Zimbabwe has contracted British Virgin Islands company Daedalus World Limited to collect taxes from e-commerce operators, digital advertisers, content platforms and sports betting outlets.
The Southern African country wants to increase state revenue and after its initial focus on telecommunications and mobile money, it has now turned its attention to e-commerce.
In a public notice dated 19 January 2022, ICT Minister Jenfan Muswere said Zimbabwe had entered into an agreement with Daedalus World Limited to assist with revenue collections from the new tax brackets.
The notice reads: “The Republic of Zimbabwe entered into a public-private partnership agreement with Daedalus World Limited of Tortola, British Virgin Islands, in terms of which Daedalus World Limited will assist the Republic of Zimbabwe by providing a revenue collection service through taxing qualifying companies.”
It adds that businesses that provide “digital advertising, content, cloud computing, e-commerce, gambling, betting, gaming and cryptocurrency services to persons and organisations within the territory of the Republic of Zimbabwe” would be targeted.
The agreement, in line with Section 46 of the Zimbabwe Investment and Development Act, was signed last year and approved by Zimbabwe’s Cabinet in November.
However, the notice did not provide a schedule of the taxation parameters or thresholds for targeted businesses.
It is expected that the development will affect international content and digital advertising companies such as Google, YouTube and Facebook.
With COVID-19 enforcing closure of borders and movement restrictions, Zimbabweans had increasingly turned to e-commerce, pivoting on the use of virtual international credit and debit cards to make international payments.
Audit and accountancy firm BDO has previously commented on “payment of income tax on e-commerce” transactions in Zimbabwe, saying “satellite broadcasting and electronic commerce services provided from outside Zimbabwe by non-resident persons are subject to Income tax at a flat rate of 5%” on turnover.
“Foreign providers of electronic services are required to register for VAT. In addition, foreign radio and TV broadcasting services are required to register for VAT,” the firm said in 2021.