The Government has cut the Intermediated Money Transfer Tax on ZiG transactions from 2 to 1,5 percent, to reduce the cost of transacting in local currency and encourage wider use of the ZiG across the economy.
IMTT is a transaction-based tax levied on electronic money transfers introduced in 2018 to widen the tax base, especially to include the informal sector, and mobilise resources to fund public services and infrastructure projects.
The ZiG has remained largely stable since its introduction in April last year and has whittled down the annual inflation rate from a peak of 95,8 percent in July this year to 19 percent this month.
The Treasury’s decision to reduce the IMTT rate is in direct response to the long standing calls from businesses and individuals alike for a review of the tax, given the tax’s financial cost on money transfer transactions.
Similarly, the ruling Zanu PF party, as one of its key resolutions at the end of its annual people’s conference in Mutare last month, directed the Government to review IMTT to ease its impact on business and citizens in general.
However, the minister said that the foreign currency IMTT rate would remain unchanged at 2 percent.
To further lessen the cost impact of IMTT on the viability of businesses, the Treasury has made the transaction tax deductible for income tax purposes.
Presenting the 2026 National Budget Statement at the New Parliament Building in Harare yesterday, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the reduction takes effect on January 1, 2026.
The IMTT review forms part of broader measures to refine the tax framework while supporting economic growth, the minister said.
The minister fulfilled his pre-budget proposal to pledge to IMTT by 0,5 percent and simultaneously increase value-added tax (VAT) by 0,5 percent to partially compensate for the loss of IMTT revenue.
“The IMTT remains a major and stable source of non-discretionary revenue, contributing about 8 percent of total tax revenue annually,” he said. “However, its high incidence on business transactions and liquidity flows has made it distortionary, particularly in a dual-currency environment.”
He said reducing the tax on ZiG transactions would promote digital payments and strengthen confidence in the domestic currency. “I am therefore proposing to review the IMTT framework by reducing the IMTT rate on ZiG-denominated transactions from 2 percent to 1,5 percent, to promote use of local currency and lower transaction costs,” said Minister Ncube.
The minister noted that the calls for a review had been consistent over the past year, with businesses and financial sector players urging the Government to reduce the burden on local currency transactions. Prof Ncube acknowledged that Treasury had already hinted at the adjustment in earlier policy updates.
“This is a matter we have highlighted before in our engagements,” he said. “Stakeholders have been calling for a redesign of the IMTT framework to mitigate unintended economic distortions whilst maintaining the integrity and predictability of public finances.”
The Treasury has moved to cushion the fiscus from the revenue loss expected from the IMTT reduction and its new deductibility feature. As a compensatory measure, VAT will increase from 15 percent to 15,5 percent, effective January 1, 2026.
Minister Ncube said the decision was necessary to maintain fiscal stability.
“As a ‘quid pro quo’ to the above concessions, and to partially compensate for the revenue forgone arising from the IMTT rate reduction and deductibility measures, I propose to increase the Value Added Tax rate by 0,5 percent,” he said.
“This measure will preserve fiscal balance whilst maintaining VAT within a regionally competitive range.”
The Government estimates that the new IMTT measures will result in about US$89 million in revenue forgone per year, necessitating the adjustment on VAT to keep expenditure plans intact.
Beyond the IMTT rate cut, the Treasury has also introduced a key incentive for compliant businesses by designating IMTT as a tax-deductible expense for corporate income tax purposes. This means businesses will now be able to subtract the IMTT they pay from their taxable income, easing their final tax liability.
To qualify, firms must be registered for corporate income tax and, where applicable, personal income tax and VAT. They must also be fully fiscalised and integrated with the Fiscal Data Management System, with all tax returns and payments up to date.
Minister Ncube said the new deductibility rule was designed to reward compliance and encourage formalisation. “These compliance conditions will ensure that the benefit of deductibility accrues only to tax-compliant operators,” he said.
“This reinforces ongoing efforts to broaden the tax base and encourage formalisation of businesses.”
For businesses, the measure is expected to reduce operational costs and free up cash flow previously absorbed by high transaction taxes. Analysts say the shift also positions the ZiG more competitively in digital payments, potentially stimulating higher volumes of local-currency transactions in the formal system.
The combination of a reduced IMTT, increased VAT and the deductibility threshold reflects Treasury’s ongoing attempts to balance revenue needs with the drive to support economic activity, digital payments and currency stability ahead of the 2026 fiscal year.
Economist Stevenson Dlamini says the proposed reduction in IMTT and slight increase in VAT should be viewed as a “strategic pivot” rather than a simple tax hike. He argues the shift modernises the fiscal system by “moving from taxing money transfers to taxing consumption”.
Mr Dlamini notes that cutting IMTT reduces the “friction cost” on digital payments, which has discouraged the use of the ZiG in the formal system. However, he says the VAT increase may offset the benefit for households, creating what appears to be a “revenue-neutral” effect. He stresses that the outcome depends on market efficiency.
“If production costs fall from lower IMTT, businesses should pass those savings down the value chain,” he said.
Former ZNCC vice president Mr Louis Herbst took a cautious stance, warning that IMTT has supported fiscal stability. He argued that VAT “compounds at multiple stages”, raising prices and widening the gap between formal and informal markets.
Ms Gladys Shumbambiri-Mutsopotsi adds that while IMTT is distortionary, higher VAT is regressive and risks eroding purchasing power. She calls for broader tax reform, not a simple shift between the two instruments. – Herald
