject to DSWT. He noted that references to "goods" within the digital services framework should be understood in the context of electronically supplied or digitally mediated services, in line with VAT legislation.

Minister Ncube stressed that the DSWT is not a new tax, but an administrative mechanism aimed at improving the collection of VAT on imported services already subject to taxation. "Imported services have been subject to VAT since 2004, with provisions strengthened in 2019 to cover non-resident digital service providers. The DSWT shifts the point of collection to regulated intermediaries such as banks and mobile money operators," he said.

He further clarified that taxpayers already remitting VAT on imported services will not face double taxation under the DSWT, and that the tax applies to all offshore payments for imported digital services, regardless of payment method, provided they are processed through regulated financial intermediaries in Zimbabwe.

Responding to recent bank communications suggesting that the DSWT applies to all international card transactions, Minister Ncube said this was inconsistent with the law's intent. "The DSWT is a compliance mechanism to safeguard the country's tax base, promote equity, and modernise revenue administration in line with the digital economy," he added.

The Zimbabwe Revenue Authority will provide detailed administrative guidance, and engagements with financial institutions are ongoing to ensure correct implementation of the measure.