Mthuli increases VAT as he cuts IMT
Staff Writer
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.
Presenting the 2026 National Budget Statement on Thursday, 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.
