ZIMRA goes after 50,000 informal traders as 5% withholding tax and US$25,000 VAT threshold loom

Zimbabwe’s revenue authority is aiming to register 50,000 informal traders by the end of 2026, stepping up efforts to bring businesses operating outside the formal economy into the tax system.

ZIMRA Commissioner for Domestic Taxes Misheck Govha set out the target when he appeared before Parliament’s Portfolio Committee on Budget and Finance. The drive is part of a broader effort to widen the taxpayer base, improve compliance and increase revenue collection.

He stated that the authority is rolling out targeted compliance frameworks explicitly tailored to capture the cash-heavy parallel economy, with the immediate goal of bringing 50,000 unregistered operators into the official tax network.

According to his testimony, Govha focused on several critical points regarding what Zimra is doing:

Govha concluded by reiterating that widening the tax base to include the informal sector is no longer optional, but essential to achieving a fairer domestic marketplace where the formal corporate sector does not carry the nation’s entire fiscal burden alone.

The scale of the challenge is reflected in the country’s latest Economic Census. Preliminary results published by the Zimbabwe National Statistics Agency found 204,798 establishments operating, with 76.1% classified as informal. The census described formal establishments as businesses registered with relevant authorities, including ZIMRA, and keeping records.

ZIMRA’s plan relies in part on its Block Management System, which divides commercial areas into geographic zones and assigns officers to work with taxpayers in each area. The system has been in place since 1 January 2023. Under the authority’s published notice, officers can visit central business districts, flea markets, farms, industrial areas, rural business locations and areas where informal traders operate.

The visits are intended to cover tax registration, returns, payments and fiscalisation, as well as taxpayer education, audits and queries. ZIMRA says the approach is meant to bring its services closer to businesses while checking whether they meet their tax obligations.

The target comes as government attempts to draw more businesses into formal channels without relying only on direct registration drives. One of the measures affecting traders is a 5% withholding tax applied to certain purchases from wholesalers and manufacturers.

A ZIMRA notice on supply-chain rules says a person or organisation that is not registered for VAT may be required to pay withholding tax equal to 5% of an invoice when buying from a wholesaler. The notice sets out exceptions for some supplies and institutions. It also describes conditions governing transactions between manufacturers, wholesalers and retailers. The 5% charge is applied in the supply chain; it is distinct from VAT charged on taxable sales. The rule is not the same as saying every trader is liable for VAT. ZIMRA’s separate VAT guidance sets the compulsory registration threshold at US$25,000, or its ZiG equivalent, in taxable supplies over a 12-month period. That threshold has applied since 1 January 2024.

Businesses below the threshold are not obliged to register for VAT, according to ZIMRA. Those that are registered must charge VAT, issue fiscal tax invoices, keep transaction records and submit returns. The standard VAT rate rose from 15% to 15.5% on 1 January 2026.

That makes the distinction important for small operators: registering with ZIMRA and becoming liable to charge VAT are not necessarily the same step. A trader may be brought into the tax system without having to register for VAT if taxable sales remain below the threshold. VAT applies to taxable supplies, not simply to the fact that a person runs a small business.

ZIMRA is also expanding digital administration. Its systems include the Tax and Revenue Management System, used for taxpayer services such as registration, and fiscalisation requirements for VAT-registered operators. The authority has said its 2026 priorities include digitalisation and taxpayer education, alongside efforts to broaden the taxpayer base. The formalisation campaign is unfolding against a backdrop of persistent economic informality. The census found that three-quarters of establishments were informal, leaving a relatively small share of businesses registered across the relevant agencies. Wholesale and retail activity made up a large part of the business landscape, according to figures reported with the census findings.

Research published in 2025 by the Institute of Development Studies adds detail to the economic conditions facing many informal operators. Its study of 2,490 businesses in Harare and Masvingo found that only the top fifth of surveyed operators were potentially earning enough to be taxable under the study’s assessment. The lower four income groups were near or below the poverty line even before fees, licences and taxes were taken into account.

The study also found that only 6% of those surveyed paid formal taxes under the national simplified tax regime, mainly through presumptive taxes. Other charges, including user fees, permits and licences, added to the cost of operating. The researchers documented informal payments to officials as another burden reported by traders.

Those findings set a complicated backdrop for ZIMRA’s registration drive. The authority’s plan is aimed at bringing more activity into the tax system, but its field teams will encounter businesses with very different levels of income, record-keeping and access to digital services.

The Block Management System is designed to deal with businesses in specific locations, rather than relying solely on traders to approach tax offices themselves. Officers can check records and registration status during visits and provide assistance with compliance. ZIMRA’s notice also says taxpayers should verify the identity of visiting officials and that officers should carry identity cards.

The immediate target of 50,000 registrations will put the authority’s local operations under pressure to reach markets, shops and other trading areas across the country. The effort also brings the supply-chain withholding rules and VAT threshold into sharper focus for small businesses that buy stock from wholesalers or manufacturers.

For traders, the difference between tax registration, VAT registration and withholding tax will shape what compliance requires in practice. For ZIMRA, the task is to identify businesses, explain the applicable requirements and bring more of the country’s commercial activity into a system where sales and tax obligations can be recorded.