Value Added Tax (“VAT”) is a cornerstone of Zimbabwe’s tax system. The VAT Act sets out what supplies are standard rated, zero-rated or exempt, time and value rules, and the treatment of imports and exports together these provisions shape taxpayers’ obligations and ZIMRA’s collection powers. Despite the existence of this legal framework, VAT compliance remains a persistent problem with significant revenue, fairness and administrative consequences.
Key statutory obligations and where compliance breaks down
The VAT Act requires persons supplying taxable supplies (standard rated and zero-rated supplies) to register for VAT once they exceed the registration threshold. Once registered they will be required to charge and account for VAT on taxable supplies, to issue fiscal tax invoices, to maintain records, and to lodge VAT returns and remit tax by prescribed deadlines. In practice VAT compliance challenges occur across these obligations, late registration, incorrect classification of supplies, mistaking standard rated supplies for exempt or zero-rated, failure to issue valid tax invoices, under-reporting output VAT, overstating input credits, fiscalisation and late filing or non-payment.
Structural and behavioral drivers of non-compliance
Several structural and behavioral factors explain why VAT compliance in Zimbabwe is low in many sectors:
- Informality and small trader dynamics: A large share of the economy operates informally or at micro scale. Small traders may not register, may lack the accounting systems to track input and output VAT, or may find fiscalisation requirements burdensome. The result is fragmented VAT coverage and under-declared turnover.
- Fiscalisation: The law demands issuance of fiscal tax invoices with set features as set out in S20 of the VAT Act, Public notice 80 of 2024 and Public Notice 30 of 2025, however, deliberate invoice manipulation, fake invoices, missing details, or sellers not issuing invoices facilitate VAT evasion.
Recent policy responses
To reduce revenue leakages, Zimbabwe has introduced measures such as fiscalisation instruments, tighter refund controls, and withholding mechanisms on certain supplies. VAT withholding arrangement aims to capture tax at source in sectors where supplier non-remittance is common, reducing the reliance on audits. While these measures can raise collections quickly, they also risk creating compliance costs for businesses, administrative burdens, and potential cash-flow stress if not properly designed or phased in.
Practical policy and administrative reforms
- Risk-based enforcement and focused audits: Use data analytics and third-party reporting such as banks to target high-risk sectors and suspicious refund claims.
- Improve taxpayer services and education: Many small businesses fail through lack of awareness. Subsidised training, simplified tax guides, and digital registration/filing tools increase voluntary compliance. Coupling assistance with compliance nudges (reminder systems, simplified payment plans) addresses cash-flow problems.
How Baker Tilly Can Assist Businesses in Zimbabwe
Ensuring Tax Compliance:
- Guidance on VAT registration, calculations and compliance.
- Conducting VAT compliance audits (Tax Health Checks) to identify potential weaknesses and areas of non-compliance.
- Navigating the complexities of Zimbabwean tax laws and regulations.
- Ensuring compliance with specific requirements like Fiscalisation Data Management System (FDMS).
Baker Tilly is there to assist businesses in Zimbabwe to overcome today’s VAT regulations challenges now for the purposes of a better tomorrow.
References:
- Section 20 of the VAT Act
- Public notice 80 of 2024 – Fiscal Tax Invoice compliance with FDMS
- Public Notice 30 of 2025 - Buyer Details on FDMS Fiscal Tax Invoice
Tax Consultant at Baker Tilly
Related content
